It's safe to say that none of us are perfect when it comes to our finances. That said, we aren't striving for perfection: we're striving for success. What separates success from failure often isn't in our initial action, it is in our response to the outcome. How well we learn from financial missteps is telling of where we will end up in the future.
We can all take control of our finances today, but it takes not just desire and willpower, but the ability to be analytical and introspective of yourself and the behaviors that both help and hurt your financial situation.
Here are a few ways you can take a bad financial situation and turn it into wisdom—and success—for the future.
Related Article: Reviving 6 Pieces of Timeless Financial Advice
4 Ways to Draw Wisdom from Financial Failures
Recognize what you actually control.
Financial disaster can come in many forms. Whether it's a mistake we made ourselves by a lack of know-how or knowledge, a swindler who entered the picture, or a market crash beyond our control, there are varying degrees or personal responsibility we do and do not carry. However, what we always carry is the burden of due diligence. This is something we all must understand!
Recognize what you do control and take charge. If you want to avoid financial failure, you have to figure out where you missed something. It's very likely there was a failure in due diligence somewhere along the line. A strategy not closely examined, an investment not investigated, or something left to its own devices. For us, we have to be true stewards over our resources. That means not just knowing what's happening, but recognizing what we're getting into, what we can actually control, and what all of our options are.
This will empower you, as someone looking to grow their net worth, to make better decisions with your money.
Identify gaps in knowledge.
Bad financial decisions almost always come from one of two places: a lack of knowledge or a lack of focus. If a money mishap has happened, one thing to immediately investigate is whether or not there was a gap in your understanding of what happened: be it in the strategy itself, a process, or in the fine print. Not being totally aware of what your money is doing or the finer point of financial deals can be devastating.
Often, it's wise to have a lawyer on your side to interpret legal documents. Otherwise, always be learning and growing in your financial know-how, particularly in the areas you wish to involve yourself in: like real estate investment. One of the things we always encourage, even to turnkey investors, is continuing your education. While you may not handle the day-to-day decisions surrounding your investment properties, being aware of the ins-and-outs of the business helps you understand what is happening and equips you to carry on conversations, strategize, and identify problems more readily.
Don't panic: plan.
Money matters to us. When something goes wrong with our finances, especially in a large sum, we're prone to panic. We each have different expressions of this. Sometimes it comes out in anger, depression, or sheer anxiety. When financial woes are hanging over us, it can feel suffocating. However, it's critical not to panic.
Instead, we must plan. This is the only way to move forward. As we mentioned, a top reason people make money mistakes is a lack of focus. If you want to grow in your wisdom, you have to push aside panic and instead re-orient yourself. Get back on track with a plan.
Don't worry about making that plan perfect: remember, it won't be. Instead of enacting your plan as-is and waiting to correct after the outcome, course-correct as you go. This will reveal where your shortfalls and strengths are as you move through the steps of recovery. It is often through these trials that we gain the most financial experience and wisdom.
Identify what throws you off-course.
Lastly, we have to find out what distracts us from making good, sound financial decisions. Even smart, savvy individuals can make bad choices with their money. Don't think that it's because you're not an expert or you're not good enough with finances!
When you suffer a financial setback, trace it back. Try to identify what threw you off-course if it was not a gap in your understanding of the situation. It could be an external distraction, like stress, relationships, work, or the influence or other voices that you should not have listened to leading you to make a poor decision. It could also be an internal distraction, like your own deep emotional desires for success that override reason and logic.
If we want something to work too badly, we can make ill-advised choices based on those desires. Recognize what throws you off. What distracts you from making level-headed, informed, logical choices with your money?
Once you recognize these areas of growth, it will be that much easier to move towards the decisions that build your long-term wealth.
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