If you are scared to death, and it looks like your financial ship may be going down, this article is for you.
This is a Twelve-Step Survival Kit that will help you get through it. If you are overextended, for whatever reason; if you have been given a pink slip at work, if your business judgments proved to be wrong, or you have no idea how you are going to feed your family, or worse still, if your spouse is leaving you due to financial difficulties; if you are at risk of losing your home, or you have lost your home, your car, or your possessions have been repossessed; if you are overwhelmed with mounting bills that you cannot pay; if you are experiencing remorse over mistaken judgments, fury over the injustices of your situation, shame over your losses, self-doubt over your ability to cope, withering self-esteem because of your failures, and terror at impending bankruptcy, then keep reading. This article is for you. And it is written by someone who has been there, and survived- several times. Believe it or not, so can you.
1. You are not alone. You may not be able to see them through the darkness of the stormy night, but they are out there. They are feeling the same terror, and hopefully doing what you are going to do to save your ship. They are as scared as you are.
2. Get your bearings. Quickly! Take stock of your situation. If you’ve never gotten real in your whole life, get real now. There is no time for fantasy or delusional thinking. There is no time for self-pity or handwringing. Open the bills you are afraid to read, and count every scrap of income or resources you have. Use your compass, your sextant, your gyroscope, and your tools of navigation. Review your financial statement as if your survival depends on it. Don’t have any financial statements? Thought that was only for business people? Did you really think that running a household did not require business skills? Who’s been at the wheel of your ship, anyway? Okay, I’ll lighten up. We’ve all been there. Financial statements are nothing more than lists. So forget about getting a degree in accounting right now, just master the basics. Quickly! Make two columns on a piece of paper, one for Income and one for Expenses. It won’t be pretty, but do it. You can’t afford ignorance right now, and you can’t afford to hide from reality. You need to know what is. First you will notice that the Income list is much shorter than the Expenses list. Include in your list when every bill is due, and how far overdue each item is. Is there anyone in your household who is not being as productive as they could be? Do you have grown children who are hanging around who could be washing cars or flipping burgers instead? Do you have a spouse who hasn’t figured out yet that your ship could founder and go down? Does s/he know how to swim on their own? Now might be a really good time to address this issue. Explain to everyone what the situation is, and the need to work together to get through. You need to get your bearings, and you need to know where the rocks are in the water so you can avoid them, and everyone needs to be moving, purposefully, not aimlessly. All hands on deck! If someone is sound asleep below deck, wake them up, Captain, and get them moving! Your financial life might depend on it.
3. Lash everything to the deck and tighten down the hatches. Quickly! When a storm blows up at sea, the first thing sailors do is to tighten down anything that may be loose on the deck of the ship, or move it below. Move to protect what you have. Get going! Time is of the essence. Survival comes first, and everything else gets put on hold. Now is not the time to launch new careers, get an education (other than the School of Hard Knocks you are currently enrolled in), or fanciful new business schemes. You need to get more cash in quickly, and you need to stop the leaks. Control the spending. Cut up the credit cards (but don’t cancel them). Prepare budgets. Every expense gets scrutinized. Can someone in the family help with the care of small children, to save on Day Care expenses? Can you get by with one less vehicle? Can the kids ride the bus to school, instead of you driving them? (They will survive the shame of public transportation!) Get used to saying No, to yourself, to your spouse, to your children. Be ruthless about expenses that need to go. Either you do it, or someone will do it for you. Which would you prefer? Downsize your plans and expenses for non-essentials, including birthdays and Christmas. Explain why to your family members. Allow your fear to motivate you, not paralyze you. This may be the scariest thing you have ever done, but trust me, do it! And if it pains you to deny anything to your children, just ask yourself whose responsibility it is to teach them how to respond to adversity? If you do not teach them by your own example, who will? Who is coming to save you? (Oh yes, I forgot, our government is, with the money hot off the presses.)
