Managing Money like a Boss! Coping with Setbacks
26th April 2018
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Even money bosses make mistakes. That’s part of being human. But smart money managers do what they can to minimise the effects of mistakes before they ever occur. Here are two ways you can mitigate the damage caused by foolish choices:
- Educate yourself. The more you know, the better choices you’ll make — and the better you’ll be at anticipating problems. Read personal-finance books, magazines, and blogs. Most importantly, talk to people you know who have control of their finances. Learn from their mistakes so you’ll be more likely to avoid similar pitfalls in the future.
- Be prepared. Your work as a money boss involves both offense and defence. You practice defence when you practice preparation. The best way to prepare? Boost your profit margin! The larger your saving rate, the larger the buffer between you and disaster. Maintain an adequate emergency fund. Keep your insurance up-to-date. Make use of barriers and pre-commitment so that you’ll do the right things automatically. (The more you remove the human element from the equation, the safer you are.) Create a cash buffer to allow you to take advantage of both emergencies and opportunities.
Even when you’re prepared and educated, you’re still going to make mistakes and suffer unexpected setbacks. It’s important to know how to pick up the pieces after things fall apart. Here are some strategies for minimising the damage:
- Don’t panic. When you suffer a setback or realize you’ve made a mistake, try to relax. Don’t freak out. Take an hour or two to distract yourself. Better yet, sleep on the problem. It’s amazing how a little time can help you gain perspective.
- Believe in yourself. Though you may not know exactly how to solve the problem at hand, trust that you’ll find a solution. You’re smart. You’re resourceful. You’re competent. Stay positive, solve the problem, and learn from the experience.
- If possible, undo the damage. Some mistakes are reversible. Suppose you just blew a bund of money on new clothes or are feeling buyer’s remorse over your new Nintendo Switch. Return the items. Or, if that’s not an option, immediately sell them to recoup some of your loss.
- Evaluate your options. Obviously, some mistakes are not reversible. If you accidentally change lanes into another car and total both vehicles, there’s no undoing the damage. So, make the most of the situation. Compile a list of options. Keeping your long-term goals in mind, figure out the best course of action. This will help you avoid making rash decisions.
- Don’t let it get you down. From personal experience, I know how tempting it can be to ease the pain by spending more money. But compulsive spending just makes it more difficult to reach your goals. It makes you feel worse, not better. Fight the urge to practice “retail therapy”. Stay away from your Amazon account. Don’t let one problem snowball into two or three.
- Learn from your mistakes. Figure out where you went wrong. How did that traveling salesman convince you to buy those overpriced steak knives? What can you do to avoid making the same mistake in the future? Don’t beat yourself up, but take a calm, rational look at how you can make better choices next time.
- Don’t dig a deeper hole. Money spent is money spent. Just because you’ve already sunk $200 into a gym membership you never use doesn’t mean you need to keep spending money on it. Cut your losses by getting out as soon as possible.
- Keep your goals in mind (and recorded in your LifeLot account!). A setback is just that: a temporary roadblock on your journey toward something more important. Make peace with the past and keep your focus on the future.
Don't forget - even the most money savvy of us all can still make financial mistakes. Don't be scared to ask for professional help along the way if you feel you need it. The Tag Team's dedication to helping others aligns perfectly with our LifeLot values so we are very happy to have them onboard. They are a friendly team that can help with all of your Mortgage, Insurance and KiwiSaver needs. Contact The Tag Team today!
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