Navigating financial problems: Tips for dealing with financial stress

Unfortunately, unexpected life events often have a domino effect — especially when it comes to our finances. For example, a health decline could cause financial issues arising from growing medical expenses.

Even if you're struggling financially, there's hope. Discover how to tackle four common financial shocks that life can throw your way.

4 common causes of financial difficulty

1. Change in employment status

Whether your position's eliminated, you're laid off, or your benefits are reduced, chances are your financial stability will be affected. If your savings are dwindling, you may feel forced to make a job decision faster than you'd like.

If you've had your hours reduced or are only temporarily laid off, you may wonder if you should stay with your current employer or seek employment elsewhere. It can be a tough decision, especially if you're receiving benefits.

And what should you do if you receive an unexpected check, such as a government stimulus or severance? If your outlook's uncertain, it's best to save money whenever possible. It's a wise idea to deposit your money into a savings account that you can get to easily when you need to cover basic or unexpected expenses.

Here are some steps you can take to better prepare yourself for changes in employment.

• Cut expenses. Take care of your absolute needs first — things like groceries, mortgage, and utilities. Temporarily cut out or cut back on nonessential expenses like eating out. You should also delay any major purchases until your work situation feels steady again.
• Review your monthly budget. Uncertainty, fear and changing routines may have shifted your spending pattern. Update your budget to reflect your current reality.
• Save your savings. Instead of using your savings to pay off debt, make all attempts to preserve it. Make minimum payments until you're back on your feet. If forced to tap into your nest egg, you'll likely want to draw from your savings and nonretirement sources first.
• Control credit card use. Resist putting expenses on high-interest credit cards if possible, because you could create debt you can't repay.
• Explore temporary or part-time employment opportunities. Consider openings for delivery drivers, home delivery services, home construction jobs, or online businesses.

2. Loss of a loved one

If you've lost a loved one like a spouse, you understand the financial stress that can come along with this tragic event. You'll likely have to work through grief while navigating financial end-of-life obligations. Whether you're struggling to settle an estate or just putting your hands on important financial documents, the process can be overwhelming.

Here are some steps you can take to make it easier.

• Learn the entire financial picture. If you weren't deeply involved in the family finances before, analyze the whole situation to better understand the ins and outs of daily cash flow, investments, insurance, retirement savings and education goals. Be sure to review your credit report for errors or anything you don't recognize or understand.
• Share the death certificate with financial institutions. After someone dies, the funeral home notifies the Social Security Administration, which in turn issues a death certificate. Request copies to distribute to credit card companies and banks.
• File beneficiary claims. To get the funds you need to cover unsettled debts, you can use account on which you are the named beneficiary like life insurance policies, investments and other similar accounts. All you need is a death certificate and completion-of-claim paperwork.
• Double-check your own beneficiaries. While the topic of beneficiaries is top of mind, it's a good time to make sure you own accounts reflect your current preferences. Be sure to check all accounts that have a named beneficiary like life insurance or retirement accounts.
• Learn more actions in our article, Dealing with a departed loved one's finances.

3. Foreclosure on your home

If a foreclosure of your home is on the horizon, here are some things you can do.

• Talk to your lender. If you anticipate that you won't be able to keep up with payments, your lender may be willing to negotiate the terms of your loan.
• Check with the feds. For tips and resources to help avoid disclosure, visit the U.S. Department of Housing and Urban Development.^{See note1}
• Focus on your credit. You may feel like throwing your hands up but remember that foreclosure only applies to your home. It's important to pay all remaining bills on time, every time, and seek opportunities to rebuild your credit where you can.
• Be patient. Rebuilding your post-foreclosure financial life is a long-term process, but it's possible if you're persistent. While foreclosure can stay on your record for a long time, consistently paying your bills on time can get your credit back on track.

4. Declaring bankruptcy

In the face of tremendous financial hardship, bankruptcy is a last resort. Bankruptcy can stay on your record for 7 to 10 years, but it may be your only viable option if you're unable to your financial obligations.

Bankruptcy isn't just caused by exorbitant spending or poor financial planning. One of the leading causes of bankruptcy is unexpected medical expenses. While you may feel like your financial situation is out of your control, focus on the things you can control.

• Reduce expenses. Yes, this topic again, but it's important. Although you might have relief from some debt payments, you still have to pay for life's necessities — food, utilities, housing, transportation and taxes.
• Establish an emergency fund. An emergency fund helps you avoid relying on credit, which may not be available in the short term. Start automatic transfers — into a savings account each month and work up to a short-term goal of $1,000. Then increase it from there, eventually saving three to six months of living expenses.
• Clean up your credit. Keep tabs on your credit report as you improve your money management skills. Bankruptcy remains on your credit history for seven to 10 years, but you could still be eligible for some forms of credit before then — though likely at a higher interest rate.

If you're going through financial shock right now, take these actions to help you get through it. Then focus on a common theme of budgeting, saving and rebuilding credit to get back on a solid financial foundation.

The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.