4. Throw your cargo overboard! When sailors know the ship may go down, they start jettisoning cargo. Survival trumps everything else. If you can live without it, and can turn it into cash, do it as quickly as possible. Let’s get this into perspective: if you don’t, your creditors will. At least right now you have some control over the choices to be made. Would you rather make them, or have some trustee of the court make them? Who do you think will be more concerned with your survival? Have a yard sale, use Craig’s List, or Iwanna (a local classified publication), or put For Sale signs on non-essentials. Now is not the time to hold out for top dollar; time is of the essence. Price things to sell.
5. Trim your sails. When you are in a terrible storm, your focus should be on survival, not on destinations. Now is the wrong time to have a lot of wind in your sails. It can very well capsize your boat. So everything gets put on hold. Forget about the vacations, the trips, college educations, and 401ks. You need to get through the right here and the right now, and you can pay attention to all those other things when you have reached safe harbor. Trim your sails, but don’t roll them up and store them below deck. But if you don’t tie them down right now, the storm will rip them to shreds and render them useless when you need them. In other words, stay focused on the essentials. You will get to your recovery plans in due time. Think humble, and forget about impressing anyone. Forget about what anyone may think of you, or who might look down on you, if they “only knew”. Forget about staying fashionable, and teach your children that they may not be able to have everything everyone else in their class seems to have right now. Again, explain, and remind them how much you love them. They, and you, are learning valuable lessons. Remember, if you lived your life as if you were in bankruptcy court, you might never find yourself in bankruptcy court. Who can take on a second job? And what of it, if someone sees you waiting tables, or doing whatever else keeps the Devil at the door? Now is no time for keeping up appearances. Get real and stay real. This takes courage. Do the right thing.
6. Be prepared to bail water. Your financial ship is going to leak. It may be seaworthy, and maybe it will survive the storm, but it is under great stress and is taking a beating. You are going to have to work endlessly at damage control. You will have to talk to lenders and other creditors. These people are not terribly interested in your stories. They are very interested in getting paid. Figure out what you can do. Make a list of what you can pay everyone before you commit to the first one. You cannot handle this piecemeal, with the first, second, and third creditor to badger you getting the lion’s share of your scarce resources. You cannot run madly from one leak to the next; you have to prioritize, and handle those leaks that are in the most sensitive parts of your ship, that can sink you fastest or do the most damage. Only after you have set all your payment priorities do you begin making commitments. At this point, do not delay talking to your creditors. They will not simply go away. Summon your courage, and talk to them. Tell your creditors what you can do, and be realistic. Do not be overly optimistic, or you will set yourself up for increased badgering, and you will have lost what little credibility you had to begin with. Your creditors will not like your answers, and they will argue with you. Remember, each one of them could care less about your other creditors; each of them wants to get as much as they can out of you for themselves. Stick to your plan. Do not lie to them, but do not waffle, and only tell them as much as they require. As every trial attorney would tell you, never answer an unasked question. You may find this hard to believe at this point, but almost all creditors will take something over nothing. Bear in mind that at this point you are doing the same thing a bankruptcy court does, except that you are volunteering to work with your creditors, and a bankruptcy court tells them what they will get. The court is an unknown for your creditors as well as for you; most people will take an unpleasant known over an unknown. Don’t expect your creditors to love you, or even like you. They may be aggressive and unpleasant. Whoever said saving a sinking ship was going to be fun? Chin up, and do what you have to do. Your only other choice is to drown. Bite your lip and stay cool.
