- Personal Finance»
- Understanding Finance
3 Steps to Bouncing Back after a Financial Setback
If you have ever had a financial setback, you understand how hard it is to cope. Your mind is flooded with thoughts of hopelessness, despair, worthlessness and defeat. You wonder how on earth you will dig yourself out from the pit that you seem to have been thrown into. Suddenly, you feel burdened beyond belief and all you can focus on is that pain that you’re feeling. If you are experiencing a financial setback right now, take heart. You can bounce back. You can thrive again. You can get back on your feet and live again.
A financial setback can occur due to a myriad of circumstances. The four (4) most common causes of a financial setback are a major illness, a divorce, a failed business, and a lost job or lost client. Whatever, the source of your financial setback, there is a way of bouncing back. Here are three important steps to take on your way back to financial health.
Step 1 – Accept Your Own Reality
So you realize that you are in bad position right now. Whether or not your current situation is your fault or not, playing the blame game will do nothing to get you out of it. The faster you come to grips with the reality of the situation, the faster you will recover from it. Ok so you are facing a divorce that you never expected. Your friends and family are all shocked and nothing that they say makes matters any better. Along with the emotional pain, you are left in a bad financial situation wondering what’s going to happen to your children, to your house, to your sanity. Or you may have medical bills that you can’t pay and you are running out of options. Your business has failed and you have no other source of income, what do you do? The first, and most important step in bouncing back after a financial setback is accepting your own reality. Accept your failures, accept your shortcomings, accept your own mistakes. The fact is that everybody makes mistakes. Accept the fact that this too shall pass. Accept the fact that time will heal your wounds and that others have been, and others will be, in worse situations than you are right now. Accept that there are some things that you cannot change but that you can change your perspective. Remember that the reputable Donald Trump faced bankruptcy not once, but four times! Today he is still one of the richest men alive. It is far easier said than done but you must be strong and simply accept that this right now is your reality. Denial will get you nowhere. Blame will get you nowhere. Self-pity will get you nowhere. So its time to take out those tissues, blow your nose, dry your tears and snap out of it. I don’t mean to sound harsh but if you are going to survive this, you have to put everything into perspective and be prepared to make some tough choices.
Step 2 – Decide on a Plan of Action
When you have accepted your own reality, you should be ready to decide upon a plan of action. This process requires some amount of brainstorming and discipline. Resist the temptation to dwell on the past and instead focus on the future. Where would you like to see yourself one month, three months, a year from today? Realize that what you decide upon today will largely determine where you will be in the future. It is an excellent idea to write down your plans which will make them more concrete and attainable. You need to be clear in your mind about the following questions:
- Where do you want to be 1 month, 3 months, 12 months from today? This process is really setting milestones for yourself. If for example you have lost your business, you may set a 1 month goal of revising your business plan or of putting together research about alternative business options or your goal may be to update your resume and to send out at least 30 job applications to possible employers. During the time leading up to the end of the month, you would have established weekly goals that you have set for yourself.
- When will you measure your progress? Will you take stock of your accomplishments on a weekly basis, a monthly basis or on a quarterly or half yearly basis? It is a good idea to set monthly goals that you break down into weekly goals. By doing this you will make yourself accountable on a regular basis which minimizes the likelihood that you will be sidetracked and distracted. Measurement is important so that you can see for yourself the progress that you have made. Remember that anything that gets measured gets done.
- Who will you turn to for emotional support and who will you turn to for practical support? Remember that no man is an island and you will need the support of friends and loved ones to help you get through these tough times. You don’t need to involve all your friends but you need to find someone who you can share with and who will give you objective advice and who will be willing to just listen as you express your feelings. If you have a pastor that you trust and who you can talk to, you should set appointments to have dialogue with him.
- How will you earn or make a living during the process? Bouncing back from a financial setback requires a broad back and a tough demeanor. Be prepared to take on lesser paying, less prestigious, temporary assignments while you get back on your feet. If you are going to survive, you must set aside all false pride. As long as what you decide to do is not illegal or morally wrong, hold your head high and give it your best shot. If you were in an executive position and you suddenly find yourself stripped of that 6 figure salary, take heart. Take stock of all your skills and work them. Now is the perfect opportunity to utilize those latent talents. Are you skilled at sales? People will always be willing to pay a good commission if you can get their products sold for them. Maybe you’re good at making speeches. Offer your services online. The possibilities are endless. Remember also that you will still have bills to pay and financial obligations such as loans, mortgages or credit card bills. Be sure to contact your creditors early and make them aware of your situation. Creditors appreciate when borrowers are up front and honest with them and they are usually prepared to make alternate arrangements while you get back on your feet. This could involve for example, freezing the interest on your account for a while, rewriting your loan so that your monthly payments are smaller or even writing off a portion of the loan for you. You just have to ask. In addition, you should cut back on all expenses that are not essential. This requires sacrifice but it must be done. If you have to pull your children out of private school and get them into the public system, do it. Get over the myth that private is always better. In many cases that is just a false impression. If you have to move to a less fancy neighborhood while you rent your own home, be prepared to do it.
Note that I didn’t include “Why” in this step. That’s because I am assuming that you had already answered that question in the first step when you decided to accept your own reality.
Step 3 – Put Your Plan Into Action
Don’t spend all your time on step 2. Some of us spend all our time planning and devote very little time to actually implementing the plan. While this is arguably the hardest step, if it is not done then all your efforts would have been wasted. As the Nike tagline states ‘just do it.’ The truth is, it is difficult to do anything when you are hurting emotionally or when you are not feeling on top of the world. It is even harder to do when you have no money in your pocket and very little in the bank. Nevertheless, if you are going to get past this, you must dig in your heels, roll up your sleeves and do what you have to do. Tracking your progress is essential to bouncing back after a financial setback. As you make progress, check off each accomplishment and find little inexpensive ways of rewarding yourself. Take a bubble bath or give yourself a pedicure; anything that will not cost much. Accept that not all your plans will go as expected. There will be times when things will not happen as you would like. Don’t let that deter you. Put plan B into action and keep right on moving.
If you commit to putting these steps into action, I guarantee you that you WILL bounce back after your financial setback. You will be stronger, you will learn from your mistakes and you will survive. Please feel free to share your progress with me.