What to Do During Difficult Personal Financial Times

01/27/2016 12:00

by Mark Kohler

The older I get, the more I realize the sun doesn’t always shine, and everyone, and I mean everyone, is at one point going to face difficult financial times.  It’s not if they are going to come, but when.

Now, one of the best ways we can prepare for these challenges is to expect them, which means we should have a rainy-day fund, keep our debt to a minimum, and be wise in our financial commitments.  However, these difficult times often sneak up on us when we’re trying to hold a business together or are blindsided by a divorce, embezzlement, or an unforeseen change in our industry or market.

These situations can occur quickly, and before we know it, we are living week to week trying to hold it together financially. On a regular basis, I have consultations with clients focused simply on surviving in the economy.  Here, then, are some thoughts I share with clients that have helped many during difficult times. I hope they may help some of you — even if things are going well.

1. Look at the Big Picture

Take some time to reassess both your long- and short-term career/business goals. Determine if you like what you are currently doing and if it is helping you achieve your life goals. Decide what areas you need to change in your life and then create a plan for where you want to be in the future.

Don’t keep beating a dead horse if the business doesn’t have any life in it. Oftentimes, we are emotionally attached to a plan of attack and need to step back and look at the trees and be willing to make a change.

2. Crunch the Numbers

Create two personal financial statements: (1) a balance sheet that lists all your assets and liabilities and (2) a cash flow statement that shows what cash is coming in and what cash is leaving. This is not a comfortable experience, and I realize many of you don’t want to look at your financial situation in black and white.  It can be depressing… I know.

However, it will immediately help you understand where your money is going and help identify wasteful spending. Along with your personal balance sheet and cash flow statement, create these two financial statements for each of your businesses ventures, too.  You’ll quickly see where the “leaks” and losses are.

Don’t be emotionally attached to any project, employee, business, or piece of real estate. Be objective.

3. Make the Tough Decisions

Now that you know the businesses and assets that are a drain on your resources, you can get rid of them.  Maybe it’s a rental property that is not performing or a business partnership that isn’t working out. This can be hard from an emotional standpoint, but it’s a must.

Start by making a punch list of three drains on your finances and get rid of them one at a time. Also, be humble and realize you might have to eat “beans and rice,” as Dave Ramsey states. Be willing to sacrifice where needed. Cut anywhere possible. Sell any luxury items. Circle your wagons, and once you get back on track, you can go back to a nicer lifestyle if it’s important to you.

4. Re-evaluate Your Business Model

As the market changes, so should your business. You need to find new ways to expand your services and get more clients in the door. Make a business plan that focuses on niche markets you want to serve and the ways you’ll add value to those customers. Don’t be married to a business model that is outdated.  Making these changes may be uncomfortable, but they’re critical to helping you survive.

What do you have to lose?

If your business is headed in the wrong direction, any change could make the difference!

5. Get Additional Education

Buy a book or take a class. Do whatever you can to expand your skills in your occupation or business and enhance your marketability.

Just make sure you are smart in how you spend your education dollars: Look for affordable and targeted education.

6. Eliminate Debt and Improve Your Credit

Strategically pay down your credit cards. Take the card with the highest interest rate and start paying it down first, making minimum payments on all the other cards. Then move on to the one with the next highest interest rate.

7. Build a Team of Advisers

I realize this can be embarrassing, but you need an outside third party to give you hard advice.

Call me if you have to! You can’t do this on your own.

Get a loved one or someone you know won’t pull any punches and will give you the hard answers you need to hear. You’ll thank them later.

Bottom line: Don’t give up.

For some of you who are just killing it and doing great, remember: The pendulum swings both ways, and the time will come again when you will have financial struggles.

Prepare and remember: “It’s not that successful people don’t have challenges; it’s that they have learned to deal with them.”

Mark J. Kohler, CPA, attorney at law, is a partner at the law firm Kyler Kohler Ostermiller & Sorensen LLP and the accounting firm Kohler & Eyre CPAs LLC. He is also the author of the best-selling book Lawyers Are Liars — The Truth About Protecting Our Assets! and What Your CPA Isn’t Telling You — Life-Changing Tax Strategies. © 2016 by Laissez Faire Books LLC.