7. Prepare your lifeboat. Your job is gone, your business has failed, unemployment is up, job opportunities are way down, inflation is ramping up and making what few dollars you have worth a lot less and your ship is going down. It is time to prepare your lifeboat. You pay creditors in the order in which they can cripple you. Now let’s make the list: You, your employees (if you have a business), the IRS (if you owe taxes), the bank that holds the mortgage on your house (or your landlord), the utility companies (who keep the heat on in the winter and the electric all year), your doctor and dentist, and all your other creditors (including the credit card companies). Who gets paid first, second, etc.? The answer is they get paid in the order in which they could disable you. That means you get paid first. Without you, there is no future, and no point to anything else. You have to eat. You have to bathe. You have to have shelter. You need your health in order to recover financially. If you are on essential medications, you need to be able to continue taking those meds. You will need transportation to get to a job or other means of earning income. Without income, no one else is going to get paid anyway. So budget for these essential items and pay yourself first. Do not be extravagant. Remember, if this doesn’t work, someone else will do it for you, and they may not be as fair or lenient with you as you will be. Then pay the others in the order in which you need them to survive. You need to pay your mortgage or landlord so you have a place to live. You may decide to downsize your accommodations if that is doable. But you may also be able to negotiate with both your lender and your landlord, for a temporary reprieve or reduction until your ship stabilizes. This may be preferable to them than to bear the expenses of getting you out and someone else in. Do not assume anything, and do not make their decisions for them. You may be surprised how much they will work with you. What is the worst they can do- Say No? You’re already there. You have nothing to lose. Do not delay. If you have knowledgeable friends, ask them for advice. You are likely not very objective at this point. You may be well advised to seek the counsel of your accountant, tax advisor, or bankruptcy attorney. Most will give you a complimentary first appointment. Even if you have to pay, it is worth it. What you don’t know may have gotten you in the trouble you’re already in! If you think education is expensive, try ignorance! You do not need to be ashamed to talk freely and honestly with these professionals. They are like your doctor—they see sick people every day. It is what they do for a living. And you can be sure of one thing: no matter how bad off you are, they’ve seen worse. So get over it, and talk to them.
8. Ride out the storm. This is probably the hardest part of all. After you have done all of the above, there is inevitably a waiting period when not much seems to be happening. You have done everything you can do at the moment. This is when those nagging voices in the back of your head start cranking up and driving you crazy with self-doubt and sometimes even self-hatred. My advice: Stuff a rag in their mouth! You are not alone, you are not stupid, you are in lots of good company, and even the worst storms do not last forever. They come and they go. The sun comes out again. What is the worst that can happen? Your spouse leaves you, your teenage children think you are stupid, you wind up living someplace different for a while, you lose weight, and you live a simpler life. There is no debtors prison anymore; if your spouse left you because of financial reversals, you will find someone else; your children will forgive you when they find out for themselves how tough life can be; and maybe, just maybe, you have learned to worry less about what everyone is thinking about you. Actually, the truth is, you’re not that important to all these other people. If they actually knew the trouble you are in, you might be an interesting topic of conversation for what, ten minutes or so, and then they will move on to what matters to them. I think it was just the day before yesterday that everyone was going to die of swine flu, and now it is all but forgotten in the rush for new and worse news. Worrying about what others think is probably what caused you to live beyond your means in the first place (if that is the cause of your problems, which may not be so).
9. Return to port. Whether you get to shore with your crippled ship, in your lifeboat, or by swimming, you will get there. You survived. First you need to know where you are. We are back to financial statements. Now is not the time to forget everything you might have learned from your shipwreck. You need an Income Statement and a Balance Sheet for yourself and for your life. And I am not just talking about people who own businesses here. Everyone needs to keep a personal set of financial statements to track their financial life. It is your report card. It doesn’t matter if there is very little on those sheets. You still need them. You need to know where you are at, and you need to begin monitoring your recovery. That means new habits, habits of personal accountability and self-discipline and personal growth. Your shipwreck could be one of the greatest learning experiences of your lifetime. You will be better prepared for bad weather the next time. You need to assess the damage and plan repairs. You have credit to repair, and you may have a few relationships to repair. There are people to be paid, and commitments to be kept. Depending on the circumstances, some of these will get swept away as part of the detritus of the storm. But there will be obligations that need to be honored if you value your reputation. Sometimes you can gain more credibility with people through your response to adversity than you could gain from years of dealing with them under normal circumstances. They have observed you under very adverse circumstances, and they have seen your character under intense pressure, and it says more than words ever could. And you always honor those who stick by you in hard times. You were fortunate to have met up with them to begin with. Once again you will have to set priorities, new goals, new time frames, and finally, means of measuring your progress.
