Does Your Financial Life Feel Like a Burning Limo?

June 14, 2013

I saw a news story over the weekend about ten ladies who were able to escape a burning limo. What makes it a good news story is that there were no significant injuries. And, most of the women were in their 90s.

They were on their way to a 96^th birthday party for a friend. I hope that when I’m in my 90s and am in a limo on my way to a party, I have a story to tell that’s as interesting as this one! Everyone was able to escape and they were even able to find alternate transportation to the party. Imagine how lively that party was as they were telling the story about how they got there…

Sometimes, our financial lives may feel like we are in the midst of a burning limo. If we remain patient, don’t panic, look for alternative solutions and maintain our focus, we too can make it to the party afterward. It reminds me of a conversation I had with someone about two years ago who was in the midst of a brutal financial time. She was about to go through a divorce, her house was significantly underwater (she owed > $100,000 more than the home’s value), and her husband had run up a significant amount of credit card debt during the last few months prior to their separation. She had gone, in relatively short order, from feeling like her financial life was completely on the right track to feeling like she was in the middle of absolute chaos and potential crisis. She felt like the world as she knew it was ending and she wasn’t sure what the future was going to hold.

At that time, we talked about things she can do to stay afloat financially. Some of the things she focused on:

Minimizing all non-essential expenses
No matter what, maintaining a 401k contribution equal to the company matching maximum
Remember that the time between now and retirement is long. Know that what you’re going through is only temporary. Will there be pain and financial loss? You betcha! But….it’s only temporary. You have time to recover.
Focus on the long term. It might be necessary to increase investment risk to get more aggressive and try to have more growth in the portfolio. Focusing on the short term and the stress, the debt, the transfer of assets to her ex (she was the primary breadwinner) will only serve to be counterproductive. Don’t pay attention to the storm, think instead about how you’re going to rebuild after the storm.
Grind through it. It’s not going to be easy. There will be good days. There will be bad days. It will be a long process, a marathon not a sprint, so patience is a prerequisite. Get the best legal advice you can and allow the process to fully play itself out before you make any major financial or life decisions.
Smile and believe that things will get better one day.

None of what we talked about that day was exactly revolutionary. It was 20% financial and 80% philosophical/emotional. But, it was relevant to her situation.

We’ve exchanged some emails as she’s gone through the process and talked more in depth about “her numbers” in subsequent conversations over the last two years. I saw her last week and got an update on her life. Her divorce is almost final. She is doing a short sale on her house and is going to downsize into a small apartment.

She isn’t thrilled about it, but it’s what she feels like she has to do in order to get her financial life completely in order. Her life fundamentally changed, and what she once saw as a “burning limo” of a financial life is now back on track. It’s a different track, for sure, but judging by the smile on her face she’s going to make it to the party later, too…