We all make mistakes. And sometimes those mistakes seem insurmountable. However, there is no reason to admit defeat just because you’ve made a mistake.
When I first started college, I let a $75 parking ticket almost ruin me. Initially, it (and other reasons) was the catalyst to me dropping out of school. Thankfully, I got my act together and got my degree which led me to being a financial planner.
As a financial planner, I’ve seen plenty of screw ups similar to mine and many much worse. Many of these screw ups had devastating consequences because the person didn’t think it was a priority to get it fixed.
I’m here today to prevent that from happening to you.
While you may have set back your finances due to your financial screw up(s), the good news is that, most of the time, you can fix it.
It’s probably not going to be easy and most likely it’s going to suck; there’s no magic solution to a financial mess up. However, there are some steps you can take to fix your retirement after a financial screw up:
1. Acknowledge Where You Went Wrong
Your first step is to identify what went wrong. Understanding your mistake is the first step to tackling the problem. If you are in deep debt, don’t identify debt as the problem. Realize that debt is the symptom. What caused the debt?
This was something that my father struggled with for much of his adult life. When I first learned how serious his debt situation was, it shook me. To this day I regret not asking him what kept him from breaking the vicious debt cycle that he was in.
If you struggle with debt, I implore you to dig deep and find out what prevents you from breaking free.
Whether you have withdrawn money from your retirement account, or whether you have racked up too much debt, you need to know what’s wrong. Be honest about the problem, and then try to avoid repeating that mistake.
2. Get Back to Financial Basics
When I was in boot camp, our drill sergeants were relentless in training us the basics we needed to survive as soldiers. It was the constant drilling that would be the backbone for the rest of our military career. Even when I was deployed to Iraq, it was “the basics” that allowed us to do our jobs effectively.
Now that you know where you need to improve, it’s time to get back to financial basics. These are the basics that we all know, but just fell out of the routine of doing. This means returning to good financial habits like:
- Spending less than you earn
- Paying down high interest debt
- Building up your emergency fund
- Having retirement contributions automatically deducted from your paycheck
It’s essential that you look at where you are right now, and go from there. Take steps to stop digging your debt hole deeper. Even if it’s only $25 a paycheck right now, have money put into a tax-advantaged retirement account.
Start following the basics associated with responsible finances. Once you are back on track in that way, you can start taking other steps to really fix your retirement.
3. Super-Charge Your Efforts
Once you know where you went wrong (and avoid falling back into poor habits), and once you are back on track with the financial basics, you have a good foundation to super-charge your efforts and really kick your retirement fixing plan into high gear.
Look for ways to cut your expenses. Even if you are living within your means now, are there still expenses that you have that may not be necessary? If there are, it’s time to cut them out. Rob previously shared 14 ways to lower your electricity bill which is just one of many ways you can save money around your household.
First step is to write down everything you spend your money on in a week. You would be surprised how much money is leaving your cozy checking account for no reason.
Use that money to pay down debt and/or boost your retirement savings. Downsizing now can also get you used to a certain lifestyle so that you will need less money in retirement.
Another way to super-charge your efforts is by finding ways to earn more money. This might mean a second job, selling stuff you don’t use anymore, starting a side gig, or finding some other way to earn money.
If that isn’t extreme enough, follow a page out of Deacon Hayes‘ debt free journey. Deacon and his wife paid off $52,000 of debt in 18 months. How did they do it? By being different.
They sold both of their brand new cars to drive beaters, stopped going on vacations, and Deacon even delivered pizzas on the side to earn more money to pay off their debt. Moral of the story is that sometimes I takes a little extra mojo to get out of debt and work on saving again.
You can use the results of your efforts to pay down debt faster, or build up your retirement savings quicker. Both of which get your financial mojo back on track.
Get In Order
In the end, the best way to fix your savings after a financial screw up is to combine efforts to reduce high interest debt obligations and build up wealth in a tax-advantaged retirement account. Concentrate on these activities after you get your financial house in order, and you can salvage your retirement — no matter how big your financial screw up happened to be.
Have you experienced a financial screw up? How did you recover?}
Do your finances need a pick me up? Be sure to check out Jeff’s new book, Soldier of Finance, which is now available at all major book retailers.