If you were suddenly wiped out financially, what would you do?

If you were suddenly wiped out financially, what would you do?  In the Fall of 2008, a lot of Americans had the chance to face that question.  Let me tell you a personal story.

In the 90s, I started a successful real estate investment company, but I also did other things that interested me.  During that time, I became a pattern day trader.  A pattern day trader is someone who buys and sells the same stock more than four times in 5 consecutive trading days.  The SEC decided to recognize this group of traders because a lot of people who were trying to be day-traders were losing everything and then running around the country shooting people.  It seemed logical to key in on this class of investor in case they popped a rivet while trading. 

Anyway, I traded about 600-700 times a year.  I had taken a small investment and turned it into a substantial sum toward my retirement in just a few short years, and it was exciting.  I loved the intensity of day-trading.  It was highly competitive, and  I really enjoyed that part.  It was matching wits with someone on the other side of the computer screen.  That someone might be a market maker or a major corporation like Lehman Brothers, Bear-Stearns, Morgan Stanley or others.  I reveled in that challenge.  I learned how to manipulate the manipulators on Wall Street, and I was having a blast!  I succeeded in about 90% of my trades which caused my net worth to soar.  You really only need to be right about 10% of the time to prosper as a day-trader, but that wasn't good enough for me.

Then, in September 2008, the markets crashed when time finally caught up with the incompetent leaders in Washington whose policies were driving the country to a Great Recession.  One reason I have such disdain for so many politicians is that they create problems, exempt themselves from the consequences and then run for re-election against the problems they created.  The collapse of the stock market in 2008, and failure of the real estate market in the convening months, should be laid at the feet of Washington politicians.  Follow the money, and you'll see the policies that allowed the mistakes to be made.  Bad fiscal policies in DC started long before the 2000s, and if you want to blame Wall Street for the economic failure in our country, you need to go back and follow the "how-to"s that allowed Wall Street and Main Street to come crashing down.  Wall Street and Main Street played their role, but it all started in DC.

When the markets collapsed, our family finances was nearly wiped out.  We lost about 90% of everything we had saved for the future.  It was devastating.  My wife was worried , and I was very frustrated with the circumstances.  But, we were sure it would be OK because the knowledge that got us to that point was still with us.  So, I started rebuilding.

Here's my advice to you, if you, or someone you care about, has suffered a major financial setback:

• Stop and decide what is important in your life.  Eliminate those things that aren't important.  Especially eliminate those things that eat money but don't produce any income.  I call those financial alligators.  Nobody wants to live with an alligator.  It eats, but you can't play with it, snuggle it or take it for a walk.  Get rid of the alligators.
  
• Take what money you do have an pay off important things like cars and tools you need to use for generating wealth.
• Create a plan.  I have two companies.  That meant I needed to create a plan for both companies.  So, in order to fully focus, I did one at a time.  I took the company that had the greatest potential to create the fastest cash flow and starting marketing it first.  I had to let some employees go to save the company (the first time ever), but it was necessary.  The marketing plan worked, and the company instantly started a nice stream of income that sustained us and took the pressure off.  It is still growing today. 
  
• Pay the most important bills first.  Mortgage, electric, water, gas, food, insurance, etc.  Credit cards can wait.  That strategy can ding your credit score, but if you're on the verge of financial collapse your credit score is the least of your worries.  You're operating in survival mode at this point.
  
• Only buy what you need to buy.                       
  
• Go to a cash system.  Put your credit cards out of reach.  Don't build up additional debt in the effort to reduce debt.  Did you hear that Washington?
• Talk to your creditors.  Explain to them what is happening and see if they will work with you.  Some will.  Some won't.  You won't know which is which until you talk to them.
  
• Save, save, save.  Pay yourself first.  Always set 10% of everything that comes in aside.  I know, you need it all, but you'll be surprised if you start doing it.  You really can do it.  Sell what you don't need and set that money aside.
  
• Link up with someone who is successful in your field.  See if they would be willing to mentor you to help you get back on your feet faster.  Ironically, I was the mentor for others and had no one during 2008/2009.  I was able to encourage some friends during that time, and it helped encourage me to stay strong and determined.  There is always somebody worse off than you are.  Trust me on that one.
  
• Remember, if you created it once, you can do it again. 

We're having our Phoenix moment.   I am looking forward to the future, and I'm thrilled that I took the biggest hit of my life, and I'm still standing.  It makes me want to say, "Is that all you've got?" But, wisdom tells me to keep my mouth shut! 

I will pass my 2008 status within a  short time, and I am grateful for that.  The lessons learned during this recession have made me a much smarter and more aggressive businessman.  The truth is, the depth of this recession didn't need to happen, and when it did, it really ticked me off because it got very personal.   I needed those emotions to drive me.   My investing success had lulled me to sleep, and I had let myself get lax during the early part of the 2000s.  I took my victories for granted and assumed it would continue forever.  That was a mistake, and it's not one that I will repeat. 

Friends, above all, if you get hit with a major financial crisis, don't give up.  I know there is that overwhelming feeling that makes you want to curl up in a fetal position, but don't allow yourself that luxury.  When you've taken a hit is the time for focused action.  You can rest and lick your wounds when it's over.

Just know, it will get better, and it might be difficult for a few seasons, but you can turn it around.  Reach out to others who can help you. They're out there.  And, for Heaven's sake, vote for politicians who have real life experience in finance and business and aren't just known for give rousing speeches.  Speeches don't feed the bulldog.