(7 minute read)

So you’re moving along on your debt-free journey when suddenly your life gets hit with something unexpected. Maybe you lost your job, or you suffered a debilitating injury. Perhaps you found out you are pregnant or you have to help take care of a parent who has fallen ill. Whatever new world you are now navigating, it probably has financial ramifications that not only don’t fit into your existing budget but also makes the current budget you have pretty worthless. Well, have no fear! No matter what life throws at you, your budget is the one thing you can still maintain control over. And you can rework and reboot it in 4 weeks or less!

Reboot your financial plan.

The first step when experiencing a life change that dramatically uproots your budget is to reboot your financial plan. If you’ve been on your debt-free journey for any length of time now, you know how important it is to have a plan to get out of debt. But when life throws you a curveball, the most important thing to do is to take a step back and make sure that the plan you have now fits with your new “normal.”

Take one week to reboot your financial plan by level-setting where you are at now. The four big categories you should write down are: How much money do you have coming in, how much money are you spending, how much money are you putting towards debt, and how much money are you saving? When you experience a significant life change, one or more of these areas most likely got hit, so it is essential to level-set today to know your starting point. 

If you lost a primary income or are going to incur significant expenses, you may want to think about if you need to tap into your emergency fund. If you think the changes that you are experiencing are going to be temporary, and you have at least 3-6 months saved up, then this could be the perfect example of a time when you need to tap into this fund. This could be loss of an income, short term disability, or break from work to care for a family member, or because you broke your leg and know that your insurance won’t cover everything. Regardless of what is going on in your life, your emergency fund could be the key to helping you get through this time.

However, if you don’t have an emergency fund or if the life changes that you are experiencing will become your new normal (such as being pregnant), then it is essential to develop a new financial plan and budget. 

Rework your budget.

Once you know what your current picture looks like today, and you’ve come up with a new financial plan, then you can start making adjustments in specific categories so you can get your budget to balance. Go through each of the four major categories over two weeks and identify where you can cut back, make changes, and where you can increase your efforts. 

Expenses: Start by slashing any costs that you can to make yourself as lean as possible during this time. If you have a student loan or a mortgage, make a call to those companies and find out if they have any hardship or deferment plans you can take advantage of to help get you through these tough times. Consider switching grocery stores to a cheaper option, canceling any subscription services you have (make sure to keep at least one for your sanity), and putting any projects you have on hold until you can entirely rework your budget. 

Debt and Savings: Slow down your debt and savings contributions, but don’t stop contributing. I know it sounds counterintuitive to keep paying off debt and adding money to your savings account if you just lost a job, but it is essential not to let a life change derail your ultimate financial goal – to get out of debt and build a financially free life. What this life change should force you to do is to increase the amount of time it will take you to get there but not stop you entirely. Make sure you are covering the minimum payments on your debt, write down the due dates for everything, so you make sure not to fall delinquent on any payments, and continue to make any retirement contributions through a company-sponsored match account. Aim to save at least $1000 a year in a personal savings account during this time, which works out to $83 per month. 

Income: If you lost a job and therefore, your income category had the most significant impact, then you should spend your short term time and resources on helping you regain employment. But you should rework your income category if your expenses increased dramatically or if finding a job takes you longer than a few months.

Consider picking up a side gig to increase your income during this time temporarily. A good rule of thumb is to try to cover the amount that the life change is now forcing you to incur. If the amount is significantly higher however, shoot to cover at least 50% of the new cost and scale back in your other categories to cover the remaining 50%. 

For example, say you are now caring for an ill parent and find yourself spending $1000 a month on traveling back and forth to see them. Then shoot to find a side gig that can help you cover $1000 a month, which shakes out to about $250 a week. Perhaps you have a couple of evenings free and can drive for Uber or pick up shifts with a delivery service. Maybe you are an early morning riser and can put in a couple of hours before the day gets going writing posts for an online copywriting service. Or perhaps you have a garage or a storage shed full of stuff you’ve been meaning to go through and now is the opportunity to list and sell those items online. Whatever you find, don’t forget that increasing your income category is a great strategy to help you rework a budget that has been derailed by an unexpected life change. 

Restart your debt-free journey.

Okay, you’re three weeks in, and now it’s the home stretch. Take the last week on your 4-week reboot to restart your debt-free journey. I often find that people think of debt as something that is happening around them instead of something that is a pillar of any financial story. But if you are in debt, you should think about it as a limb that is a part of your body; you can’t just cut it off when the going gets tough. If you are serious about getting out of debt and building a financial life that doesn’t include debt, then no matter what happens in your life, you have to continue to make strides to get out of debt. 

Start by reminding yourself why you decided to start on your debt-free journey. Reference your “why” poster and re-read your break up letter to debt. Then review where you are in your debt-free journey. In the last three weeks, you should have written down your current debt balance and the payment plan you had made for yourself previously. You also should have written down when each bill comes due and what the absolute minimum payment is for each. Shoot to pay the minimum payments on each debt and then pick the debt with the highest interest rate and double the payment. This should help you continue to pay off debt while keeping all your debt payments paid until you establish a new “normal” with your budget. 

You did it!

In 4 weeks, you not only revisited and revised your financial plan and debt payoff strategy but also rebooted your budget. Way to go! It can be hard when life throws something unexpected your way, but your budget is always something that you can assert control over if you take a little time to rework it when a life change happens. In as little as four weeks, you can reboot your financial plan, rework your budget, and restart your debt-free journey so you can continue to build a happy, sustainable financial life no matter what life throws at you. 

Shoot me an email if you want help reworking and rebooting a budget that got derailed. And as always, I hope you stay healthy and happy!

Xoxo, 
Amy