- Everyone deals with financial setbacks, but you can't let your bank balance or net worth define you.
- The first step to getting back on track and healing your mindset is releasing shame.
- My advice is to identify what is and isn't within your control, put a goal on hold if you need to, and surround yourself with supportive people.
- This article is a contributed piece as part of a series focused on millennial financial empowerment called Master your Money.
As one of the founders of Clasp, I've observed and spoken to hundreds of optimistic, well-intentioned people who are excited to transform their financial lives. But what happens when life gets off track?
We're all grappling with that question now more than ever before as the whirlwind that is 2020 comes to an end. This year marks the second global economic crisis that we've been confronted with in just a decade. And for millennials in particular, enduring two such cataclysmic events during formative financial years is proving to be catastrophic to wealth creation.
The cold hard truth is that it is impossible to predict unexpected events, otherwise they would be expected, right? But as the saying goes, when creating any plan hope for the best but prepare for the worst.
Sometimes though, the unexpected can be so severe that it completely derails and debilitates you. In these cases, when it all seems so insurmountable and how can we overcome inaction and move forward?
The key to dealing with financial setbacks is maintaining perspective and repairing the damage to our mindset. No one enjoys negative setbacks — in fact when we do face them, we often feel completely powerless and it can really injure our entire outlook of the world.
But the key here is to heal our mindset, and here's how:
1. Create space around your circumstances
Oftentimes we develop these ingrained mental models of how we believe the world should work. And when negative situations arise that deviate from what we believe should happen, it can disrupt our mental health.
First and foremost, accept that many things are truly outside of your control. Allowing for space between your circumstances and your identity is paramount. Don't tie yourself to your financial circumstances. You are more than your bank balance. Repeat after me: "My self-worth is not my net worth."
2. Give yourself a break
Let's face it. Our financial position is as much determined by our own personal choices as it is by broader systemic factors. Acknowledging and understanding this truth can relieve us of the shame often associated with financial setbacks and ultimately enable us to get off that achievement treadmill.
It's okay to readjust your goals to reflect reality and there should be no shame in doing so. For example, if you're concerned over not meeting a savings goal, cut the goal in half. Or give yourself permission to put the goal on hold.
3. Create a supportive environment
Perspective is how you perceive the world around you. Building a supportive environment keeps you grounded at times when you feel overwhelmed and allows you to make connections to others. Try cleaning up your digital environment by following great financially-focused influencers whom you can relate to. Or join an online community that fosters open communication, where you can learn from others as well as contribute your own experience.
But remember, it's important to invest the time in finding the right people to surround yourself with, whether it's who you follow on social media or who you call late at night when you're up worrying about your money problems. Your mentors should reflect your values and who are as a person.
When all is said and done, the key to financial health is mental health. Start by being gentle with yourself and set the stage to better maintain perspective in order to overcome setbacks. And above all, understanding that a financial setback is just as damaging to your mental health as it is to your net worth is an important step in getting back on track.
This article was contributed by Sunny Israni, a CFA, founder and CEO of Clasp, and a member of BI's Money Council.
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