What do I do now? Have you ever asked yourself that question? It doesn’t matter what the circumstances are, that question is one of desperation. That question has the power to move you towards success or expedite your path towards failure. The only way to refrain from asking this question is to develop a plan that has enough flexibility built into it that it will allow you to pivot when the conditions on the ground change. I do not know if you have recognized it yet, but the government is accelerating the pressures felt by the average American family at a lightning pace. The fact that a government shutdown causes more than a ripple in the economy speaks to the problem of having too much government in the economy instead of having too much economy in the government.
The other day the President spoke of the number of people who have signed up on the state exchanges as a sign of the success of the ACA. What is missing from his rhetoric is the ACA individual mandate will result in a fine for people who do not have insurance. Another incentive in the ACA is that the enforcement arm of the ACA is the IRS, which is notorious for destroying people’s lives. Could it be that people are petrified about not meeting the mandate to have insurance? Whatever the motivation for compliance, your personal drivers for success must adapt, adjust, and overcome to these new realities.
So, what do you do now? The power of planning cannot be understated. The power of contingency planning cannot be overlooked. The power of mitigation planning cannot be neglected. In this poor economy, in this new reality of the ACA and other government regulations, you need to eliminate three aspects of your financial behaviors: debt, credit, and overspending. You might argue that these aspects are three in the same, but they are not. In fact, they are related but they are not the same; just as the three types of strategic planning are related, but not the same.
Debt, credit, and overspending is a three headed monster with an insatiable appetite. Once you have entered this downward spiral you will find it nearly impossible to save yourself. Overspending is a behavior. Behaviors usually have a driver, which is an internal reason to pursue a behavior that brings some level of pleasure. Although overspending is related to credit, credit is not a behavior. Credit is a financial product sold to the consumer to feed the third head known as debt. Debt, for lack of a better term, is the residual effect of the financial product of credit, which is utilized by the behavior of overspending to acquire a consumer good that brings some level of personal pleasure.
Three separate concepts, inseparably linked, that reduce the likelihood of you achieving the success you desire. Do not be fooled by the myth that you can use debt to achieve the success you desire. If you want to get out of debt, you have to start with the drivers of the behavior that resulted in the debt you find yourself in. When you stop to think about debt and the psychological dynamics of debt, you will find that most debt problems are driven by desires that exceed resources.
Although not all debt is an intentional living above your means type behavior, all debt is related to a lack of planning. I previously mentioned the three types of strategic planning that should be part of your planning cycle. These are basic planning, contingency planning, and mitigating planning. Your basic planning should never include the use of credit. If you eliminate the use of credit, you effectively eliminate the possibility of debt. This is a simple concept. If you cannot afford it, then do not buy it until you can. The problem is that for a majority of people, credit is used to artificially inflate their incomes to have the pleasures of life, now. So you have to set some boundaries in your basic financial plan. No credit.
After establishing your basic plan, you have to consider the “what if’s” of life. This type of planning is called contingency planning. Contingency planning asks the question “What would I do if…?” This is where you build fluff into your basic plan. This is where your emergency fund comes into play. This is where other forms of savings and investing come into play. Your “what if” scenarios create the motivation to live on less than what you earn for the expressed purpose of adapting to any contingency. A contingency is nothing more than an unforeseen event. Contingency planning says, I don’t know what is coming, but I suspect that something will come. Therefore, I will set some financial resources aside to handle these contingencies if and when they arise.
Over the last twenty-one years, I have maintained a contingency fund equal to one year’s gross salary. Notice that I said gross salary. This means if I were to lose my job I could likely withstand two years of unemployment before my resources would be depleted. This is my contingency plan. Now if I were to lose my job, other things would have to go, but I could maintain my basic needs of food, shelter, utilities and transportation. So your basic strategic planning set the boundary of no credit. Your contingency plan also includes that boundary. You build your contingency plan by spending less than you earn and setting aside the difference.
Finally, you have to develop a mitigation plan. This is where I would suggest that you relax the boundary of no credit. A mitigation plan is about bridging the gap in the midst of a crisis. If your situation is one where you have blown through the emergency fund and you have exhausted the contingency fund, then you have to become creative in mitigating your crisis. I teach that a mitigation plan is the loosest type of planning for major crisis events. Not that the planning should be loose, but the creativity within the plan must be highly adaptable to the situation.
A mitigation plan will actually be implemented as soon as you recognize that your crisis is moving you in that direction. While in the contingency phase of a crisis, you will want to begin to identify and establish the resources for your mitigation strategy. Since each person’s situation is unique, the dynamics of your mitigation strategy will be developed after doing a full present state analysis, future state analysis, and gap analysis. For more on this process, download your copy of my eBook Strategic Goals: The DNA of Personal Success at the Amazon Kindle Store.
So what do you do now? I will encourage you to do three things. First, find a strategic coach who can help you begin to build these disciplines into your life. Next, make it a strategic goal to eliminate the drivers of the behaviors that led to your debt problems. Finally, establish your three levels of strategic planning by developing a basic, contingency, and mitigation plan for the rest of your life. If you want to learn more about how I can help you through this process, visit my website at http://kenrupert.com and consider bringing me on as a strategic partner to help you begin to plan for your success. I specialize in working with care givers to create balance and stability in the care giving environment. However, I work with anyone who wants to create an environment of balance and stability for his or her life.