It is quite distressing to lose a job or a source of livelihood leading to unprecedented financial difficulties.
The loss does not only strain the little cash you may have but it also heavily stresses your mental health. The Covid-19 pandemic has taught us that jobs can come and go no matter how big and sources of livelihood can be wiped out in a jiffy.
But, there is always a silver lining to every dark cloud and when it comes to financial obstacles, everything changes with the state of mind after such a setback.
Depending on which stage you are in the 7 stages to financial freedom, the following incidents could be a big financial setback.
Millions of Kenyans in the last two years have lost their jobs following the destabilising effects of the Covid-19 pandemic.
Job loss, Covid-related or not can have moderate to serious negative effects on someone’s mental health, and without cushions such as an emergency fund or a side hustle that can keep you afloat in the intervening period, things can get tough.
The interest rate refers to the cost someone pays for using someone else's money. The recipient or beneficiary of the interest suffers when rates fall. This means that they do not get the value for their investment.
A business may fail due to several reasons including mismanagement, loss of key business, drastic changes in the business environment, or acts of nature. Whichever way, business failure can have devastating effects on the owner’s mental state.
There are some investment opportunities we jump into and then learn later that we were to burn our fingers. When this happens, it could be because of a lack of integrity where one invested or what is more common nowadays - ponzi schemes. Losing money in such situations definitely hurts.
Sometimes things we can’t understand happen to us, causing immense losses. These always leave an experience that may be traumatising among them a financial setback that could take a toll on one’s mental wellbeing.
This is when the stock market collapses rapidly and without warning. In this case, companies lose the value of their stocks which results in an economic crisis.
The biggest stock market crashes on the record include the Great Depression of 1929, Black Monday of 1987, the 2001 explosion of the dot-com boom, the financial crisis of 2008, and the 2020 Covid-19 pandemic.
Since financial setbacks can strike when we least expect them, they are almost always inconveniencing times. Things like loan repayments can be very taxing and could lead to debt accumulation which worsens an already fragile state.
But, we have to take charge and respond when things get rough.
Here are some ways you can improve your financial well-being and bounce back to not only being money-wise, but also recovering from the mental strain suffered.
A good place to start when financial tragedy hits is by altering your financial strategy and planning. A financial setback does not just affect your existing budget but could also make it hard to achieve financial goals.
To avoid putting your future in jeopardy, analyse your debts and figure out how you may speed up your debt repayments. This will help in ensuring that interest accrued on your debts does not overwhelm you. You can also reorganise your repayment plans by speaking with your creditor to ensure that you are not caught unawares when they come calling for their money.
Determine whether you can transfer money from your other savings accounts into your monthly spending. The money you set aside for major financial goals can be temporarily redirected with the goal of replacing it later.
Have a budget to help you prioritise how you spend your money. Look at non-essential spending, reduce recurrent costs and entirely cut off some services like gym memberships that are underused, or monthly subscriptions.
By having a budget, you are able to easily follow the first step of altering your financial plan. This means that what is meant for debt repayment goes to servicing it etc.
This could be found in a trusted friend or mentor. When a financial setback hits, don't be hesitant to ask for help if you're feeling overwhelmed or unable to concentrate due to your financial difficulties.
You can contact friends and family members but also consider getting professional help such as counselling.
The support is to get you back on your feet and frame of mind, all you have to do is get it out of your heart with someone you trust.
It is hard to qualify or quantify that which you do not have a list of. So, list all your losses to have a clear picture of how serious the problem is and how much of an impact it may have on your mental and financial wellbeing as well as your ambitions.
Assess your situation to be in a good position to see how much money you've lost and how to begin the recovery process.
Listing your losses puts you on top of understanding what is going on with your finances, and it can help reduce stress by, in part, coming up with a recovery plan when all is very clear. Get all the facts to help you accept the situation and begin moving on.
A journey to recover from a financial setback is exhausting. Since it is an effort borne from our own decisions and a result of systemic factors, it is ok to take a break in the process. This not only gives you time to mentally and physically recharge, but it also gives you room to explore different perspectives in dealing with a situation.
The break could come in the form of re-evaluating your goals which could include cutting your savings target in half or even postponing a commitment towards your goals.
Sometimes when financial setbacks hit, they put us in a situation where we’re seemingly running from an avalanche with no way out. Whatever the emotions come at you in this time, deal with them and let your mind and heart heal from the pain of the setback.
Unless you deal with your feelings about money, you run the risk of having negative effects on your emotional and physical well-being. You might begin by talking about your stress with loved ones or a mental health expert.
When bombarded by circumstances occasioned by a financial setback, the reality is that we may lose our identity because of how we think about our situations and ourselves. Take a deep breath and let your circumstances be separate from the real you. This way, you’re able to understand that the world does not have to necessarily operate the way we want it to. If this happens, we can detach ourselves from the negatives and be able to focus on the positives.
The mental models of how we think of how the world should operate can be hard to shake. And when things don't go according to plan, it can have a detrimental effect on our mental health.
Accept the fact that many things are out of your control before you can begin to take charge of your life. It's critical to maintain some distance between your current situation and who you are as a person. Don't be bound by your current financial situation. Money is just one aspect of who you are. "My self-worth is not my net worth," repeat after me.
Remember our previous article on how an abundance mindset can make you wealthy?
Well, overreacting is common when losses occur. Frozen in fear, some people fail to act when they should or they are too cautious because they are unsure of what the future holds.
Even though it's natural to feel overwhelmed after a financial setback, taking even the smallest measures toward recovery can have a significant impact.
The first step is to evaluate the problem. How long will this setback last, and how long will it affect you? Was there a trend or habit that led to this setback? You need to know exactly what you're losing and how it will affect your finances and mental wellbeing.
Make plans for the future in the knowledge that there is more than enough out there for everyone. Put yourself in the shoes of the person you want to be and break out of jail.