Your Financial Crisis Manual
|March 26, 2012||Posted by Roshawn Watson under Uncategorized|
Crisis is merely concentrated information. When you are facing a big financial problem, you can simultaneously feel lonely, irritated, ineffective, and hopeless. Nonetheless, a devastating financial blow doesn’t mean that doors of abundance are forever shut. Men don’t drown by being underwater; they drown by staying underwater. You can come out of hardship, and the best way to do this is with a plan. Here are 9 steps to navigating a financial crisis.
That which does not kill us makes us stronger. Friedrich Nietzsche
Define the Immediate Threat
I believe one of the first steps to coming out of a financial crisis is to stop the immediate hemorrhaging so that you can fight another day. To achieve this end, you should clearly define the impending threat. First, doing so allows you to allocate your resources accordingly. Second, defining the threat can likewise help you take a step away from the intense emotion associated with the crisis, so that you can gain clarity on the facts. For example, suppose you identify your threat as an outrageously large hospital bill. While it is true this could potentially harm your credit should you be unable to pay, that is not where you are at today most likely. Today, you’re just overwhelmed by the large amount owed, so that’s where the focus should be. Perhaps the hospital will be able to work with you to make the bill more manageable given your income (such as agreeing to partial forgiveness or at least a workable plan), or maybe it is time to start thinking creatively about increasing your income.
The point is to not allow a general awareness of financial problems to dictate your attitude and behavior. Get the real facts; otherwise, you will be ruled by fear, misinformation, and anger.
Anger dwells only in the bosom of fools. – Albert Einstein
Seek Wise Advice
Opinions are like noses: everyone has one, and they usually have a couple of holes in them.
During a crisis, it is important to draw on the available resources, including your access to seasoned mentors, but you have to be careful that you are getting wise advice. Rather than asking advice from anyone that will listen, I love listening to trusted teachers. They have insights well worth the time it takes to develop relationships. In fact, just last week, a professional investor prevented us for making a very costly mistake.
Someone can see the folly in your most carefully laid out plans, so make sure you access their wisdom. While it can be difficult sharing where you have missed it, where you lacked knowledge, or where you have been challenged, especially if you are a private person, it often does more harm to suffer quietly. You have access to this mentor for a reason. Don’t squander opportunities to dip into their wells.
How do you give birth to a bright future? I think motivation is key. The old saying goes your attitude determines your altitude. It becomes very difficult to continuously face life challenges as an “Eeyore.” Sometimes you REQUIRE an infusion of motivation to simply persevere. Remind yourself of uncommon achievers, such as Walt Disney who persisted despite being fired for lack of creativity and Steve Jobs who persisted despite of being ousted by the Apple board. Don’t forget Sylvester Stallone’s powerful story where he believed in himself despite being told repeatedly he wasn’t good enough. Lastly, remind yourself also of when YOU were an uncommon and unlikely champion. Going through a difficult time does not make you any less awesome.
All men fall, but the great ones get back up.
Develop a resolve rectify the situation. As long as we are very emotionally connected to the drama surrounding a problem, it can be difficult resolving the actual problem itself. Misery loves company, so some people are indeed comforted by rehashing their issues to garner sympathy repeatedly, but that won’t necessarily take them any closer to the solutions. In fact, it may prolong their troubles because they are focusing on the problems for sympathy sake rather than for seeking insight.
I’m not suggesting that you discount your pain. Pain is very instructive and can be instrumental in developing the resolve to change your life, BUT if you are too focused on describing the pain instead of finding solutions to your crisis, you won’t progress. Decide which is more important: sympathy for your pain or movement towards your victory.
Create an Actionable and Specific Plan
It’s great when our troubles do end quickly, but if Publisher’s Clearing House1 doesn’t knock on your door, are you still implementing a plan that will make you a financial champion? Creating an actionable and specific plan to overcome a large problem can seem daunting. The key is to keep perspective. Rome was not built in a day and neither was the mess you’re in, most likely. Therefore, don’t ignore the law of process: you can not always be what you are not, but you can become what you are not. Also, be sure that your plan is specific. For example, to plan to get out of debt is not specific enough. Instead, plan to pay off $40,125 in debt over 18 months. That specificity allows you to break the goal down into manageable parts and sets benchmarks whereby you can judge your progress.
Inactivity is the biggest thief of opportunity.
