“I’m so poor I can’t even pay attention.”
Almost everyone has to deal with loss at some point. Whether it’s the loss of a loved one or the loss of a dream, we are faced with the ripping away of something which we held dear to ourselves.
When we are faced with a significant financial loss, we go through the same suffering and grief, but we also want to react, to fight back. Whether it’s because of overinvestment in one particular stock that tanks or because of a big medical or legal bill, we are faced with the cognitive dissonance between what we thought was possible and the reality that we now face. We’re also tempted to believe that we can get it back as quickly as we lost a lot of money, which is a fallacious belief. It took time to build up what we had, and while it was quickly lost, it will not be quickly rebuilt.
The most common emotion when faced with loss is anger. Those feelings are most likely to spill over into aggressive behavior such as lashing out. Furthermore, as a Boston College study shows, we’re much more likely to respond to rewards than to threats when we’re angry, so the prospect of taking inordinate amounts of risk to quickly recover what we’ve lost a lot of money is much more appealing than when we rationally look at the situation.
The sooner we can accept and embrace that there is no quick recovery from a sudden financial loss, the more likely we are to actually recover from the loss and move on. Here are some things to consider if you’ve faced a sudden large financial loss:
- Don’t make any sudden financial moves. Emptying out your IRA or 401(k) to make up the difference will cause even more problems in the long run. You’ll have to pay taxes and you’ll also probably have to pay early withdrawal fees. You’ll make a bad problem worse by compounding your expenses.
- Change your mindset and reduce your lifestyle. The first step in changing your mindset is to mentally step back. A University of Michigan study shows that engaging in a mental exercise of imagining that you’re an observer to the scene rather than the participant will help reduce feelings of anger. That lost a lot of money is gone and is never coming back, and you can’t keep living as if it was there to be a backstop. Slash your expenses. Redefine your “needs” and cut down to essentials. You can build back to where you were, but you have to plug your leaks right away. If you have kids, you need to explain to them what’s happening and you also need to reassure them.
- Look for additional sources of income. The quickest way to fill the hole is to get a bigger shovel to put more dirt into it. You may also wind up finding something better than you have or starting a new business that grows beyond what you expected.
- Talk about it with loved ones. You just had a big loss. It’s OK to be stunned by it. There will be some real feelings of hurt and anger and disappointment. Bottling up those emotions will give them nowhere to go and prevent you from releasing them to move on. It will also help you to start to objectively examine what caused the loss and what will prevent a future loss.
- Focus on the present and the future. What is in the past cannot be undone. Take a walk. Appreciate the fresh air, the open sky, the flowers. Envision an even better future. Write down the things for which you are grateful. Come up with ideas for how you’re going to move from the present to the envisioned future. Every morning, write down ideas for moving from the present to the envisioned future. It will be difficult at first, but it will get easier over time, and eventually, you’ll write down the idea which will work for you.
Unless you’re Mark Zuckerberg, who, while he lost a lot of money on the day of the Facebook IPO still was worth billions of dollars, a significant financial loss is going to hurt you, financially, emotionally, and spiritually. Address all of the aspects of the loss so that you can move on. In baseball, there is no six-run home run. In football, there is no twelve-point touchdown. In soccer, there is no goal worth two or three normal goals. When you find yourself behind, chip away bit by bit. Celebrate small goals and small milestones and give yourself a reason to look forward instead of backward.
- John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.
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