A version of this post was originally published on Business Insider.
Let’s take a quick quiz. Count how many times you answer “yes” to the following questions:
Have you ever…
- Overdrafted your checking account?
- Forgotten to pay a bill?
- Spent more than you earned?
- Acted on bad financial advice?
- Chosen to spend your money instead of save it?
- Ignored a financial problem instead of dealing with it?
- Procrastinated on an important task in your financial life until it was too late?
Now, add up the total. Is your score “1” or higher?
Congratulations, you’re perfectly normal.
Everyone makes mistakes with their money. The first thing you need to do when you make a money mistake is to understand that it’s not the end of the word, and you are not alone. Even financial professionals, money experts, and so called “gurus” of personal finance advice can make financial mistakes.
Once you recognize it happens to everyone, there are a few other steps you should take that can help you better deal with money mishaps.
1. Don’t Beat Yourself Up Over Past Mistakes
Before you can move forward, you need to let go of any past mistakes made with your money.
I can’t tell you how many times people have told me they waited to ask for help with their finances because they were ashamed or embarrassed about mistakes they made months, or even years, ago.
But what’s done is done — there is no use in beating yourself up over it. And the longer you wait to address the mistake or ask for help in fixing an error, the worse your situation will get.
However, “don’t beat yourself up” doesn’t mean forget about the mistake, or blame someone else.
2. Take Responsibility for what Happened
This is often the hardest part of dealing with a recent money mistake: acknowledging that you messed up. It can be easier to feel as if the financial mess you find yourself in is not your fault. But instead of pointing the finger at everyone else, take ownership of the mistake.
Maybe you overdrafted your checking account or went into debt because someone hit your car and you had to pay for the repairs, and didn’t have enough cash to cover the bill.
Surely the other driver is at fault for your predicament, right?
No. Maybe the other driver was 100% at fault for causing the accident, but that driver did not force you to overdraw your checking account. You are the cause of the overdraft because you didn’t have an emergency fund available for these kinds of situations.
Could you have predicted someone slamming into your car and the subsequent repair bill?
Of course not, but life is unpredictable and sometimes things go wrong. You can plan for whatever that might be, even if you don’t know what specifically might not go your way by setting aside some cash to use if an unexpected or emergency expense comes up that you can’t otherwise afford.
In this instance, taking responsibility means saying to yourself, “I made a mistake. I didn’t have an emergency fund. But now I’m going to take action to build one.” You might find that taking responsibility actually leaves you feeling more empowered.
Once you take responsibility, life is no longer something that just happens to you. Life becomes something in which you have power and agency, and then you’re more well-positioned not only to avoid future mistakes but to actually be financially successful by making better choices.
Which brings us to step number three:
3. Commit to Better Choices Moving Forward
If you made a mistake, acknowledged it, and took responsibility for yourself, the next step is to commit to learning from what happened and preventing that same mistake in the future.
It’s never too late to get back on track, or to start making progress toward the kind of financial success you want.
Again, there’s no point in ruminating on the past. The only thing that matters is your commitment to taking the right steps, right now.
4. Turn Your Commitment into Action
As James Clear writes in his new book, Atomic Habits, “people think they lack motivation when what they really lack is clarity. It is not always obvious when and where to take action.”
This is the main challenge you face now, as you prepare to move on from your money mistake and make better financial choices in the future.
You might be very motivated to succeed — but without the clarity to know what to do, how to do it, or what to focus on, you may continue to make mistakes despite your best intentions.
You need the following in place if you expect to start doing better with your money, and continue building good habits into the future:
- A way to track money coming in and money going out of your accounts each month (in other words, your cash flow).
- A method to prioritize both your needs and your financial goals.
- A system to get and stay organized as you work toward what you want.
- A guide who can help you check your blind spots and filter through all the information that’s out there so you only follow the best advice for you.
- An accountability partner to ensure you continue taking action (even when you don’t want to or lose motivation).
This is exactly what, as a financial planner, my specific planning process helps people accomplish.
But you don’t necessarily need to hire an expert to help you (although depending on the complexity of your financial situation, you should consider it).
You can check these boxes by using apps and tools. You can read personal finance books and follow podcasts from experts in the field. You can join communities where you can share tips and get accountability from others who, like you, are committed to achieving success.
The most important thing is that you take the first step — and that you take it now. Everyone makes money mistakes, but few people go through this process of learning from them and improving because of them.
Be one of those few, and you’ll also be on your way to being one of the few who enjoys true financial success.
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