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Dealing with unexpected financial loss

As anyone who was a victim of  Madoff will testify, being hit with sudden financial loss is like finding yourself in a capsized boat without a life jacket. However, there are things you can do regain control, including following this seven-step plan, writes Tom Davidow and Pat Annino

1. Acknowledge the crisis.

Your immediate response may be like Scarlett O'Hara's: "I can't think about that right now. If I do, I'll go crazy." Denying reality, however, will only paralyse you. The way forward is to acknowledge that you are in crisis and that you cannot think your way out of it by yourself.

2. Acknowledge your emotions:

Sudden money loss can trigger a range of negative emotions including shame at your situation, anger at yourself and everyone else and sadness at your loss. These feelings can become overwhelming to the point of paralysis. However, facing these emotions will make them less scary and enable you to think more clearly.

3. Write it down.

Writing can help move you out of paralysis. Without judgment, write down your negative feelings: "I am ashamed." or "I am afraid;" and your most pressing worries: "I don't know where to turn." and "I'm afraid of becoming homeless."

Now write down ten steps to solutions, for example:

  1. Call my lawyer/accountant/advisor.
  2. Search the internet; go to the library.
  3. Whom do I know who has gone through this?
  4. To whom can I talk about this?
  5. To whom can I turn for support?
  6. What are my assets/income?
  7. What are my liabilities/expenses?
  8. Can my kids take loans on their cars and college tuitions?
  9. List 10 tasks (making calls, appointments, filling out documents) for the day.
  10.  Check off each task as you do it and put uncompleted ones on tomorrow's list.

4. Share the information.

Talk about the situation with your family, friends and those you trust. Give them the information that you have and be open to their responses, including ideas for possible strategies and solutions. The knowledge that you're not in this alone—that you're in a partnership—is the single most determinative factor in your ability to navigate the course.

5. Pay attention to your health.

The stress of sudden money loss can impact your health. See your physician, tell him what you're going through and get a check up. Exercise regularly, eat a healthy diet and take time to relax.

If your emotions are proving difficult to deal with, consult a psychologist. They may be able to help you understand your present emotions, explain how this crisis may trigger shame or anger associated with past events and help you move forward by dealing with the past.

Part of getting through this is forgiving yourself for the impact your actions have had on loved ones. A spiritual/religious advisor can offer wisdom to help you with that.

6. Assemble a team. 

Assembling a team of financial and legal advisors will put you in a state of readiness to act. If you were diagnosed with a serious illness, you would consult with more than one physician to find a treatment. Likewise, interview several attorneys and pay them for their time. You will learn a lot and will find those with whom you are comfortable and whom you trust.

A general lawyer may be part of the solution but a specialised lawyer is essential, whether it's a bankruptcy lawyer, divorce lawyer or litigation specialist. Your team should also include an accountant, financial planner, banker and credit specialist. At least one member should be totally independent from the crisis.

7. Act.

Armed with your support system, write a business/financial plan outlining where you are now and how you will move forward. Organising your future plan into discreet steps will make it less overwhelming and easier to deal with your emotions as they arise. Choose your partners wisely, assess your risks carefully and be aware of warning signs, but be willing to make mistakes. It is far better to make errors of commission than to remain stuck in denial.

Be prepared to repeat these steps more than once. Taking action will clear the fog, change your beliefs about the situation and improve your sense of self. Continue to focus on the future. As you come closer to resolution, the progress you make will be its own reward. 

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