The external circumstances surrounding financial peril are different for just about everyone who experiences it, but the internal decisions leading up to the situation are quite commonplace. How you cope with the crisis will determine whether or not you will get through this situation - it’s also a predictor of whether you’re likely to end up in a “different but equally difficult” situation down the road. I know, because I’ve experienced financial peril myself.
My external situation that created the crisis was a tax re-assessment. Others have experienced divorce, job loss, starting a business without financial projections, and investment losses.
What are the “internal factors” that create a financial crisis? Usually it’s our own impatience and need to have it all right now. Most people headed for a crisis also avoid the details that need to be attended to on a daily basis.
The remedy is actually quite simple – but not easy because it involves facing reality and slowing down.
- Start where you are – this means dealing with guilt or judgment about the past and recognizing that ‘wishing’ for the future won’t make it happen any sooner;
- Get very clear on what’s important to you – personal, written goals, with dollar amounts beside them are essential; and
- This is the critical and most important step regardless of where you are today – with money or without: document your current situation – what bills are due and when, what amount of debt do you carry, what assets, income and other money is available to you. Without this it’s all in your head and you won’t know who you need to talk to or what specific amount of money is needed at what point. Without this you won’t even be able to properly ask for help.
Using these three steps, I once balanced my checkbook to within $3 after paying all the bills and putting food in the cupboards even though I was sure in my head that we were doomed to lose our home because there wasn’t going to be enough money to pay the rent.
