I remember my sophomore year of college well. It was 10:30pm and I was driving out of my girlfriend’s apartment. Instead of coming to a complete stop at the stop sign, I went slowly and took a right. There was no one on the road so I took a chance.
This opportunity cost me $60. A police officer pulled me over for a moving violation and I got into a fight. At the time, I had maybe $500 to my name behind leaving at McDonald’s and doing temp work for $4.25 an hour. I was so upset that when I mailed my check I included a note saying that I hoped they would do something positive with my $60.
This was the first time I felt real financial despair. It would not be the last.
The feeling of financial desperation returned
Recently, my wife took the car to do some volunteer work at our children’s school. When she got back, she parked in our driveway, then went to substitute teach at the first preschool our son attended. I am proud of her for taking online education courses to become a certified teacher. With her kind, patient demeanor and maternal instincts, she would be great.
Unfortunately, the pay is low at $24 an hour. But when you don’t have health care benefits, retirement benefits, or steady active income, every dollar helps. Further, teaching gives her a great sense of purpose. So when I went outside around 4:30pm to pick up the kids, I saw a ticket on our window. How can this be? The car was parked in our driveway for hours.
Then I looked closely at the $108 ticket. The car had apparently been on the side of the road while cleaning the driveway near our children’s school that morning. Sigh. No good deed goes unpunished. My wife drove to volunteer for an hour, and was rewarded with a ticket that will take six hours of wrangling the little ones to pay.
I couldn’t help but feel upset because I’ve already sunk thousands of dollars into fixing the car. After 60 straight days of a “system will shut down in 1 minute” warning from an electrical gremlin no one can find, despair begins to feel inevitable.
So, on top of the financial despair, I felt angry. With so many problems associated with the simple need to be somewhere, I began to fantasize about ditching the car altogether, taking Ubers everywhere, or simply never leaving the house.
Overcoming the feeling of not being able to get ahead financially
I am writing this post in part because some readers criticized me for being out of touch with my article, “Of course, $10 million is enough to retire early.” I thought I was blunt in arguing that people who don’t think $10 million is enough simply haven’t done the math. However, maybe I wasn’t critical enough?
Or maybe just the act of writing about larger-than-average numbers is a violation of one’s sense of well-being. I’m not sure. Anyway, I thought I’d do a 180 and talk about surviving dire financial circumstances. I have a feeling some people prefer to read about tragedy because it makes them feel better about themselves.
Getting a ticket or having an accident that wipes out a day or a month’s pay is unfortunate. But there are much more serious circumstances that we can face.
Major events that will create financial despair
The first thing that comes to mind, since I just wrote about the topic, is what happens to your surviving spouse and children if the primary income earner dies prematurely. The solution, even if you are already FIRE, is a term life insurance policy which covers the family 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 the loss of work while carrying debt and supporting others. We hope that your company offers a severance package that lasts you for several months. After that, desperation builds with each day that another company ignores your application, and you start to wonder if you’ll ever work again while your expenses continue, undisturbed by your panic.
The third is losing your job and seeing your investments down 20% or more in a bear market. This is the double chin that so many felt in 2008. I was so worried about getting fired that I didn’t submit my $25,000 MBA tuition reimbursement in early 2007. The cracks were forming, so I read the room.
The fourth is a catch-all. It comes from finally achieving a financial goal, just to be submitted another search the moment you exhale. Nonsense, I thought to myself financial research as a parent just ended our two 529 plans covered four years at the most expensive private universities. Then a friend in the Diamond Head pickleball told me he was “saving money” on senior care by paying only $18,000 a month for his mother’s group home. Just like that, I felt defeated again, asking for another $1 to $3 million to take care of four parents.
How to overcome financial despair
Here’s the good news. After 30 years of going back and forth between brokenness and comfort and occasionally back to brokenness, I’ve learned that depression is a feeling, not a permanent state. And feelings respond to action. Here is exactly what I do to get out of the hole.
1. Reduce despair to an actual number.
Desperation feeds on uncertainty. “We will be destroyed” is paralyzing. “We owe $108, which is six hours of work” is only a Tuesday. The moment you turn a vague fear into a concrete figure, your brain stops spinning and begins to settle. Write down what the problem actually costs, then write down the next single action that solves it. The crisis is just a mathematical problem in a scary mask.
2. Keep a despair buffer separate from your investments.
Most people stack their emergency cash with their wallet, then panic when the two fall together. Instead, keep three to six months worth of boring cash whose only job is to absorb parking tickets, fender benders, vet bills and broken water heaters. The point is not the return. The point is that minor mishaps remain annoying rather than becoming catastrophes. A tampon is permission to exhale.
3. Refuse to rely on a single income stream.
A revenue stream is a single point of failure. Three is resilience. Eight can create permanent financial security. Even a little side hustle changes the way you sleep at night. Focus on building like multiple streams of passive income as much as possible. Don’t wait until you lose your main source of income to get started.
4. Insure disasters, eat worries.
The events that really destroy families are death, disability and lawsuits, so insure them aggressively with life, long term disabilityand one umbrella policy. But don’t file a claim for a $108 ticket or a $500 bender. Auto-secure the small stuff, outsource the destructive stuff, and remove most of the scenarios that keep you awake.
5. Zoom out ten years.
Time heals most financial mistakes. We find new jobs, recover from market losses, build bigger buffers and level up our skills. Ten years from now, this week’s ticket won’t even be a memory. The despair you feel today is real, but it’s also temporary, and it’s often the exact anxiety that forces you to adapt and build more wealth.
6. Stop comparing. Compare again.
My pickleball buddy gave me a new $3 million problem in less than five minutes just by raising my bar. Comparison is the fastest road 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 a passive aggressive note with a $60 check, would be surprised where things ended up.
7. Do one thing today.
Depression is what happens when you sit and ruminate. Action, any action, restores a sense of control. Cancel a subscription. Sell something on Facebook Marketplace. Apply for a job. Move $50 into savings. Momentum is also a feeling, and it is the opposite of despair.
In 2023, I created a self-inflicted financial wound by buying a dream home we didn’t need. My family was perfectly happy in our old place with its panoramic ocean views, side-by-side parking and quiet location. But my obsession with climbing the steps of the property blew our passive income by $150,000 a year and drained our liquidity.
The last time I lived pay check it was 2005, except for when I had a six-figure job that I suddenly learned to love. In 2023, I had no stable salary. I still don’t. So I made the number of passive income loss concrete, I got one part-time consulting work with a startup, built a new stream of income online and reminded myself that nothing good or bad lasts forever. Desperation faded, as always.
You will do whatever it takes to get out of your financial slump
When people depend on you, you discover a resourcefulness you didn’t know you had. Financial despair is deeply uncomfortable, but worry is also the most reliable motivator I’ve ever found. No one hones their skills, picks up a side gig, or finally builds an emergency fund when life is easy and the wallet is hitting an all-time high.
So if you’re stuck right now, staring at a ticket on your windshield or a mailbox full of silence, take comfort in this: the despair is temporary and it’s leading you somewhere useful. Make the number concrete. Build buffer. Increase your 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 double-check the confusing parking signs before leaving your car to the city vultures, eager to nickel and dime you to death.
Questions and suggestions for readers
Readers, have you ever felt real financial despair? What caused it and how did you eventually ascend? And what little tricks do you use to get off the ledge when one expensive surprise after another keeps landing on your windshield? What other types of financial despair are there?
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