We all make mistakes. Sometimes the mistakes are relatively small and easy to fix. Other problems, though, seem huge and insurmountable.
Chances are, you’ve made more than one financial blunder over your lifetime. In fact, you might be dealing with the fallout from major money problems right now.
While it might not be easy to overcome major money mistakes, it is possible. You have a better chance of success if you follow these steps:
1. Slow down
Start by slowing down and taking a step back. Once you realize you’ve made a mistake, it’s tempting to rush in and start “fixing” the issue. The problem is that we rarely make good choices when in a state of anxiety.
Research published in the Journal of Neuroscience indicates that anxiety can impact decisions. When you are in a state of distress, it’s difficult to make a decision that will ultimately help you. Snap decisions made in response to money mistakes can actually make things worse.
Slow down. Take a few deep breaths. Don’t make a move to change the situation immediately. Suppress the urge to take action.
2. Assess the situation
Once you’ve slowed down, you can assess the situation. Where do you stand? Be brutally honest about how bad things are. You can’t move forward if you don’t have a solid idea of the starting point.
This is also a good time to research your options. Gather information about your situation by visiting reputable websites, reaching out to your network, and talking to experts. Don’t decide on a course of action yet; do get an idea of the possibilities.
3. Admit the problem
Part of your assessment is acknowledging where you went wrong. Too often, we try to avoid responsibility for the mistake. Unfortunately, this can lead to a mindset that doesn’t allow us to take control of the problem.
Confront the issue head-on, figuring out where you went wrong. Be honest about how you ended up in the situation. Once that’s done, you can learn from your mistake and move forward.
4. Create a plan
After you’ve had time to slow down, assess the situation, and admit the mistake, you can create a realistic plan based on your starting point. Figure out the steps you need to take to move forward. You might need to put together a payment plan for a debt, negotiate with a creditor, or get a second job.
In some cases, it makes sense to talk to a financial adviser about steps you can take. If you need help creating a plan, ask for it. An outside view from someone who is detached from the situation can provide valuable input as you find a solution.
5. Adjust your behavior
Money mistakes may not be the end of the world, but you do want to avoid getting stuck in a cycle. This means adjusting the behavior that led to the mistake.
If you’ve been living beyond your means, change your spending habits. When you neglect to plan for taxes, make better arrangements moving forward. Learning from your missteps is part of life, and that includes learning from money mistakes so they don’t turn into habits.
How I applied these steps to one of my money mistakes
I’ve made my share of financial blunders over the years. One of the biggest mistakes I made early on with my business was not planning for my tax bill. When April 15 rolled around, I owed more than I could afford to pay. Here’s how I moved forward using these steps:
- Slow down
My first impulse was to just ignore the bill and hope I could pay it later. My second thought was to max out my freshly paid-off credit cards in order to satisfy the IRS.
Both of these were terrible ideas, born of panic. I slowed down and didn’t take any immediate action, determined to consider the situation and learn about my options.
I looked at what I owed and thought about the reality of how I couldn’t pay my taxes. Then I began learning about my options. I found out that the IRS offers an installment plan, and I also looked at other possibilities.
- Admit the problem
Sadly, it wasn’t the fault of the IRS that I wasn’t prepared to pay taxes. I hadn’t researched taxes for business owners, and I hadn’t been paying quarterly taxes.
I wasn’t setting aside money to pay taxes or even factoring them into my calculations. I acknowledged that I had caused this problem, pinpointing the issue.
- Create a plan
After I learned about the installment plan, that’s the route I decided to take. I put together a plan to repay my tax debt as quickly as possible, using the online form to sign up for an installment agreement.
- Adjust my behavior
Finally, I changed my behavior. I set up an automatic transfer from my checking account to a savings account so I wouldn’t even have to remember to take care of it each month. I created reminders and now I pay my quarterly taxes on time, using the money I set aside each month.
Next time you make a money mistake, realize it’s not the end of the world. Once you stop beating yourself up about it, take action to overcome the problem and move forward.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|