Why financial setbacks can be positive learning experiences


When life changes, money changes. And when money changes, life changes. Transitions in life are not only inevitable, they are constant. In fact, life is not linear but a set of many transitions. And with those transitions come setbacks.

I am currently moving. I was away with my son during the key weekend of the move and, perhaps naively, I imagined that I would return to my new home, my wife and my movers having taken care of everything perfectly during my absence.

But a series of setbacks prevented it. In my frustration and amidst a sea of ​​boxes and bubble wrap, I peeked out to see my son playing Super Mario on his Switch. He was celebrating his ascent of a level.

It helped me remember that challenges exist at every step or transition. Completing a shift means moving on to another.

As a professional planner, I typically guide clients through over 30 familiar life transitions such as moving, marital issues, retirement, and estate planning. Like Super Mario, a life without setbacks, challenges, opportunities or struggles would be a boring existence. Not only would we be bored, but we could never learn and improve.

Financial setbacks should not only be expected, but also welcomed.

If you ask people what a perfect world looks like, you might get a world where life is effortless, stress-free, and worry-free.

Though it looks heavenly on the surface, this mythical world crumbles with a little thought. Humans adapt very quickly to their environment, which is called hedonic adaptation, so being happy all the time would become our new normal.

And if that’s normal, then we would need to feel very happy to feel some joy. And what we consider normal today would be sad in this new world.

There will be challenges and setbacks in your financial life. Benjamin Franklin once said that the only guarantees in life are death and taxes. However, Franklin missed another guarantee: setbacks.

Setbacks will happen and pretending they won’t happen is futile. If you assume there won’t be a setback, then you, almost by definition, will feel bad when the next setback comes (which it inevitably will).

But since you should have known that setbacks will happen, feeling bad is effectively your choice. This does not mean that we can predict the future.

If we talk about investments, we know from the data that there will be a sharp decline in the market in the future. After all, a business cycle goes around and back.

What we don’t know is when it will happen, why it happened, or how long it will last. These are the unknowns.

Likewise, you will face unexpected expenses. You don’t know how big this expense will be, when it will happen, or why it will happen, but it is a guarantee that there will be unforeseen expenses in your future.

Further setbacks are not guaranteed, but possible. For example, my son may have failed the exam I took him for. I could be obsessed with the house I wanted to buy.

The promotion you wanted could go to an outside rental. Your business could go bankrupt. You may argue with your partner over money. Your children may be in financial difficulty and need money from you. Your parents may need financial help.

All this is possible. Some of them are not very likely, but others are more likely than you think. Again, we don’t know when they will happen, or why, or how long they will last. Only that they are possible.

Changing our mindset to expect setbacks will make us more resilient in the future.

Instead of being upset when the next setback occurs, we can reframe it as a learning opportunity or invitations to solve interesting problems.

Sam Instone, co-CEO of AES

It is important to understand that adversity is necessary for growth. If you’ve never had to solve a problem, then you have no problem-solving skills. Setbacks and adversity give us the tools we need.

Instead of being upset when the next setback occurs, we can reframe it as a learning opportunity or an invitation to solve interesting problems. We can see setbacks in such a way that we can’t wait to come out on the other side with our new skills, knowledge, and abilities.

As with my misery on moving day, setbacks will befall you. Pretending they won’t happen won’t help you. Instead, reframe setbacks as opportunities for growth. Practice reframing a failure as soon as you are aware of it, as this can prevent you from getting angry. Not being angry is necessary to find the best possible solution to the setbacks that life throws at us.

Life isn’t linear, and your plan shouldn’t be either. Setbacks are not our enemies; they should be welcome. It just takes a bit of a mindset shift.

Sam Instone is co-chief executive of wealth management firm AES

Updated: January 28, 2022, 4:00 a.m.


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