6 Well-Proven Steps That Guarantee Financial Recovery
- Reveals the exact actions you need to take to get back on your feet financially.
- How to set goals you actually have a chance of achieving.
- Why there's no need to aim for perfection when it comes to improving your situation.
If you're suffering from a serious financial setback, don't worry – you're not alone and there is a solution.
In fact, the recent stock market crash, real estate decline, and banking panic has left many people in the same position.
And if the recent financial crisis wasn't enough to take you down, it seems many people found their way to financial disaster through more traditional routes like divorce, overspending, medical bills, or bankruptcy.
The reality is more people than ever face serious financial difficulty today.
Regardless of what caused your financial setback, your path to recovery and prosperity will require a common set of action steps.
You may believe your situation is unique, but many have walked this path before you. The road to financial recovery is well-worn, and the steps to come back after financial disaster are fully proven.
So let's get started with the six step process that will help you recover from any financial disaster…
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Step 1 – Accept Your Situation
The starting point for financial recovery is to stop wallowing in your misery and accept reality.
Yes, it’s a bummer. Yes, you’re likely the victim of somebody else's wrongdoing. Yes, it’s devastating.
Most important of all – none of that matters now. What's done is done and there is no turning back.
Resisting what’s already a fact is futile, so don't waste your energy. Accept reality.
Living in the past only makes forward progress more difficult. Instead, accept the setback, let go of it, and commit to forward movement.
Not because it’s the right thing to do, but because it’s the best way to help yourself.
Related: 5 Rookie Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons
As long as you waste your energy wallowing in your misery, you’ll have that much less energy to dedicate to solving the very real challenges you face to move forward in life.
The best defense is a good offense, so get out of defensive mode and get started on the road to recovery with a clear offensive strategy.
Step 2 – Take Inventory
The second step to financial recovery is to take inventory of your current situation.
You must know what resources you have, and what liabilities you face, when developing your plan to come back from catastrophe.
You have to know where you're at now before you can develop a realistic plan to get where you want to go in the future.
It’s no different than using a road map to plot your path to a destination. In order to plan the route to reach your goal, you must first locate where you are now on the map.
It’s the same thing financially – you must define your starting point based on what is true today.
Ask yourself the following questions to assess your situation:
- What are your remaining assets?
- How much money do you owe?
- How much income do you bring in each month?
- How much do you spend?
- What is your credit score?
- Are they any long term implications to the financial disaster (alimony, health issues, I.R.S. liens) that must be included in your recovery plan?
The objective at this stage is to take an inventory of your current situation. You want to know everything that will affect your financial recovery plan so you’re ready for step 3.
Step 3 – Define Your Goal
The third step in your financial recovery plan is to define your objective or goal. You must determine where you want to go financially.
Staying with our road-map analogy, this step is akin to locating your end destination on the map.
Once you know where you are (step 2), and you know the end destination (step 3), it’s simply a matter of plotting the course to get there (step 4).
Setting your end destination is the same thing as setting a goal.
The “S.M.A.R.T.” goal setting system provides helpful guidelines:
- Specific: There must be a clear and definable end result. For example, “I want to make more money” is too vague and general, but, “I want to have $10,000 per month residual income after taxes by January 5th, 2017″ is specific and points you in a clear direction.
- Measurable: You must have some way to measure your progress toward the goal. In the example above, the measurement is dollars of residual income per month. I also encourage you to add interim goals along the way to break big goals into more realistic chunks. For example, how much residual income should you have one year from now? Three years? Five years?
- Attainable: There’s a fine balance between setting a goal that stretches your ability while still remaining within reach. If you set a goal that’s too easy, then you're not challenging yourself. If you make it too hard, then you're setting yourself up for failure. A properly designed goal achieves that razor-edge balance that stretches your comfort zone without being out of reach.
- Realistic: If you're deep in credit card debt and filing for bankruptcy, it probably isn't realistic to set a goal of becoming a millionaire in 12 months. Enough said?
- Timely: A goal without a deadline is just wishful thinking. You may want $10,000 per month residual income, but unless you include a date for this to occur by, it doesn’t qualify as a smart goal. It’s just wishful thinking. Give yourself a deadline.
Step 4 – Develop Your Plan
Now that you have your goal for financial recovery and you've assessed where you’re at today, the next step is to develop a plan that bridges the gap between where you are now and where you want to be.
Staying with our road-map analogy, you need to figure out the most efficient path to get from point A to point B.
It’s important to note you must balance offensive and defensive strategy at this point to keep the process fun and fulfilling.
For example, one mistake I often see people make when paying down debt is to do nothing but pay down debt. The problem is that's not very fun or very rewarding for most people.
One solution is to balance paying down debt with adding in a little tax deferred retirement savings or other assets.
The reason is to experience some emotional satisfaction so you feel rewarded by the asset growth, which increases your odds of staying with process long-term.
We aren’t robots: our emotions are part of the process and must be honored.
Step 5 – Take Action
The fifth step – taking action – sounds obvious when reading it, but for some reason, it eludes many people in practice.
The reason it’s important is because a plan for financial recovery is nothing more than wishful thinking until it’s converted into action.
Nothing happens until you take action. It’s where the rubber meets the road. Action is the fuel that converts goals into tangible results.
A lot of people dream about improving their financial situation, but few take consistent action, and that makes all the difference. The ability to consistently and persistently direct meaningful action toward achieving a goal is what separates successful people from those who are not.
Step 6 – Correct And Adjust
As you take action, the one result you can be certain of is you'll learn from your experience – and mistakes.
You’ll improve your skills and become more knowledgeable as you take action. That’s why you should never try to perfect your plan from the beginning.
Instead, just get started with a reasonably intelligent approach and correct course as you learn more.
The wise goal achiever knows that perfection is impossible, but correction is desirable; therefore, he just gets started as best he can. Then, he adjusts along the way to achieve his goal more quickly and efficiently.
Seldom (almost never) will your first plan be your best plan, so don't waste the effort trying. Starting immediately is more important because you’ll have plenty of time to correct course later.
Perfection is impossible – correction is desirable.
That's it – six simple steps that can help anyone turn the corner following a financial setback. Now that you know what to do, having a concrete wealth plan to achieve your financial goals might help you stay focused.
And if you have any other tips I left out, please add them in the comments section below.
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