Take action! It is so painful when capable people persist in misery and lack when they possess all that’s necessary to enter into abundance. It is not enough to know what the problem is or know the correct course of action to get out it. At some point you have to progress from “knowing” to “doing.” For example, while reading books and attending seminars and conventions are great, that’s often not what changes a person’s life. Similarly, knowing that business owners are 5 times more like to become millionaires in itself won’t impact your financial world, nor will having a phenomenal idea that never gets implemented. A wide variety of ideas and desires puts money in no one’s pocket. It is only when you use that acquired knowledge or idea and follow a plan of action that you create success. Start taking decided steps out of the mess today.
Track Your Progress
Being on a plan where you are being held accountable is a powerful thing. I noticed this years ago when listening to Dave Ramsey’s radio show. He would methodically walk people through the baby steps. As they saw measurable progress, they were motivated even more to fix their financial sloppiness. Lives were changed by providing a psychological reward (moving to the next stage in the baby steps and encouragement from Dave Ramsey) that incentivized good financial behavior. Contemporary psychology refers to this as the principle of reinforcement: “responses, which are accompanied or closely followed by satisfaction,…will, other things being equal, be… more likely to recur…” (Thorndike, 1911).
You can add positive reinforcement to your crisis eradication plan as well. The rewards don’t have to be big. You may elect to simply chart your financial progress (such as tracking your debt to income ratio, your wealth [or net worth], your debt repayment, the number of cards that you have cut up, etc.) and announce to someone you admire that you are hitting your goals. Often, heartfelt praise is sufficient reinforcement.
Perform a Financial Autopsy
It frequently isn’t until an autopsy is performed that we realize the true pathology underlying someone’s death. Similarly, uncovering the root causes to your financial dysfunction often requires a financial autopsy: introspection and thoughtful consideration of the factors resulting in the crisis. Otherwise, we only address the superficial behavior or problem and are thereby powerless to prevent it from recurring.
For example, 80% of personal finance is behavioral, but we often spend the majority of time on the conduct, and then we wonder why people get suboptimal results. For example, the imminent threat identified earlier, such as “I can’t make my credit card payment this month,” may actually be merely the symptom of the true problem, such as:
- not living on a budget
- having an income inadequate to meet your needs
- having a broken money philosophy
- limiting financial beliefs
- having antiquated money practices
When you are out of the thick of the drama surrounding your crisis, make sure that you truly unload the underlying issues. Perform a systematic financial autopsy, even if it requires meeting with a financial counselor. Deal with the core issues so that the misbehavior doesn’t materialize again.
Memorialize the Event
Yes, it is borderline sadistic to memorialize a financial tragedy, but one of the blessings of harsh financial pain is that it creates such a powerful mental and emotional scar. When recounting a profoundly negative financial event, “sane” people not only remember the trauma that they endured but also resolve to NEVER experience it again. This is known as what some refer to as an “emotional implantation moment.” The power of an emotional implantation moment is that it memorializes that event in your mind. It instantly transports you back to the same feelings and thoughts that you had during that tragedy.
Perhaps we should take this one step further and couple our successful navigation of a difficult financial patch with something that is really positive that perhaps we couldn’t have done beforehand, such as throwing a phenomenal “I’m out of debt party,” taking that enviable vacation, or giving that sizable donation. Regardless of what you do, don’t allow the crisis to leave you bitter and fearful. Place a positive spin on it. After you are out, celebrate leaving that season of your life.
Whatever you don’t acknowledge, you don’t celebrate, and whatever you don’t celebrate will eventually exit your life – The Law of Recognition.
If you value your successes, don’t treat them trivially. They are major and worthy of your celebration.
Yesterday is in the tomb, but tomorrow is in the womb.
You do not have to be defined by negative circumstances and challenges. By strategically approaching crisis, you can decrease the noise and focus on results. Additionally, remember some of the biggest proponents of personal finance and financial literacy have had devastating financial adversity including Dave Ramsey, Robert Kiyosaki, Donald Trump, and Suze Orman. Harness strength found in their stories of triumph. Know that your latter will be better than your former. Lastly, remember when assessing the size of your financial mountains not to discount the size of you.
Adversity causes some men to break; others to break records. William Authur Ward
Decide today which man or woman you will be!
Lastly, if you like this article, please subscribe to my FREE email updates or RSS feed (reader), Retweet it, Like It on Facebook, Tipd it, Fark it, Stumble it, and tag it on Delicious. Also, click here to receive my eBook for FREE.
A Deeper Look at Dave Ramsey’s Seven Baby Steps To Financial Freedom – And How They Apply to Us
Do You have the Courage To Be Wealthy
How To See A Bright Future
3 Myths Regarding The Great Idea
Becoming A Financial Champion
1Note, the estimated odds of winning a recent $10 million sweepstake were 505,000,000 to 1 according to About.com, so if you are banking on winning, it may be a VERY long wait.
Image Credit: Photoloni