So the shit hit the fan.
Now what? Step one, turn off the fan. Step two, start cleaning up.
In all seriousness, adversity is a part of life, and financial adversity is something we’ve all faced. And like the Stoics say, you can’t control what happens to you, only how you respond. With that in mind, I’m going to talk about how to successfully navigate financial adversity, and also help you prepare and strengthen yourself so you’re better positioned to handle more of it in the future.
I’ve lived through market crashes, recessions and pandemics. My family has experienced the tragedy of losing someone before their time. Over my 20+ year career as a financial advisor and Investopedia top 100 financial advisor many years in a row, I’ve learned having your financial affairs in order goes a long way to helping manage through hard times.
While money can’t take away emotional pain or create happiness, it does provide stability and peace of mind-when you have it. Not having it can exacerbate an already bad situation. Bottom line, it’s better to have money.
It’s my goal to help you navigate financial adversity and to emerge from it stronger.
Here’s what we’ll cover:
- Neutralize ongoing threats
- Conduct a postmortem
- Create your plan for moving forward
- First principles to put to work
Let’s get started.
Neutralize ongoing threats
What’s your favorite police/crime drama? If you watch enough, you know the first thing a police officer does when they arrive is to secure the scene. They do this to ensure the bad person isn’t still a threat.
When we experience adversity, we need to do the same. We need to look at the scene and figure out what needs to be done to stop the figurative bleeding.
If you’ve been the victim of cybercrime, have you secured other aspects of your online life? Have you changed passwords, checked other accounts, and alerted your banks?
If you lost your job, have you updated your resume and started the search for your next opportunity?
If you’re experiencing a short-term disability, have you reached out to the HR leaders at your company to access your employee benefits?
During highly stressful and emotional times, it’s important to keep your cool and act logically. Determine what you have control over and make sure you’re doing everything you can to weather the storm you’re experiencing. Who can you reach out to for help? What insurance or relief programs are available? Take a business-like approach to getting past whatever adversity you’re experiencing.
Conduct a postmortem
This too shall pass. Everything happens for a reason. I could continue with these, but you get the idea. When we’re in the middle of an emergency, it can feel like we’re never going to make it out. But you probably will.
Once you come out the other side, it’s valuable to conduct a postmortem. All this means is to review something after it’s happened. Here are the steps to follow when conducting a postmortem of financial adversity:
- What happened?
- Why did it happen?
- Who are the responsible parties?
- What can be done to fix the situation?
- What’s the best way to move forward?
What happened? After a little time has passed, you’ll be in a better position to evaluate what happened.
Why did it happen? Whether it was within your control or not, be as honest as you can with yourself about what caused the problem.
Who are the responsible parties? I’m a massive proponent of accepting ownership for the good and bad things in my life, but that doesn’t mean what happened wasn’t somebody else’s fault. Work to assign blame to the correct parties.
What can be done to fix the situation? Is there anything to be done? If there is, work to determine what would fix the problem.
What’s the best way to move forward? Napoleon Hill famously said, “Every adversity carries with it the seed of an equivalent or greater value.” While this may be hard to accept/digest, it’s the truth. Every bad situation presents an opportunity to grow and learn.
Create your plan for moving forward
“Never let a good crisis go to waste.” – Winston Churchill
Change often requires hitting rock bottom, or coming close to it. While I’m not sure why that’s true, I simply know that it is. When you’re clear of your financial problem, it’s time to create a plan for moving forward to a better future. And that’s fundamentally what I want for you.
I want everything to achieve their desired level of financial success. And I know in order to do that, the first milestone is financial security.
Here are the steps to finding financial security:
- Set your financial goals. You need to know what success means to you in every area of life. To help with this process, you can access our Goals course for free.
- Get clear on your values. There’s never been a more important time to be firm in what you believe and what’s of greatest value to you. To help here, you can access our Values course for free.
- Know your facts. You need to understand your cash flow, keep a budget, be a good steward of your credit, and understand your beliefs about money.
- Get six month’s worth of expenses saved in your emergency fund. This won’t be easy, but it will absolutely provide you with financial peace of mind. It will also be the financial security you need to begin moving towards financial success.
First principles to put to work
A first principle in something that is true. There’s no subjective interpretation, it just is.
When it comes to personal finance, I want to share 7 that you can put to work in your life immediately.
- Pay yourself first. If you’re in the habit of paying everyone else first and waiting to pay yourself, you’ll find there’s nothing left over for you. You do this by signing up for your company’s 401(k), opening an IRA and setting up automatic contributions, setting up automatic contributions to a savings account, or to a taxable brokerage account.
- Stay out of debt. Credit card debt crushes us. If you’re in it, getting out of it should be a top priority. You can access our Get Out of Debt course for free.
- Diversify. As investors, we take on too much risk. You can easily take a diversified approach to your investing through low-cost mutual funds or ETFs.
- Spend less than you make. This is an example of, “Sounds easy, does hard.” I’m confident you intellectually know this to be true. But almost two thirds of us are living paycheck-to-paycheck, which means we’re not doing it.
- Plan for emergencies. As you come out of your current financial adversity, rest assured more will be coming your way in the future. Setting your financial foundation and creating your emergency fund is how you follow this first principle.
- Know yourself and your patterns. We all follow predictable patterns because we’re creatures of habit. Work to recognize yours and when you identify negative behaviors, work to break them and create positive ones.
- Become the CEO of your financial life. There will never be anyone more interested in financial success than you are. Becoming CEO doesn’t mean you have to do everything, but it does mean you need to take an active interest in everything. Accept personal responsibility and start acting accordingly.
Making it real
Financial adversities can set us back. But they can also propel us forward.
I’m hopeful these tips and steps can help you emerge from your problem better and stronger. I’m confident if you follow them that you’ll put yourself on the path to a great financial future.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
Connect with one of our Certified Partners to get any question answered.
If you’d like help getting on the same page with your partner, check out our Same $ Page Course.
If you’d like to help your kids get good with money, check out our Teaching Kids about Money course.
Stay up to date by getting our monthly updates.
Check out the LifeBlood podcast.
LifeBlood is supported by our audience. If you purchase through links on our site, we may earn an affiliate commission. Learn more.