personal finance  |  september 13, 2022

7 Suggestions That Could Help You Navigate Periods of Financial Hardship

When you are struggling with financial hardship, it’s difficult to plan for the future if you don’t have confidence in your plans for today.


Key Insights

  • Stretch short-term available cash.

  • Discuss payment options with creditors. Many businesses may offer flexible payment options.

  • Explore low interest rate borrowing options, such as a home equity line of credit or refinancing a mortgage.

  • Carefully consider any distributions from retirement accounts—including loans from a workplace plan or individual retirement account (IRA) distribution.

Judith Ward, CFP®

Thought Leadership Director

It’s difficult to focus on the future if you don’t have confidence in your plans for today. If you or someone you know is struggling with financial hardship, we have some suggestions that can help you get through this trying time.

1. Stretch short-term available cash.

If you received any money in the short term, like a tax refund, use it to pay current expenses or build up an emergency fund.

2. Discuss payment options with creditors.

Many companies may offer flexible payment options on mortgage or rent, credit cards, car loans, and utilities. And they may be willing to work with you if you make a good faith effort to continue some type of payment plan.

3. Review expenses.

Managing expenses is especially important in light of recent increases in inflation. Consider focusing on actions to trim costs in hard-hit categories such as gasoline, travel, and food. Check your subscriptions for streaming services and other types of memberships that are recurring charges. You may be able to temporarily pause these items or decide to cancel if you aren’t using them. Review auto insurance policies to see if changing your deductible could save you money. Your premium may also decrease if you are driving less due to changes in your work situation.

4. Take advantage of available discounts.

Many businesses offer discounts for seniors and military, but some have extended that courtesy to first responders and frontline workers. Other businesses simply offer discounts to anyone who says they need help. Ask at point of purchase if this is available.

5. Explore low interest rate borrowing options.

If you are employed and can qualify, a home equity line of credit (HELOC) can provide access to cash. The interest rates on HELOCs are usually much lower than credit cards. Another option—depending on your current mortgage rate—is to check to see if refinancing may help.

6. Carefully weigh the pros and cons of retirement account loans and withdrawals.

Dipping into retirement savings should be a last resort, but consider the following: Roth IRA contributions can be withdrawn at any time, tax- and penalty-free, and could be your first consideration. Additionally, your workplace plan may allow you to take a loan that you would pay back over a handful of years. Keep in mind, if you leave your employer and are unable to repay the loan, it may count as a distribution that could be subject to income tax and possibly a 10% excise tax penalty. Taking a hardship distribution or total distribution from an IRA may result in taxes and penalties and do the most harm to your future retirement savings. Make sure you understand all of the details before tapping into money intended for the long term.

7. Remember, it’s OK to ask for help.

Asking for help is a tough step to take, especially if you’ve never been in a situation where you have had trouble making ends meet.

If you need to take a break from saving until your current financial situation settles, make sure you make a point to revisit the decision in the future. In the short term, it may make sense to contribute less to retirement accounts and have more cash on hand in a savings, checking, or money market account. Ideally, though, still contribute enough to receive any company match. By taking the right steps to get through a period of hardship, you can get back on track when your situation improves.

Important Information

This material is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. This material does not provide recommendations concerning investments, investment strategies, or account types; it is not individualized to the needs of any specific investor and is not intended to suggest that any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making. Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.

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Next Steps

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