About 5 years ago I found myself in a pretty bad financial situation. A combination of bad luck, big entrepreneurial risks and political changes (affecting the economical landscape) turned my life upside down. I won’t go into details, maybe I will do this later, in a separate post.
It took me about one a half year to get out of debt, and another two to stabilize and re-enter a growth line. Somewhere in between, I changed two countries.
I wouldn’t remember this if I wouldn’t build a small tracking tool yesterday. You know, I keep a tight tack of my spending. I have a budgeting template that I copy over every month, in which I put all my income and the expenses for the current month. At the end of the month, I start over, with the remaining amount from the previous month in the income area. I started to do this when I got into that financial shitshow and I kept the habit straight for 5 years. In time, the sheet template got improved a little, but overall it’s based on the same approach: input, output, and, at the end of the month, the remaining amount.
The small tracking tool I built is a meta-sheet, in which I posted the input, the output and the remaining amount for each month. I then put these 3 columns in a chart, just to visualize the monthly evolution. There’s something about seeing trends and lines that clarifies the data, more so than just bare numbers.
The chart clearly showed how in the first year I was barely making it, with the “end of the month” line sometimes going below zero. Then, I started to constantly stay around the zero level with that line, for about a year. A few months later, there was a little gap between the income and the output, meaning I was finally making more than I was spending, which reflected in the “end of the month” line slowly going up. Noice.
But then I remembered I forgot to add something to the tool. The “savings” part. I didn’t start to save constantly until a year and a half ago, after I stabilized. So, I added a fourth cell, with the amount of savings for each month. Now I had 4 lines in the chart, with the “savings” line starting only in the recent months. But even if that line started late, it clearly showed a very different story. Not only was I able to end the month slightly positive, but each month I was able to put aside some small amount, on top of everything else.
Why am I writing this? To motivate you to track your finances a bit more firmly? Maybe, but that’s not my main point.
To motivate you by showing that it’s possible to get out of debt and stay afloat? Maybe again, but that’s a very large topic, and it can’t be covered in a single post.
I’m writing this to share that it’s a learning process. It’s a constant adjustment process that we have to follow, whether we like the process, or not. Looking at how my financial behavior changed over the course of 5 years, and what impact this had on my overall financial resilience made me understand, once again, that it’s all about stacking small habits on top of small habits, and follow them consistently.
When it comes to financial resilience, it pays more to look at the trends, and maintain a long term strategy, than to expect immediate results. Being impatient, and obviously stressed by the financial strain, my initial expectation was to “make it big” in one step, to pay the debt by some sort of magical hit. That’s a losing strategy. First of all, the odds to win the lottery are infamously small, and second, if I would have somehow succeeded in getting out of debt instantly, I would have missed the lesson. I wouldn’t have time to internalize the processes, to form and use the habits.
And the actual value is not in staying afloat by luck, but to foster the skills and habits that will help you stay afloat even when the odds are against you, and luck is not around to save your fat ass again.
That’s what financial resilience is about.