Rebuild your emergency fund
You may have depleted your emergency fund due to a financial setback. If that’s the case, it’s important to rebuild. And you may want to aim higher than what you had before.
For years, three to six months of living expenses was the gold standard for emergency savings. But since the events of the pandemic, some financial experts have changed their tune.
Suze Orman, for example, now recommends aiming for a 12-month emergency fund so you’re covered for a range of financial events. But, she also acknowledges that it can take a lot of time to get to a year’s worth of rainy-day savings.
To avoid getting frustrated, focus on shorter-term milestones. For example, if you’re trying to get to a 12-month emergency fund, first aim to build up enough savings to cover one month of essential living costs. Once you’ve done that (and given yourself a pat on the back), move on to your next month, and so forth.
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Learn moreTackle the debt you've racked up
If a financial hardship caused you to rack up credit card debt, you may be staring at a balance that feels daunting to pay off. The average U.S. household with credit card debt owes about $6,065, Federal Reserve data shows. But, your balance may be higher if you found yourself in a dire situation and you didn’t have nearly enough savings to cover it.
Even a smaller credit card balance could be eating up your income and causing you a world of emotional distress. Equifax reports that there's a strong link between debt and poor mental health, and that people with debt are more likely to have stress, depression and anxiety.
Once you start tackling your debt, you may start to see the light at the end of the tunnel and feel better. And while you have options for paying off debt, it often pays to start with the costliest debt you have and work your way downward.
Work on boosting your income
A higher salary could be your ticket to working your way out of a financial hole. And there are a few ways to go about getting one.
You could try identifying skills you’re missing and build them up to excel at your current job. You can also talk to a recruiter to make sure you’re being paid fairly for your role.
Another way to score more money? Ask for it. A 2024 Lending Tree survey found that 82% of full-time workers who asked for a pay raise in the previous year had received one. But if you don’t speak up, you may not see any pay increase.
If you can’t snag a salary increase, you can try boosting your income with a side hustle. Side Hustle Nation reports that the average side hustle brings in $1,122 a month.
Granted, the median monthly side hustle payday is only $200, which tells us that $1,122 may not be so realistic. But, it all depends on the job you snag and the amount of time you're willing to put in.
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Learn moreGet help from a financial adviser
It’s a big myth that financial advisers only want to work with wealthy clients. In some cases, the way to become wealthy is to work with a professional over time.
A financial adviser can help you create a realistic savings plan. They can also offer guidance on how to efficiently dig your way out of debt. Plus, they may be able to recommend different types of insurance for protection against future hardships.
If you feel that your financial situation is a mess, you may want to see if there’s a low-fee adviser who will work with you to help you recover. You may also be eligible for no-cost financial advice through the Financial Planning Association’s pro bono program.
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