4 steps to take during a financial emergency

Whether it's a job loss or another disruption in income or expenses, navigating an unexpected income loss can feel daunting. However, with a well-thought-out financial plan, you can regain control, find stability and gain some peace of mind.

To start, list all sources of income you currently have and gather a full picture of your financial status by noting your savings, debt and essential monthly expenses.

Being honest about your financial standing enables you to lay the groundwork for effective planning, helping to mitigate the crisis through necessary steps.

Your situation at this point can be overwhelming, but it's important to remember your needs are more important than your wants. Start by creating a new  budget  that reflects your current financial situation. This is an opportunity to adjust your short and long-term financial  goals . These goals can help guide your budgeting decisions and help you to remain focused on your priorities. Now, you can evaluate your cash flow by comparing your total income to your total expenses. Allocate your available funds to cover essential items first, like mortgage, utilities and groceries. This may mean you'll need to go over your bank statements from the previous months to identify non-essential spending and explore ways to reduce other costs until you get back on track.

Read more: How to keep your expenses on track with spending buckets

When facing financial challenges, it's important to take control of your finances through strategic actions. Consider consolidating or refinancing your debt to simplify payments or reduce interest rates. You may think about  refinancing  your mortgage at this time. Simultaneously, reach out to your lenders and service providers to explore possible relief options, negotiate better terms and discuss flexible payment plans or extensions. Communicating with your creditors is important if you're struggling to meet debt obligations. Be sincere and honest about your circumstances may convince the lender to work with you. By proactively managing your debt and communicating with creditors, you can work towards stabilizing your situation.

If you don't have an  emergency fund , begin by setting aside a small portion of your income each month, even if it's just a few dollars. Every little bit helps, and it builds a habit of saving. Consider setting up  automatic transfers  to a separate savings account to ensure consistent contributions to your emergency fund.

Learn more: An Ally Bank Savings Account can help you build an emergency fund.

Finding yourself in a sudden financial bind, such as job loss, is a lot for anyone to tackle. Take a deep breath and keep these steps in mind as you navigate through this challenging chapter.