The 5 Step Plan for Managing a Personal Financial Breakdown

People encounter various emergencies in their lives, and, as a result, potentially anyone can become financially destabilized at some stage. This takes place when one’s earnings do not meet expenditures for a long time thereby processing a critical and a financially precarious situation. Unlike most other crises, which are simply financial, this type involves the destruction of relationships, reduction of health, and depletion of one’s emotional capacity.

What will follow below is an article detailing five comprehensive and easy steps on how one can manage and get out of a personal financial calamity. The following steps are derived from my personal experiences, literature, and experts’ observations regarding finance. Still, please, seek this information on your and adapt all the stated steps according to your case.

Take something to write on and stick to each of these steps as they will involve reflection and note-taking.

Step 1: Understanding the Causes

Emergencies can be any unfortunate occurrence, which leads to one being in a financially unstable situation which includes; losing a job, accumulating bills, emergencies or other diseases. Ultimately, they boil down to two main factors:

    • Income Reduction
    • Increase in Spending

Your specific type of crisis could be as a result of one or both of these facets, which puts you in a position whereby your earnings are inadequate to support your expenditures hence creating financial pressure. To rise above your current financial problem and prevent similar problems in the future, it is necessary to understand what led to the situation.

The first step entails an appraisal or an assessment of the financial standings and picture of an individual. For every cause think of other possibilities and record them. This may sound like a simple step, but it is usually quite difficult since we develop certain patterns of spending and fail to look for the best ways.

Step 2: Creating a Budget

Budgeting is crucial, which has to be prepared not only in the period of a financial disorder but constantly. If you don’t already have a budget created, now is the best time to do so. This step is very important as it acts as the ground for the subsequent steps.

    • I have discussed the detailed information on how to create budget and I have also provided the free Excel format that you can use. It is important to understand that a well constructed budget gives an individual or any organization a sound outlook of the financial position he/it is in so that best decisions can be made.
    • Your budget should tally all your sources of income and all your expenses no matter how big or small they are. The said theory also requires each and every little expenditure to be documented. If you write down all your spends, it helps you understand yourself better and develop wiser decisions that push you towards better financial stability.
    • You should check through your check statements, receipts, and bills in order to make sure that you have not left out any expenses. For instance, concerning their actions, I usually check my bank statements, and incorporate the new expenditure data into the budget a few days after the purchase is made.

Step 3: Setting Financial Priorities

This in a way requires that the appropriate setting of financial priorities is done so as to pave way for efficient the going concern.

Having your budget with you, you are now ready to make choices. This is the time to write goals and define money values in order to move out of crisis’s crest.

    • First, prioritize your payments to cover basic needs: rent, grocery, electricity, gas, vehicle, etc These are the bare necessities of life not the luxuries to sustain a wholesome living. When basic needs have been met, the next thing that should be targeted is your debts. Frequently, identify which debts can be put off and which can be reconstructed with regards to the payment plan.
    • Where possible, one should consider establishing an emergency fund which will be used to fund any occurrences without putting pressure to the pocket. If there is to be a similar event in the future then it will be helpful if there is a cushion made so as to avoid its effects or tackle it in a better way than was done now.

Step 4: Setting up a Plan

Having analyzed the financial state of affairs and determined the priorities, we need to make a plan. Record this plan and put it somewhere you will be able to see it to ensure that you are always reminded of it.

    • Your plan should be quantifiable and time-bound showing what needs to be achieved within a certain time period. The more specific you are in your goals, the simpler it becomes to measure your advance and quantify outcomes beneath efforts. Here are key components to include:
    • Objective: Syllabically, it is important for you to declare the intention of coming out of the crisis.
    • Available Resources: If possible, list any other resource that can be obtained in order to achieve the set goal, for example, money saved for emergencies or contacts of people who can be helpful.
    • Reduce/Limited Expenses: Some of the austerity measures that are useful and can be followed are; Creditor one may propose that debt can be paid a little amount of money or be a little longer to be paid, this should be a little bit considered.
    • Increase Income: Review ideas to increase your earnings, for example, getting a higher paying job, accepting a part-time job, or selling items one no longer requires. Consider what are your strengths and how can you utilize them for extra money.
    • Internet chances have emerged and opened different routes through which one can boost up the income. If you need ideas, here are some options to consider:
      • Freelancing
      • Online tutoring
      • Marketing company’s products or services online
    • In prolonged situations, you might have to go for help to governmental organizations, NGOs or any other organizations which provide support. However, according to the guideline, the assistance that is often provided by such institutions should be temporary. The end-goal is to be able to fend for oneself through the money being earned from investments.
    • Stay focused with an intense determination to the laid down goals and strategies. Lack of such finance can be a discouraging factor, but it should be noted that nothing is impossible if only one is persistent and patient enough.

Step 5: Review and Adjustment

  • This final step is critical to sustainability of the idea with the company. Reviewing your plan is also very crucial; it is always recommended that the plan should be revised and updated to suit the current needs. The more detailed objectives and strategies are outlined, the better you will be able to track the results and adjust the intervention course to the existing conditions.
  • That’s why your plan should not remain a document gathering dust on a shelf. Consult it often, evaluate but analyze the progress made and modify the plan if deemed relevant. Perhaps, it can be employed as the map that helps set directions for your actions or even your decisions.
  • In essence, there are several ways, albeit difficult, of extricating oneself from a financial crisis. Just bear in mind that everyone, includes millionaires, have gone through it and they were able to come out of it. Thus, it is possible to conclude that endurance, self-discipline, and a clear-scheduled strategy are the main factors that can help on the way through and come out to win.


Managing one’s own finance can indeed be quite stressing, but this is not to say that it cannot be surmounted. The major stages to restore the financial stability includes the identification of the causes, establishing of the budget, setting priorities, formulation of a detailed plan, and follow up.

Therefore, you get to be on top of your financial affairs, and begin to make right choices in order to overcome the crisis and come out a better person financially. Remember that, it is not about how you or one stumbles but how swiftly and efficiently one rises back up again.

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