If you are in your 40s and suffering a serious financial setback you are not alone.
Financial setbacks in midlife are unfortunately very common, and can hit us from many unexpected directions, a crash in the stock market, a cut in earnings, a job loss, having to support a family member, death of a spouse, divorce, illness and a list of countless other black swan events.
But while this can feel like the end of the road for our financial success, it doesn’t have to be and many over 40s have used this as the springboard to future success.
Twenty years ago, Doris Belland lost her husband to a long and expensive cancer battle, inherited $400k in debt and had no income. Two years after that she had paid off all her debt, started a successful real estate business, built up an investment portfolio and followed her passion of helping other women become financial rockstars.
Cinde Dolphin battled cancer 4 times with 9 related operations and experienced 3 job lay – offs in the years following her cancer diagnosis, but this didn’t hold her back from starting a company designing a product for cancer survivors at the age of 61.
There is a wealth of similar stories if you look for them and there is no reason your story cannot be one of them.
When these setbacks happen our first reactions are overwhelm, panic and stress. It’s important to get clear on what you can and cannot control and then take the following steps.
Accept where you are
Our mindset is a big element that we can control.
And wasting energy in the negative emotions detracts from your creativity and the resilience you need to face the challenges you are facing.
The fastest way to get on the road to recovery is to get out of defensive mode and into the offensive position by taking action.
Figure out exactly what your current financial situation is.
To begin your journey to financial stability you have to be clear where you are on the map.
- Understand what your current cash situation is
- What debt you owe
- How much cash you can bring in per month
- How much you spend
When you find yourself in financial quicksand your immediate priority is to cut your discretionary spending. This means all that unnecessary, uncommitted spending that you DO have control over.
Go through your committed expenses with a fine tooth comb and negotiate lower rates like your life depends on it. Because your financial life does and building this skillset is something that will serve you in your next stage of life!
Get a handle on your debt
Get clear on what you owe, how much the minimum payment is, the interest rate and when payment is due.
Getting out of debt quickly is one of the biggest priorities for rebuilding financial stability.
Target the debt smallest balance and pay extra towards this one without impacting the repayment of the due amounts on the other debt. While it is counterintuitive to payoff the smallest debt first and not the one with the highest interest rate, this method leads to quick wins as you pay off your debt and motivation to keep going!
Replenish your emergency fund
If you are firefighting a midlife financial crisis chances are you have drained your emergency fund if you had one, and it’s important to get this built up as soon as possible to a lump sum of at least 3 to 6 months of necessary expenses.
Getting this financial cushion comfortably in place gives you the security and stability to get your creativity on and that’s what you need for the next action step.
Alternative sources of income
Camilla Gaines, the 64 year old accredited financial counsellor and founder of Retire Certain, realised along with her husband 15 years ago, that following a major career disruption, they weren’t on track to support their comfortable lifestyle.
They began what she themes “a wonderful adventure” to build up alternative streams of income from investments and alternative assets.
In the process they ended up pursuing life-long passions capitalizing on areas of expertise from previous careers.
Necessity is the mother of invention and when we allow ourselves to be creative and open, we get to uncover opportunities and areas of income we hadn’t considered before.
I’m a strong believer in Alexander Graham Bell’s words; “ When one door closes another door opens.” and the opportunity lies in opening that door!