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We all need money management advice, whether you’re an experienced investor or a young adult trying to purchase your first home. MassMutual’s team is here to help.
Today’s insights on how to recover after a financial misstep come from Chad Tourin, founder and CEO of Kinnect Financial in Ft. Lauderdale, Florida.
Q: Everyone makes a money mistake at some point. What’s the best strategy for getting your financial house back in order?
A: When someone comes to me after a financial misstep, the first thing I recommend doing is zooming out to their overall long-term financial plan. The magnitude of the mistake often feels significantly worse than it actually is because it’s the most recent financial decision made, but one financial mistake does not define the rest of your financial life.
The key to moving forward is not dwelling on it. You can’t undo the past, but you can make the next financial decision with more clarity, more intention, and a better plan for moving forward.
The next thing I recommend doing is taking an inventory of the facts.
- What happened?
- Why did it happen?
- What is the real impact today?
This may require updating your current financial plan in light of the misstep. How are things like cash flow, debt, savings, insurance, retirement, and taxes affected?
A financial problem almost always feels heavier when it’s viewed in isolation, but once the facts are clear and the impact is put into perspective, you can take emotion off the table and start making thoughtful, informed decisions again.
What did you learn?
Mistakes are inevitable, and, like other setbacks, they can be excellent learning opportunities. The best way to move forward is to focus on what it taught you.
Perhaps you did not have an adequate emergency fund, which forced you to run up high-interest credit card debt when money got tight.
Maybe lifestyle spending moved faster than the plan, which hampered your ability to contribute to tax-deferred savings tools that could potentially help you build wealth. (Related: 3 times you should talk about money with family)
Perhaps there was not enough liquidity in your portfolio, forcing you to accept heavily discounted prices on securities you needed to sell during a market decline. Or, maybe debt, taxes, retirement, or protection planning were being handled in isolation when they really needed to be coordinated.
That kind of awareness is often where better planning begins. (Related: Is your financial plan holistic? 6 financial questions you should ask)
From there, the path forward is usually very practical. Put a financial plan together and reconnect your day-to-day decisions to the long-term plan.
That may include an analysis of your key objectives, investment strategy, and estate plan. It may also include a closer look at financial strategies that can potentially help protect your assets and interests, including life insurance, disability income insurance, and long-term care insurance.
Whether it’s building a debt strategy, rebuilding an emergency reserve, increasing savings over time, or putting guardrails around the next major purchase, a plan and a decision-making framework will help you stay on track.
A MassMutual financial professional can be instrumental in helping you visualize your financial goals and put plans into action.
A financial misstep can be painful, but it can also become a turning point if it leads to better habits, better coordination, and more confidence moving forward.
Discover more from MassMutual…
6 personal finance tips to strengthen money habits
How to avoid these 5 common financial mistakes
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