Recovering Emotionally From a Financial Loss

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Everyone begins life with grand goals. Children plan what they want to be when they grow up, and many adults plan families, purchasing homes, and retirement. When a financial loss is experienced, all these goals could be jeopardized. The result is not only financial loss but also can lead to emotional devastation.

Recovering from a financial loss takes work and discipline. Budgets must be made and implemented. Sometimes, it means taking on a second job. But what about the emotional pain that comes with it? How do you deal with that?

Consequences of Financial Loss

If financial loss were only about the money, it wouldn’t be so devastating. A sudden drop in the savings account or investments can interrupt retirement plans. Instead of enjoying your senior years, you’re working and scrimping.

You may have thought you had enough for your children’s college, but that’s gone. Or your dream home could be in foreclosure.

The result is your lifestyle also takes a hit. You can’t enjoy eating out or vacations anymore.

Beyond the financial consequences, there’s the emotional. Many people experience embarrassment. Admitting that you lost your money to a Ponzi scheme or poor business decisions is hard and often humiliating.

There’s an identity loss if your financial hit results from a job loss. You may have been the bank president with all the position’s prestige, but now you’re worried about paying the bills or, worse, foreclosure.

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Feeling betrayed is also a consequence of financial loss. Whether it’s Sam Bankman-Fried or Wall Street in general, many feel let down by those they trusted.

Stopping the bleeding is the first step. Taking care of yourself is the second.

Objectively Assess Situation

The first step to assessing the situation is accepting what happened to you. In other words, don’t try to deny your situation.

If you think you'll be fine once the stock market turns around, it may be wishful thinking that smacks of denial. Hoping to retain your old lifestyle on a new job with half the salary is also living in denial.

Accept what has happened.

Once your emotions are checked, take a rational look at your situation. Take an inventory of what you’ve lost and, more importantly, what you’ve retained. The problem may not be as bad as you initially thought.

Don’t take any action in the heat of the moment. By taking the time to reflect, you avoid making decisions based on emotions rather than the facts.

Develop a New Budget

Analyze what income is being generated and what needs to be paid. Don’t hide from bills. Instead, list all your bills and prioritize them. If you have high credit card debt, pick up the phone and talk to the credit companies.

The worst thing you can do is ignore them. You may be able to stretch out payments or negotiate a lower balance. But you must deal with them.

Take inventory of all debt and income and organize it in a document. Establish a system for paying your bills. Write down due dates.

Reevaluate priorities. You'll no longer be able to afford luxury items; acknowledge that in your budget.

By developing a written budget, you may find some relief from the anxiety or stress your financial losses have caused. Even if the numbers still look bad, you’re moving forward with a plan.

Make Lifestyle Adjustments

Your lifestyle is about to change. And one of those changes may entail taking a second job. Income solves a lot of problems. And adding additional income to the equation will help you dig yourself out of the hole sooner.

That dream home may need to go. Downsizing is a quick way to reduce expenses. It reduces the mortgage, and the cost of upkeep and utilities often diminishes.

You won’t be able to throw those dinners you’re known for or shop at pricey stores. Needless spending must stop. Everything changes, and you have to adjust.

It doesn’t mean you must be miserable; it’s just a different lifestyle.

Avoid Self-Blame

Don’t blame yourself. This often happens with fraud victims. They feel they should have been smarter. You can’t always keep financial theft from happening. Most people trust their financial advisor or broker, but some bad apples exist. It’s not your fault if you end up with one. Most of the time, you do have legal recourse.

For example, those who did business with Bernie Madoff or Sam Bankman-Fried, trusted and believed in them. The victims had no idea what was going on. But the fault is with Messrs. Madoff and Bankman-Fried, not the victims.

Seek Professional Support

Counselors, financial advisors and others can give you support when you’ve experienced a financial loss.

Many people will reach out to a financial advisor but skip the counselor or therapist. This is a time to be mentally prepared to face the upcoming challenges. You can only do this if your head is in a good place.

Some people are reticent about talking to friends or family. It’s difficult to discuss finances, and there’s the “embarrassment” element. That’s when a therapist or counselor should be consulted.

There are many community resources. Online support groups and forums can also help. If finances prevent you from seeking help, ask about a payment plan.

But a financial loss can elicit feelings of grief or despair and these emotions should be dealt with.

Financial Loss Affects Emotions

A financial loss can upend your life. Many people will ruminate on the loss until it consumes them.

Start dealing with your loss by assessing it. Once you have identified liabilities and income, it’s time to develop a budget to put you back on track. The process of doing this will help you accept your situation.

Prepare yourself for a lifestyle change. And seek help if you feel overwhelmed, depressed, or grieving.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.