I've always been a fan of Bill Bryson's writing. It's true that he doesn't write about investing, or money, or anything at all to do with financial planning, but in many ways his writing provides us with lessons that we can easily adapt to financial issues.
In a high school commencement address he gave several years ago, Bryson provided the following piece of advice:
Be happy. It's not that hard. You have a million things to be happy about. You are bright and young and enormously good-looking -- I can see that from here. You have your whole life ahead of you. But here's the thing to remember. You will always have your whole life ahead of you. That never stops and you shouldn't forget it. (I'm a Stranger Here Myself, Broadway Books, 1999.)
It's that last part that really made me begin thinking about Bryson's advice in financial terms -- not that the whole bit isn't important. Being happy is a skill too many of us seem to have lost as we've grown older and busier. But having our whole lives still ahead of us is an idea I had forgotten.
For any number of reasons, many of us will find ourselves in the position of starting over financially. Perhaps you've had a financial setback in the markets like we witnessed when the technology bubble burst in 2000. Perhaps you've had a business fail, or you've lost your job, and you've lost most or all of your capital. Perhaps you've suffered a personal setback -- divorce, accident, or illness -- that forces you to begin again. Whatever the case, we all face the potential risk of our plans falling apart, and we might become faced with the necessity of starting again.
The point of this isn't to scare or depress anyone. In large part, I'm speaking from personal experience; life happens, and usually when you're not expecting it. The point really is that when you do have to begin again, you can do so with more information and a better plan than you may have had before.
Here are four simple tips -- nothing new or earth-shattering -- that we can all build on in lean times.
1. You can almost always get by on less than you're spending right now. Americans spend a fortune on "conveniences" and luxuries. For example, if you're paying $125 a month for cable television, try turning off the cable completely and renting movies online instead. You've just saved more than $100 a month and trust me, you're not missing anything in not watching television. My students think I'm nuts, but I don't miss TV now that it's gone. Identify some of your frivolous areas of spending and cut them back. Even reducing that spending total by a small amount each month can mean the difference between savings and debt.
2. Get rid of your credit card debt. Even if you don't get rid of your credit card completely, take it out of your wallet in any month that you're unable to pay off the entire balance. I've even seen Foolish readers on the message boards recommend that you literally freeze your card -- in a block of ice. Don't thaw it out until the balance is zero, and then keep it paid off every month or back in the freezer it goes.
3. Pay yourself first. If you're like most people and wait to see how much is available at the end of the month to put into savings, there won't be anything left and your savings will never amount to anything. Instead, set up an automatic savings plan so that the first part of your paycheck (10% is a great target) goes directly into your savings and investing plan before you even see it. You'll soon get used to that extra money not even being there, and you can sleep easily at night knowing that you're saving regularly.
4. Identify the kind of investor you're going to be and then stick with a disciplined approach all the time. If you're the type of investor who prefers to be hands-off, then set up your selection of mutual funds and add to them systematically. But then don't watch them daily and second-guess yourself every month. If you are a buy-and-hold investor, a la Warren Buffett, get your lifetime punch-card of no more than 20 stocks set up and do your homework carefully. Then punch your ticket and go about your business. If you're an active investor and follow the market constantly, then adopt whatever discipline you're comfortable with and stick with it. The point is to be consistent and disciplined.
Starting again in middle age is painful emotionally, but it's not fatal. Again, trust me; I speak from experience. The important thing to remember is that you still have your whole life ahead of you. You're just working from a revised playbook. It's natural to beat yourself up emotionally for past failures. We all do it to some extent. But that doesn't get you on your financial feet any quicker.
When all else has failed, revert to the basics: Live within your means. Save regularly. Invest well using sound strategies. And don't forget all the help available to you here at the Fool. Between the personal finance advice available at Motley Fool GreenLight, the investing advice available in the stable of newsletters, and the terrific support from your fellow Fools on the message boards, starting from scratch isn't nearly as daunting as you might think. Hang in there, Fool. We're with you.
For help in regaining your financial footing, be sure to check out our credit center.
Fool contributor Robert Sheard is the author of The Unemotional Investor and Money for Life. While he hates to admit that he's middle-aged, he knows what it means to start from scratch. Just ask him; he'll tell you. The Fool has a disclosure policy.