Anyone who has lost life’s savings to a divorce settlement or investment in a stock market crash knows that starting over financially isn’t easy. But many people find themselves after many years of work and putting money aside in savings and investment having to do so as a result of crisis that hit and wiped out their savings or value of investments.
If you find yourself in a situation like that, you will need to move past your shock and frustration and focus on how to stabilise financially and begin a new journey that takes you to where you hoped to end up financially. Easier said than done, you must, however, be realistic in how far you will be able to go if you’re beginning this new journey in a later stage of your life.
Keeping the following points in mind can help you recover quicker and avoid past pitfalls.
Learn from mistakes
In many cases, a major crisis could have been of no fault of yours. For example, a stock market crash or a real estate bust isn’t something that you probably could have changed. Still, trying to understand what went wrong and the extent of your responsibility, if any, could help you avoid a similar situation in the future.
Once you are able to pinpoint some of the causes of past financial trouble, consider what solutions could have been applied, and what you should do differently going forward. For example, if your troubles where the result of mounting credit card debt, consider how you can develop your skills in financial planning, find alternatives to credit cards when you need an extra source of cash, and how you spot the early signs of spiralling debts.
Set new goals
If you have lost years worth of savings or investments, it may be hard to acknowledge that it would be hard to make up for the losses — although it is not impossible. Altering your goals to make sure they are achievable is a must.
For example, if you moved from having a massive equity in your house to being underwater, your plans for cashing on your equity are now obsolete. If these plans were meant for retirement or college education, you better begin immediately on Plan B, which could be tightening the belt even further to put some money aside, or looking into loan options.
It is never easy to make a major change or alter goals, but the sooner you’re able to recognise and adjust, the more likely you will be in a good position to achieve the new goals. A change of mindset must go along with your planning, because it could take some planning and tough compromises to recover from a financial setback and move forward.
Educate yourself about your financial investments and seek help when you’re making major financial decisions. Being aware of where the economy is headed, and learning more about the outlook for different markets can help you make informed decisions, with or without the help of your financial adviser.
In addition, if you’re in a situation where major financial decisions are being made such as a marriage or a divorce, consulting with a financial adviser or an attorney can be helpful. In many cases, drafting paperwork correctly can pre-empt problems down the road and protect your financials. Similarly, if you’re starting a business, for which you will be personally liable, make sure you have as many protections in place as possible. Yes, you can keep a positive outlook for the prospects of your new venture, but you also must plan for a safe exit should things go wrong.
In all cases, don’t rush into signing any binding documents, without fully being aware of the financial and legal consequences. The more time you put upfront, the less you will have to worry later. Past negative experiences can be a good reminder of how things might go wrong, but they should not be a deterrent to moving forward with sound financial planning.
Starting over financially
• Learn from past experience
• Be aware of economic indicators
• Adjust your goals
• Seek help and advice when needed
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.