How Long Does It Take To Recover From a Financial Setback?


Ameriprise is out with a suitable survey for our troubled times – tracking the impact and recovery path from major personal financial setbacks.

The survey covers some interesting ground, especially on what triggers a financial setback, how to recover, and how long it takes to recover. It takes, in fact, about one to five years to recover from a major personal disaster.

The entire survey is worth a look-see, but here are some key takeaways from the Ameriprise survey:

--- Most investors (73%) have experienced at least one major financial setback of some kind in their life, according to the Ameriprise Financial Comebacks study.

--- The most common financial setbacks among investors in the past are typically the same setbacks we are seeing during the pandemic.

--- The good news is that with time and deliberate actions, 89% of those investors have made a comeback or are on the path to recovering.

“Many individuals experience at least one major financial setback at some point,” Ameriprise reports. “And while it’s costly and takes time to recover, 89% of those we surveyed either made a comeback or are on the path to recovering.”

According to Ameriprise, market losses, earning less than we expect, job loss, supporting family members financially, and bad financial decisions are at the top of the list of financial setback triggers. (Personally, I would add divorce to that list.

What are the first steps back from a major financial setback? Ameriprise offers these tips:

Meet with a financial advisor - During difficult times, meeting with a financial professional can be more helpful than ever. Talk with your advisor to guide you through financial decisions to help you get through this difficult time.

Stay focused on your goals - Don’t make impulsive decisions that could have a negative impact on your long-term goals. Stay calm and stay the course. Ameriprise clients can view goal progress online — any time, from any device.

Scrutinize your expenses and monthly budget - Look at your budget with a critical eye. Decide what spending is necessary and what’s discretionary. Cut out or reduce unnecessary expenses.

Avoid tapping your retirement accounts - There are many drawbacks to taking an early retirement plan distribution including the taxes you may face. Also, an early withdrawal reduces the size of your retirement nest egg, and the funds you’ll withdraw will no longer grow tax-deferred.

Invest in ongoing financial planning - Tracking your goals and progress — any time, from any device — can help you feel confident, connected and in control of your financial life.

Personally, I've been focused on paying down debt this year, after six years of college payments. What I've found is that once you start cutting debt and momentum builds, seeing your debt level sink and your saving and credit score rise is a real thing of beauty. 

I'm sure that goes for a financial setback, too. In a way, that's good to know in a year where financial chaos looms large for millions of Americans - who may have to dig out from a financial calamity of their own.