Your Financial Crisis Manual
| March 26, 2012 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
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.
Draw Inspiration
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.
Resolve
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.
Course Correct
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.
Closing Thoughts
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!
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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
So much to chew on in this. I do think there are times when people get so overwhelmed by their situation that they become paralyzed. Paralysis doesn't make us better at resolving financial crises. But neither does the crisis of the moment have to define who we are.
Agreed. I hate feeling overwhelmed. I try to reduce instances where I'm under that kind of pressure. Sometimes time involves taking a decided step back to process.
Very powerful steps Roshawn! And I love the quote: Men don’t drown by being underwater; they drown by staying underwater.
Thanks MC! I really appreciate it. That quote has gotten me through very challenging times.
Great post as always. I really like your point about tracking your progress. This has been huge for me in reaching some of my goals. Whether it be financial or fitness or anything else, I record each bit of progress I make. It helps keep you motivated and focused.It also helps you stay positive and avoid negative feelings.
Miss T! I'm so happy you are back!
It's funny that you use the fitness goals as your example. I certainly did that too, honestly years before even noted the Dave Ramsey example. It can be TREMENDOUSLY powerful, so I'm so with you there.
Thanks. I had a great trip. I will be working on getting a few pics up on the blog in the next few weeks. Just catching up from jetlag and the other must dos.
Miss T, I'm so glad to hear that. I can't wait for the pics. I'm sure you have a lot of things on your to do list. I'll be traveling very soon too (just not anyplace exotic.
This is great Roshawn. Don't forget the 'Law of Identity': A is A, a thing is what it is. This can help you define the immediate threat and get those real facts you mention. Really stimulating post. I always like to hear about Stallone's story too, what a dude!
Hey Drew. I REALLY appreciate your comment. I've never heard of the Law of Identity, so duly noted. I appreciate that insight and having you as a reader. Cheers!
First, I love that you included the Nietzsche quote – I found his writings very interesting when I studied philosophy in college…
Moving on, I'm glad you included the section on drawing inspiration. That's so important. A lot of people get so set in the day to day that they forget to look to the future, the brighter horizons ahead, and feel depressed instead of inspired.
I never studied philosophy, so sometimes I'm getting exposed to some of the teachings for the first time. It's very enlightening.
I think too often, those of us in the PF niche ignore inspiration, yet it's very important to what we do as well.
A very well researched and thorough article. This article is mentions key points to survive any setback in Life. Loved your quotes. I would suggest you publish this article as an Ebook 🙂
Thanks for sharing,
Karunesh http://www.chase-a-dream.com/
Thanks so much Karunesh! I will definitely consider adding this to an eBook that I am preparing. Thanks for the recommendation. (I appreciate it!)
Having mentors is hugely helpful. Listening to them is even better. Great article as usual, Roshawn.
Thanks so much Andrew! Here's a question for you… (playing devil's advocate)… if you don't listen to someone's advice, can you honestly say that they are your mentor?
Your last paragraph is powerful. Everyone goes has to fall off the horse before they succeed.
What amazes me are the sheer numbers of inspirational stories that have a person who failed as a central feature. That narrative is very powerful.
Sometimes the best way to learn a lesson and to have it stay learnt is to mess up big time. Then you really hunker down and think… what went wrong and how do I ensure this never happens again. My favourite related quote is actually a Winston Churchill one: "Success is the ability to go from one failure to another with no loss of enthusiasm." It's very true… with every failure you learn a lesson, but the hard part is still being around to put that lesson into practice rather than throwing in the towel
Thanks for the comment Rob!
That's a very important point. You can definitely learn from a mess. Pain is a very powerful teacher. I love that Churchill quote as well. Thanks for sharing it. It has definitely served me well during some difficult times as well. I really appreciate your insights!
Shawn, I loved Sylvester's story; it's truly inspiring for anyone who wants to achieve success. Period!
Agreed. There's nothing more to say!
Excellent post! Very detailed.