10. Repairing your financial ship. This storm, to be meaningful, needs to be a learning experience. Hopefully you managed to control your panic enough to actually think about what happened to you. Some storms seem to blow up out of nowhere and catch everyone by surprise. Sometimes life can blindside you; sudden illness, unanticipated loss of a key family income, business reversals, etc. There is no way to predict everything in life. Maybe that happened to you. But you always need to examine all the details, and this is one time when you need to be unsparing with yourself. This is not self-flagellation, beating yourself up over mistakes. Everyone makes them. But if you deny their existence, you lose an extremely valuable learning experience, and you may very well find yourself sometime soon in yet another storm. To you it may seem like a lot of bad luck; to a more objective and experienced observer, it may resemble more a failure to learn. Never scorn life’s second chances. Learn. It is much easier to deal with reality if you come from a starting point that you are okay as a human being, that whatever you did or didn’t do you can forgive yourself for. Accept yourself, and forgive yourself, exactly as you are! Now get to the learning part. This is where the storm returns value to you—as the beneficiary of one of life’s hard knocks! It is never fun to think about what you could have done, or should have done. But what would be the point of a toddler flagellating himself because he can not do the 100 yard dash yet? That’s not where he is at the moment. He is a toddler. The same is true of you; you are where you are, and you know what you know, so why beat yourself up over what you didn’t know?? Just take this opportunity to humbly learn it, and get better at this thing of financial literacy. You want to end up with a feeling of financial competence, a feeling of satisfaction that you really do know what you are doing. This is not something that you can fake, not to yourself anyway. To try to fake a sense of competence is the worst kind of fraud—you are cheating yourself!! So work at this, and become competent! You can do this! If it makes you feel any better about yourself, our government is a perfect example of some very bright people who appear unable to learn and who continue to make the same mistakes over and over again. They fail to learn, because every disaster gets blamed on someone else. No one is accountable, no one learns. You can do better! Don’t act like a politician in your own living room! Besides, you’re not allowed to print money. Educate yourself about financial matters. There is a lot of free information on the Internet. There are local groups who share your interest in financial literacy, for the same reasons. Right here in Greenville, SC there is a Financial Literacy Club that meets monthly to play the Robert Kiyosaki (author of Rich Dad Poor Dad) board game Cash Flow 101 and to discuss financial subjects. Learn how to read and use financial statements.
11. Ignore the landlubbers. My experience has been that people are much more supportive of you in your misfortune than you might expect. They may have genuine compassion, they may have survived similar hardships but just don’t talk about it much, or they may be thinking “there but for the grace of God go I” and your experiences motivate them to pay more attention to their own financial matters. They may seek to learn from your experiences. Good for them. We all should learn whenever we can. There may be a few people, very few, who are insecure and who bolster their own weak self-confidence by gloating over the misfortunes of others. These may be armchair quarterbacks who at one time or another envied you your seeming success, and are glad to see you take a fall. It makes them feel better about themselves. Maybe these are people who would never get off dry land, who would never set sail out across that wide ocean of opportunity, who have no curiosity about what their own potential is, or are too afraid to find out, and therefore they settle for denigrating those other brave souls who dare to go where they would not. If you experience one of these individuals, ignore them. Life’s too short.
12. Dare to set sail again! Most sailors have experienced a perfect storm at one time or another. Many of them have experienced financial shipwreck. Some have made and lost fortunes and made them again. Most heal, learn, and become seasoned, weathered, and valuable seamen. They are the old hands who teach the young ones. Become one of them. Learn to respect the sea of risk. Learn that bad things can happen, and that most storms announce their advance in enough time to prepare. Learn to inspect you financial ship, and keep it and yourself “shipshape.” Remember that the revered Holy Man of investors, Warren Buffett himself, lost over $25 billion in just the last twelve months. Does anyone keep track of how many times Donald Trump has declared bankruptcy? Does anyone remember these people as failures? Not likely. Hold your head up, and dare to adventure out again, a little wiser this time.
Thanks for listening in. John Bechtel, Greenville, SC