I vividly remember my second year in college. It was 10:30 at night and I was leaving my girlfriend’s house by car. Instead of coming to a complete stop, I rolled slightly to the right. There was no one on the streets, so I took a chance.
That opportunity cost me $60. A policeman pulled me over for trespassing, and I passed out. At the time, I had $500 to my name after grinding at McDonald’s and doing part-time work for $4.25 an hour. I was so upset that when I sent in my check, I attached a note saying I hope they do something good with my $60.
At that time I was beginning to feel financially hopeless. It wouldn’t be the last time.
The Feeling of Financial Despair is Back
Recently, my wife took the car to do volunteer work at our children’s school. When he came back, he parked in our driveway, then went to meet the teacher at the first school our son attended. I am proud of her for taking online education courses to become a certified teacher. With her kind, patient manner and motherly instincts, she can do a lot of good.
Unfortunately, the pay is low at $24 an hour. But if you don’t have health care benefits, retirement benefits, or working income, every dollar helps. In addition, teaching gives him a greater sense of purpose. So when I went outside around 4:30 pm to pick up the kids, I saw a ticket on our windshield. How is this possible? A car was parked in our driveway for hours.
Then I looked at the $108 ticket. Apparently the car had been on the side of the road during window cleaning near our children’s school this morning. Sigh. No good deed goes unpunished. My wife drove to volunteer for an hour, and was awarded a ticket that would take her six hours of bickering toddlers to pay.
I couldn’t help but feel angry, because I had already sunk thousands of dollars into car repairs. After 60 consecutive days of “the system will shut down in 1 minute” warning from some electrical gremlin that no one can find, despair begins to feel inevitable.
So despite the financial despair, I felt angry. With so many problems tied to the simple need to be somewhere, I started thinking about ditching the car altogether, taking Ubers everywhere, or never leaving the house again.
Overcoming Feelings of Financial Inadequacy
I’m writing this post because some readers criticized me for not linking to my piece, “Surely $10 Million Is Enough to Retire Early.” I thought I was emphatic in arguing that people who don’t think $10 million is enough haven’t done the math. However, maybe I wasn’t critical enough?
Or perhaps the mere act of writing in larger than average numbers is a violation of one’s sense of well-being. I’m not sure. In any case, I thought I’d do a complete 180 and talk about surviving tough financial situations instead. I feel that some people prefer to read about tragedy as it makes them feel better about themselves.
Getting a ticket or having an accident that wipes out a day or month of pay is bad luck. But there are worse situations that we can face.
Major Events That Will Cause Financial Desperation
The first thing that comes to mind, as I recently wrote about this topic, is what happens to your surviving spouse and children if the breadwinner dies prematurely. The solution, even if you are already FIRE, a term life insurance including the home until the debt is paid off and the children are independent adults. I pray that you all live long and healthy lives.
The second source of despair is losing a job while carrying debts and supporting others. I hope your company offers you a severance package that lasts you a few months. After that, desperation grows each day another company ignores your request, and you start to wonder if you will ever work again as your expenses continue, never mind your panic.
The third is losing your job and watching your investment tank 20% or more in a bear market. This is the double chin that many feel in 2008. I was so worried about being laid off that I skipped filing my $25,000 MBA tuition refund in early 2007. Cracks were forming, so I studied the room.
The fourth is a catch-all. It comes from finally reaching one financial goal, and then being given another quest when you exhale. Foolishly, I thought my financial claims as a parent were over when our two 529 plans totaled four years at expensive private universities. Then someone at the Diamond Head Pickleball Courts told me she was “saving money” on senior care by only paying $18,000 a month on her mother’s group home. Just like that, I felt defeated again, looking at another $1 to $3 million to support four parents.
How to Overcome Financial Despair
Here is the good news. After 30 years of bouncing between brokenness and comfort and sometimes back to brokenness, I’ve learned that despair is a feeling, not a permanent state. And emotions respond to action. Here’s what I do to get out of the hole.
1. Reduce despair to a realistic value.
Despair feeds on ambiguity. “We will perish” is paralyzing. “We owe $108, which is six hours of work” is just Tuesday. As soon as you turn the abstract horror into a concrete person, your brain stops spinning and starts solving. Write down how much the problem costs, and then write down the next one action that eliminates it. The problem is just a math problem wearing a scary mask.
2. Keep a pessimistic hedge separate from your investments.
Many people put their emergency fund together with their portfolio, then panic when the two go down together. Instead, spend three to six months of expenses on boring money whose only job is to get you parking tickets, fender benders, pet bills, and broken water heaters. The point is not to come back. The point is that small disasters are always annoying instead of disasters. The buffer is a permit to vent.
3. Refuse to rely on one income.
A single cash flow is a single point of failure. The third is resilience. Eight may create permanent financial security. Even a side hustle changes the way you sleep at night. Focus on building as many passive income streams as possible. Don’t wait until you lose your biggest source of income to get started.
4. Confirm disasters, eat problems.
The events that really destroy families are death, disability, and lawsuits, so insure those who are aggressive about long-term health, long-term disability, and an umbrella policy. But don’t file a claim with a $108 ticket or a $500 fender bender. Affirm the little things, pass on the hurtful things, and eliminate most of the situations that keep you awake.
5. Rewind to a ten-year view.
Time corrects many financial mistakes. We find new jobs, recover from market losses, build bigger buffers, and increase our skill level. Ten years from now, this week’s ticket won’t be a memory. The despair you feel today is real, but it’s also temporary, and it’s often the discomfort that forces you to adapt and build more wealth.
6. Stop comparing. Compare back.
My pickleball friend gave me a new problem of $3 million in less than five minutes, just by raising my bar. Comparison is the fastest way to despair ever invented. So compare yourself to where you started, not to the richest person in the courts. The college version of me, sending an angry note with a check for $60, would be surprised where things ended up.
7. Do one thing today.
Desperation is what happens when you sit and purge. Action, any action, restores a sense of control. Cancel subscription. Sell ​​something on Facebook Marketplace. Apply for one job. Transfer $50 to savings. Motivation is also a feeling, and it is the opposite of despair.
In 2023, I made a self-inflicted financial wound by buying a dream home that I didn’t need. My family was very happy in our old place with its amazing view of the sea, side parking, and quiet area. But my passion for climbing the architectural ladder increased our income by $150,000 a year and drained our energy.
The last time I went paycheck to paycheck was 2005, except when I had a six-person job that I just learned to love. By 2023, I had no steady income. I still haven’t. So I did the number of direct income losses, took a part-time consulting job and started, created a new way to make money online, and reminded myself that nothing good or bad lasts forever. Despair vanished, as it always did.
You Will Do Whatever It Takes To Get Out Of Your Financial Trap
When people depend on you, you discover wisdom you didn’t know you had. Financial despair isn’t comfortable, but being uncomfortable is also the most reliable motivator I’ve ever found. No one develops their skills, takes on a side gig, or eventually builds an emergency fund when life is easy and the portfolio hits a high.
So if you’re in a rut right now, staring at a ticket on your windshield or a silent inbox, take comfort in this: despair is temporary, and it’s pointing you in the right direction. Make the number point. Create a database. Add an income stream. Then go pick up your kids from school, because that part was never about the money.
And maybe, just maybe, take your time and check out the confusing parking signs before you leave your car for the city streets, eager to nickel and dime you.
Student Questions and Suggestions
Readers, have you ever felt financially hopeless? What caused that, and how did you get out? And what little tricks do you use to talk yourself off the edge when one expensive surprise after another keeps landing on your windshield? What other types of financial despair are there?
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