This is a guest post from Neal Frankle, CFP®. Like many, he was affected by the financial crisis but unlike most who did nothing, he managed to turn it into a positive experience.
It’s easy to be scared to death these days. You may have lost 40% (or more) of your investment capital. To put the cherry on top, you might be making a lot less money now than you did 12 months ago too. Times are tough. Believe me, I get it.
But like no other time before in your life, now is the time for an adult assessment of where you stand financially. The funny thing is you may find that things aren’t as bad as you think. For example, my income took a major hit when the market started to melt down last year. I am in the money management business and as the assets I manage shrank, so did my paycheck. To make matters worse, my business expenses are fixed so my net income went down much faster than the market. Believe me, I know what financial pain is.
I got scared. I worried about my clients. I worried about my business. I worried about my family. I worried about worrying. I got out of this funk by taking an objective look at my situation. I:
- looked at exactly how much we were spending and how much we could cut. There were things that “we couldn’t live without” only a few months ago but we learned to live without them anyway.
- took many of the steps outlined in this blog over the last several months. (editor’s comment: what a smart man)
- got my entire family involved in the finances and it was the first time they ever took an interest. Everyone pitched in. It was good.
It turned out that it wasn’t all that bad.
Since then, we spent more time together as a family doing things that didn’t cost money. We played cards instead of going out to movies. We sat and talked instead of going out to dinner. This was a huge positive and it’s a gift I never would have gotten had it not been for the economic downturn.
I also made changes at the office and readjusted my retirement plan. I’ll probably have to work 5 years longer than I originally anticipated, but that’s not so bad either. I love what I do and I can’t imagine doing anything different with my time. The great thing is, the 5 extra years doesn’t take into account the possibility that things could improve. Stranger & worse things have happened.
If you are worried and have financial anxiety, assess your situation objectively. What is the worst thing that could happen? Is it likely that you’ll starve and be homeless? Probably not. What is the worst-case scenario for you?
The next question is, “Can you accept your worst-case scenario? If you have to cut your expenses or get an additional job, is it really all that bad?
The last question is, can you improve the situation? In my case, I had no control over the market but I did have control over how I communicated with my clients and how much money I spent in the office and at home. What can you do to improve your situation?
A few months ago I never would have said this but now I have to admit that I’m grateful for this financial fiasco. I’m not happy about the damage it’s done to millions of people, but it really helped me focus on what matters and what doesn’t.
How about you? Have you benefited in any way from what’s happening in the financial world? I’d really like to know.