The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy!
Financial failure is something we all experience from time to time. Whether you manage your finances well or not, it’s natural to experience a budget failure or fail to meet one of your goals every now and then.
Financial failure is important because it teaches us very important life lessons through experiences we’d rather not relive. They key to coming out on top, is confronting your financial failure early on and overcoming it so you can continue on the path toward financial success.
Start with Confrontation
First assess your situation and accept the fact that you messed up. This is a crucial first step because it’s so hard for people to do. If you don’t accept your failure however, you can’t move on.
If you’ve been living above you means, accept that. If you’ve gotten lazy with your goals over the past few months and lost motivation, accept that. Whether you feel guilt, shame, or frustration, it’s better to acknowledge it so you can move past it and forgive yourself.
Find Out Where You Went Wrong
Sometimes it’s hard to tell when you’ve failed financially and what led to the downfall. If you set annual goals like I do, you may not see the results you’re looking for until later in the year.
However, if you realize your situation has changed and your goals now seem unachievable, you’ll have to realize that and make some changes.
For example, I originally planned to have all my student loan debt paid off by the end of the year. Once I realized that would not be possible since I wanted to pay for my wedding in cash, I realized I needed to make some changes to my goal. That’s not necessarily a financial failure as it’s more of a shift in priorities.
On the other hand, if you set out to save 30% of your income this year and that involved cutting back on expenses like dining out and you failed to do so, you need to identify what caused you not to meet that goal.
Maybe it was the fact that you got tired of budgeting some months or failed to meal plan and got tired of cooking. The convenience of restaurant food is very tempting and odds are there are some factors that led you to give in to that temptation and dismiss the other intentions you had for your finances.
Scratch Everything and Come Up With a New Strategy
Once you’ve confronted the issue and determined what led you to fall short, you’ll be ready to scratch everything and start over. This involves finding better ways to maintain your motivation and developing more realistic goals.
For example, a solution to your excessive dining out issue may be limit dining out instead of trying to cut it out completely. Track how much you spend on restaurant food each month and try to cut that number in half and assign that expense a budget category that way you don’t feel deprived but you’re still saving money.
Other financial failures may be more serious like messing up your taxes or having to pay more interest on your debt since you didn’t prioritize it and pay it off the previous year. It’s crucial that you come up with an effective and realistic game plan to bounce back from your financial mishaps.
Also, start tracking everything more closely and paying yourself first. Have weekly budget meeting either on your own or with your partner to make sure you’re staying on track. You can also team up with an accountability partner so you can motivate each other and track your progress.
I also take care of my financial priorities before anything else when new income hits my bank account. It’s not only fun but it also ensures that I’m staying on track with the goals I set for myself and I can avoid financial failure.
Continue to Educate Yourself
Financial education is the key defense mechanism to financial failure. I’ve made quite a few financial mistakes in the past and most of them were due to the fact that I wasn’t financially literate.
Yes motivation and realistic goal setting could have very well helped me succeed, but it’s hard to be motivated when you don’t understand what you are actually working toward. When it comes to my debt, I’m motivated to pay it off not just so I can say I’m debt free and be able to go on shopping sprees whenever I want.
I want to pay off my debt because I understand interest is eating up my hard earned money and debt is holding me back from other things I want to do with my money like save up for a home and invest. I understand that if I apply for a mortgage, lenders will look at my debt to income ratio and it will factor in what type of loan I’ll be able to get.
I want to retire some day, and I can’t do that with debt. If I pay off my debt earlier, I might even have extra money to put toward retirement so I won’t have to wait until I’m 65 to stop working. These are the true driving reasons behind wanting to pay off my debt aside from wanting a better life overall for myself and my family. All of these reasons help motivate me, but I never would have understood their importance if I didn’t educate myself about personal finance and continue to seek out more knowledge and information.
Read books and blogs, listen to podcasts, talk to you bank, attend financial literacy events in your area, and do everything you can to learn more about how to manage you money so you can overcome financial failure and avoid it in the future.
Stay On Top of Everything
Your money issues could also be improved quicker once you become more alert and realize that you can make changes every single day as opposed to just once a year. If you want to refinance your debt, create a new budget, or ask your employer for a raise, you can do that at any time, not just in December or January when everyone is reflecting on their goals and plans for the year.
Try to view each month, week, and day as an opportunity for a fresh start, that way you have nothing holding you back from overcoming financial failure.
How about you all? Have you experienced financial failure before? How did you overcome it?
Share your experiences by commenting below!
***Photo courtesy https://www.flickr.com/photos/86530412@N02/8226451812/
