We’ve all been there. You thought you were out of the woods and then something hit your account and now you’re overdrawn. Maybe you forgot to pay a bill and now there are massive late fees? Either way, it happens to all of us, and it’s important that you develop strategies to keep it from happening again.
Here’s how to deal with financial setbacks.
Give yourself grace
Mistakes happen. You can always strive to do better, and you aren’t perfect. Everyone takes an L sometimes, and dealing with it is what prepares us to avoid those pitfalls in the future.
Recognize and Avoid Tilt
You know that feeling when you keep trying to do something, but things keep going wrong, and you get frustrated, and you start doing even worse? Congrats, you’ve experienced tilt.
Tilt is a term that originated in pinball, but the concept has been applied to other games, such as poker, chess, or esports. Think of it as when you reach that point that you’ve lost your cool and are no longer making the best choices.
Money is an intensely personal topic, and a financial setback can feel incredibly damaging.
The burden for recognizing the signs of tilt falls squarely upon you. If you’re in a position where you might make a rash or suboptimal choice regarding your finances, then you should step away from the situation and allow yourself some time to calm down and reassess.
Set realistic goals
You want to pay off that credit card early, great! Don’t put yourself in a position where you end up needing to use that same credit card to pay for living expenses at the end of the month because you made a payment that was too big.
This is why you need a budget and ideally a zero-sum one, meaning you account for all money coming in and give it a job. Income minus expenses (don’t worry, this includes your savings, investments, etc.!) equals ZERO. Tracking your money is the ONLY way to make sure you’re utilizing it to meet your financial goals.
Learn how to make your first budget here:
Know yourself, know your limits, and most importantly,
Set achievable goals
Striving for excellence is great, but it can be disheartening to fail to meet your own expectations. Budgeting is a muscle that you have to train, and you work up to proficiency gradually, not by making yourself miserable.
You might want to pay off a bill by a certain month, but then something comes up. Be flexible, and understand things come up. Here’s the trick though – once something comes up, make plans on how to better handle it next time something similar does! For instance: A sudden car expense pops up meaning you have to use the money you were going to pay the original bill with. Pay the bill and then set up a sinking fund for future car expenses. Because that will happen again!
Learn how to set up sinking funds here.
I’m not coming for anyone here, but you need to be aware of your idiosyncrasies. This sounds extremely broad, so here are some examples of things you might need to work into your budget:
- Retail therapy after a long workday/week
- Eating out when you didn’t pack a lunch
- Social gatherings (drinks, food, entertainment, etc)
- You miss your dog now that you’re back in the office so you buy expensive dog bones
- Buying small gifts/toys for your least favorite child because you feel guilty about having a favorite
- You donate to charity fundraisers/raffles/your coworker’s “small business”
- You need a certain item when it releases (whether it’s a book, videogame, electronic, etc)
- You habitually browse marketplace/mercari/ebay for items
- You literally can’t stop buying plants
Make your budget work for you! If you need a specific allotment for certain spending, then add it into your budget. Don’t let it be what breaks your budget.
Building back better
Once you’ve identified your spending triggers, you can start recognizing them and redirect your energy instead of doing those same old habits.
Mistakes and setbacks are actually an important part of your financial journey. You can learn from them and use them to level yourself up/ improve.
Remember, we’ve all been there, you’re not alone in this and you CAN get back on track!