I find that action plans work best for me. I can list all of the steps that need to be done and then break them down even further into smaller tasks to ensure that each action step gets done.
Thank you so much Tackling your debt!!!! Action plans can be very powerful when followed. I find that often really large tasks tend not to be as intimidating when they are broken down into individual components.
Glad that someone wrote about the importance of crisis and how to cope with it. I have long now believed that crisis is absolutely necessary for change; and between you and me I did go through all steps you discuss. Taking a deep breath and rolling to changebthe situation, though, was the key. In fact, turning our financial situation around was my resolution in 2010. Good worknas usual, Roshawn!
Thank you so much Maria!!!! I really do appreciate your account of your own crisis. I'm so proud of your progress, and you sharing your story is impacting thousands of readers. I applaud your efforts and your openness.
Hope and confidence are the basis. If you know deep inside your self that you will survive this, then you live another day. Having some good friends can help you in this. Seeing others coping with crisis as well (role models). Have the hope and confidence, then follow these 9 steps and you are all set.
Van Beek, I'm with you! You definitely have to believe in yourself. If you don't believe in you, it will be hard for someone else to believe in you. Moreover, you believing in yourself and perhaps someone else believing in you could be the difference between you getting that job or being denied, you getting premium mentorship or languishing in ignorance, and you stepping out on faith or being paralyzed by fear. It all goes back to what you know deep down. Thanks so much for the comment. I really appreciate it.
This is very well written Roshawn.
I think having a plan has helped me the most. It gives so much confidence, even in the darkest of times. And, it has kept me honest whenever I am tempted to stray.
Thanks so much Bret!
I know having a plan can focus your energy towards coming out instead of being overwhelmed by the circumstances. Often, that's all that is necessary: within you are already all the tools necessary to overcome the crisis, but you must believe that you can come out of the crisis first. I agree. It gives so much confidence "even in the darkest of times" that's is so well said and heartfelt.
Hi Roshawn,
I am loving the new theme! Course-correcting is so important. You can plan up-front, but you must also be prepared to react to the waves ahead.
Thank you so much Kevin! We definitely need to be able to adapt. That's often what distinguishes the "amateurs" from the "masters" or those who become the "masters" of their own domain: the ability to respond appropriately to unexpected challenges.
Man Roshawn, where do you come up with this stuff? Inspirational reading as usual! Loved your point about describing a problem, looking for sympahty, rather than finding solutions. Guilty as charged! Solid advice about remembering the crisis and celebrating. I'm also guilty of just seeing the negative points and forgeting the positive of surviving it!
Buck, I get inspired to write about different topics. Since I've been writing in the PF genre for a little while, I like to change things up. Thank you so much for your comment. I think we can all finds ourselves in wanting sympathy category. I am surprised that you have just seen the negative though! You seem like such an upbeat and happy person from your posts and podcasts.
Thank you Mr. Watson. I enjoyed every bit of it. Truly, action beats inaction. I may also add that there are others who are partially dependent on relatives. When relatives got broke, one is also hardly affected. For someone who doesn’t have the need to be responsible, maxing out credit cards becomes a habit.
Thank you for commenting Belinda. I really appreciate it. You bring up a very interesting dilemma about co-dependent family members. I think it is very important to have healthy boundaries with family members; otherwise, the situation can end up hurting all parties instead of helping them.
The sayings you have quoted is very true: Your attitude determines your altitude. I remembered a preaching yesterday on not giving up joy and the effect of negative emotions on the body. If you let negativity stay in you and entertain negative thoughts, you will surely end up damaging your mental and physical health. The proper state of mind is very important in handling any crisis.
By the way, your post is very informative. More information and you’ll have a wonderful ebook! 🙂
Best regards,
Belinda
Thanks Belinda!
I love that quote as well. I do agree that one can become too focused on negativity, that they literally poison any efforts to improve their lives. They end up sabotaging their own success. It is quite tragic.
I actually do have a lot more material on this topic. We'll see if it finds it way into a product 🙂
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