There are few feelings worse than when you realize that you’ve made a financial mistake. Whether you’ve splurged on something you shouldn’t have, forgotten to pay a bill on time, or worse, gotten scammed out of some money, that sinking feeling in your stomach is hard to shake. Financial mistakes are a hard topic to discuss because no one wants to discuss mistakes we’ve made with money. We’d rather share the highlights like our great investment or the vacation we got at a steal.
The truth is financial mistakes can happen to anyone, no matter your age or experience. But mistakes are an opportunity to learn so that next time, you’ll know how to react, understand, and recover from those financial mistakes. Below are seven steps to take if you’ve made a financial mistake.
Acknowledge the mistake
Let’s say you’re out running errands when you stumble onto a splurge-worthy purchase. It’s on sale and you think you’re in the clear, but soon you realize you’ve overdrawn your account. Now what?
The first step in dealing with a financial mistake is to admit you’ve made one. It’s easy in hindsight to see the warning signs, but it’s important not to beat yourself up as that won’t change the situation. Instead, make a plan so you can move forward and avoid future mistakes.
Back to our example—your first step is to acknowledge you’ve made a mistake so you can make things right.
Assess the damage
Making a financial mistake can feel like the end of the world, but it likely isn’t. Take a step back and fully assess your current financial situation. If you are in a relationship, you should discuss the situation with your spouse or significant other. By being open, you can both understand the pressures and will be able to work together to find the right solution.
If you’ve overdrawn your account, you’re probably dealing with a Non-Sufficient Fund (NSF) fee. Make a tally of how much is owed, including any additional fees, so you can properly resolve this mistake.
Freeze your spending
Once you’ve fully examined the issue, you may want to consider freezing your spending. Look at your monthly budget and see where you might be able to trim some expenses: cancel subscriptions to any redundant streaming services, limit eating out at restaurants, and skip any recreational travel. Of course, this won’t be fun but it won’t last forever. And in the meantime, you may find you prefer to save money instead of spending it.
Talk about it
Depending on the financial problem, you may want to seek the help of a relative, a friend, or a financial advisor. Remember, you can meet with a Georgia’s Own financial advisor at no cost and no obligation. Outside advice is important because it will provide you with perspective and ideas on how to resolve the problem. There’s nothing wrong with asking for help when you need it.
Additionally, it is important to break the stigma surrounding financial discussions. For a lot of people, talking about money is sometimes seen as taboo, especially if you’ve made a mistake. But talking about it helps others avoid the same mistake.
In addition to financial wins, tell your friends when that cool gadget you bought wasn’t actually worth it. If you feel like you’re constantly moving money around your budget, talking with a financial advisor may help you restructure your budget to better fit your needs, and help you avoid the constant struggle.
Determine your options and resolve the problem
Once you understand the repercussions, have had a discussion with your significant other, and talk to a trusted advisor, it’s time to look at all of your options to resolve the problem. When you’ve decided on your best option, make a list of action steps to ensure you accomplish everything needed to get back on track. Then, it’s time to start checking things off that to-do list. Fixing the financial mistake will make you feel better and give you a path to go forward.
If you have the funds available, you may decide to transfer money from another account to cover any NSF fees along with your purchase. If you’ve really blown your budget, and you’re able to, you may want to return the item.
Learn from your mistake
Now that you’ve resolved your financial mistake, your mind is clear for you to fully examine why you made the mistake and what you can do to prevent it in the future. No one makes a financial mistake intentionally—sometimes we rush a large purchase without fully factoring the debt into our budget or we forget about an upcoming payment. Life, and mistakes, are bound to happen. But understanding how you made the mistake is critical to preventing it from happening again.
Plan for the future
Finally, once the dust has settled, you’ll want to plan for the future. One of the most important steps is to open and work toward fully funding an emergency savings account. Remember, mistakes are a part of life but that’s how we learn. Don’t give up, or you risk turning a temporary setback into a permanent one.
Moving forward, you have several options to keep you from repeating your mistake. Set up balance alerts to stay on top of your accounts, and consider setting up overdraft protection. You can also opt out of overdraft protection so the purchase is declined if that is preferable. Lastly, make sure you update and adjust your budget regularly.
Key takeaways:
- Mistakes can (and will!) happen to all of us. The best thing to do is acknowledge the mistake so you can learn from it.
- Assess the damage with your partner, and consult a trusted advisor to help find a resolution.
- Once you’ve resolved your financial mistake, create a plan to avoid future mistakes and fund an emergency savings account.
When you have a budget and a financial plan, you might be tempted to think everything should go smoothly. But that isn’t always the case—we all make a mistake from time to time. By acknowledging the mistake, creating options to resolve the problem, and discussing it, we create a path forward and action plan to actually fix the problem.
