Your Personal Wealth
“You have to understand that when things go wrong in your life, it doesn’t mean you need to quit. It means you need to get stronger and change your plan.” – KeKe Palmer
In every plan, strategy document or venture, there is an element of risk. The risk of failure.
Plans can and do fail, supposed sure bankers turn out to be an error of judgement or a decision based on very faulty and inaccurate information. Market situations may change without notice and you are left with a huge loss or worse, your business totally wiped out. What do you do when your plans seem to have fallen through and failure is a reality staring at you? Let’s first look at the reasons why a plan can go wrong. 1. Inadequate Information: This is the biggest cause of failure. Starting a venture with only half the story. You heard someone opened a shop and is totaling sales of 500k every week and you jump into the business without asking what the associated costs are. OR you hear one company paid a huge dividend last year and your friend encourages you to purchase the shares and sell in two months not taking into consideration the underlying financials of the company and your own financial needs at the time. Three months down the line, the share price has plummeted and your 500k is now 285k...
2. Poor decision making skills: A lack of exposure to situations will limit you in decision making. Reading, sharing experiences and listening to experienced people will always help to broaden your perspective. Furthermore, you get better at making decisions, by making decisions!
3. Lack of experience/ sense of discernment: Starting a venture /investment without studying those who has done it before or learning the ropes of the venture. This is tied to poor decision making skills.
4. Lack of preparedness: Most of us are guilty of this as we take for granted our residual knowledge of certain areas and thus fail to prepare adequately.
5. Failing health /Sickness- No one I have spoken with in the last five years has ever shown me a plan that includes an ‘in case I fall ill buffer’. Our expectation is always of robust health and strength to do the things we like and enjoy no matter the age. The reality is that your lifestyle could change in the event of a debilitating illness. Not only does the illness rob you of strength and workable hours, it reduces your earning potential and drains your life savings
6. Job Loss- With the economic changes worldwide, losing a job can happen to anyone. It could be due to a cost cutting drive by your firm, a merger or just plain winding down of a whole business unit.
7. Death- when a parent, benefactor or spouse passes away, there is an almost immediate change in financial circumstances.
8. Separation/Divorce: The failure and break up of a marriage is a major cause of financial stress as plans prepared based on two incomes will have to be revised.
9. Single Parenting: Whether a deliberate choice or unplanned, single parenthood has its own challenges that can put a strain on financial goals.
10. Carelessness and slothfulness: This is typified by a failure to pay attention to details and a general sluggishness in attending to and making decisions
More often than not, our emotions get amplified when there is a failed plan. We feel anger, betrayal, self-pity, denial, shock, social withdrawal and finally depression. These emotions further drive home the sense of hopelessness and futility associated with bad plans.
Is the failure of a plan, a business venture, a marriage or an investment insurmountable? What can you do when all your financial plans come to absolutely nothing or when you put all of your savings in a project or investment and it goes horribly wrong? I would like to share some of my thoughts and some insights I have done on dealing with failed plans:
• First of all, review your original plan and check for lapses or errors of judgement that can be corrected. Sometimes we call this a plan B but the truth is you should always have a worst and best case scenario for every investment and a tipping point at which you exit or invest more. Go back to the plan and review critically.
• Following from this is a preparedness to take action immediately you notice a downward trend or change in your projections. For example: If you have an equity portfolio and you read market news that suggest a down turn in the market, immediately advise your broker to sell down the portfolio and move into a fixed income or money market product until the market stabilizes or rebounds. Delaying action could cost you some of your investment.
• This ensures you reduce the impact of the losses you will incur in the long run. Another example is if you start a business and after three or more years, you are unable to reach breakeven point. Be sure to review the business model, the internal processes, customer acquisition and complaint resolution process. Where there is an obvious error, be sure to take immediate action.
• For investments, speak to your financial advisor or personal banker to explore other asset classes or investment instruments that you can switch to.
• Make every effort to keep your emotions out of investment decisions especially at this point. You must be ready to take swift and decisive action no matter how painful it is.
• Where you are in debt, reach out to your creditors and restructure the loans. Make sure you commit to a regular repayment no matter how small.
• Change your execution style. If you relied solely on word of mouth, did absolutely no research or reading on your own before making decisions, then consider doing the opposite (and vice versa if all you did was read and research without talking to people to get a human angle)
• Learn from your mistakes. Be it a failed relationship or a failed business venture, learn from the mistakes you made and take steps to ensure you do not repeat them (within reason)
• Draw up a new plan putting into effect all the lessons you have learned from the past mistakes.
• Finally, ensure you build in a review step in your plans. It could be monthly, bi- monthly or quarterly. Having a set review period keeps you proactive as you can interpret early warning signs and take remedial action.