My finances have taken a hit. What should I do now?

Whether it's a job loss, mounting debt or a bad investment, the temptation to instantly recover the financial loss may be strong, but the first priority should be doing what you can to stop the current situation from becoming worse. 

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22 Aug 2026 09:30PM

In my 20s, an older friend in the banking industry shared how she had unwittingly developed a habit of overspending on her credit cards and ended up S$30,000 (US$23,500) in debt.

Determined to turn her life around, she froze her credit cards, channelled her money towards repaying her debts, started selling her branded goods on marketplaces and cut down on eating out.

During this time, I noticed that she often talked about avoiding further mistakes. But what surprised me most was how she stopped talking about investing altogether. We used to exchange investment ideas in a group chat, but she eventually put her monthly investments on hold until her finances improved.

Her situation taught me something I've since come to see as important whenever we face a major financial setback, whether it's debt, a job loss, a bad investment or a scam.

When such things happen, the first instinct is to start cancelling and cutting down on expenses, and telling everyone in the household to tighten their belts for the next few months.

Of course, these are sensible moves – but when a household is facing a serious financial setback, cutting discretionary spending can take us only so far. And for anyone with outstanding loans or credit card balances, interest doesn't stop accumulating just because income has.

Instead of focusing on what we can cut, perhaps a better approach is to give ourselves enough financial runway to recover.

STOP THE BLEEDING FIRST 

Financial problems can happen suddenly, such as getting retrenched, suffering a major investment loss overnight, or falling victim to a scam that takes your life's savings. 

Sometimes, several problems hit at once. 

You may already be in debt when you lose your job, or find yourself supporting your children or ageing parents while your savings are shrinking. Money problems tend to feed into one another, ramping up your sense of urgency and making it feel as though you need to fix everything all at once.

And yet, financial recovery does not happen overnight.

The first step is to ask: What is currently making my situation worse every month?

If you accumulated too much debt from consumer spending, it can be worth removing your stored card details from shopping platforms and reducing your credit card limit for discretionary spending, as my friend did.

Pay off higher-interest debts first, so the problem doesn't compound longer than it should.

If you suffered a large investment loss, resist the temptation to make increasingly risky trades in the hope of quickly winning the money back. 

The same applies after a scam. Once someone has been scammed, they may be contacted by people claiming they can recover the stolen funds, usually by requiring another upfront payment first. Do not risk losing more money just because accepting the original loss feels unbearable.

If you have lost your job, recalculate your monthly expenses based on your new circumstances and reduce your burn rate to stretch your emergency funds further. 

During this time, this may also mean temporarily pausing your regular investments. 

The goal at this stage is not to recover everything you have lost. It is simply to stop your financial situation from getting worse and give yourself more time to recover.

STABILISE YOUR CASH FLOW 

Once you've stopped the financial leaks, the next priority is to work out the minimum your household needs each month.

This matters because being short of money can become expensive. If we miss a bill payment, we incur a late fee. Carrying credit card debt can saddle us with interest rates of more than 25 per cent a year.

The less financial breathing room we have, the more costly each subsequent mistake becomes.

Start by identifying essential expenses such as mortgage, groceries, utilities, transport, dependants' needs and basic healthcare, as well as expenses that protect you financially, such as essential insurance coverage and minimum debt repayments.  

If you had built up your emergency funds while you were working, this is the time to use them. 

At the same time, having such funds does not mean changing nothing about your spending. 

If your essential household expenses are S$6,000 a month and you have S$30,000 in your emergency savings account, that gives you five months of runway. Bring your monthly expenses down to S$4,000 a month, and you buy yourself more time to find your footing without having to borrow to pay next month's bills.

You may also need to find ways to temporarily bridge the income gap. 

One of my friends ended up teaching tuition for a year before she found her next career move. 

Depending on your circumstances, part-time or freelance work may offer a lifeline.

Even if it doesn't immediately replace your previous salary, it can reduce the amount you need to draw from your savings each month. The immediate goal here is to fix the monthly deficit first.

REBUILD YOUR SAFETY NET, NOT YOUR OLD LIFE 

Once your financial situation has stabilised, you may be tempted to start investing again and make up for lost time. But your priority should now be on rebuilding your emergency savings.

Unexpected emergencies, such as a parent being hospitalised or the refrigerator breaking down, can happen when you least expect it, and an emergency fund prevents you from financing them with debt and interest.

Once your emergency fund has recovered and your monthly cash flow is positive again, you can return to focusing on your longer-term goals, such as investing, retirement planning, or rebuilding funds for your children's education.

One of the hardest things about financial setbacks is that they can make us feel as though years of our hard work have disappeared.

But recovery does not always mean returning to the same salary, savings balance or investment portfolio you had before. 

Someone who has paid off S$10,000 of debt has made enormous progress even if their investment account is still empty. Someone who is earning less than before but no longer drawing down their savings is recovering, too. 

Financial recovery is rarely a straight line. We do not need to solve our entire financial life overnight. We only need to make sure the decisions we make this month leave us with more options next month.

When times are bad, the biggest financial win may not be about making more money, but simply stopping things from getting worse, buying yourself more time, and then slowly building your way back.

Dawn Cher, also known as SG Budget Babe, is the bestselling author of Take Back Control of Your Money. She has been running a popular blog on personal finance for the last 12 years.