Hardly a day passes without more news of economic downturn. For those old enough to remember, the headlines conjure up memories of the Depression of the 1930s. On a national level, they call our attention to an ever-growing budget deficit, enormous trade imbalances, growing unemployment and swelling numbers of the homeless.
More close to home, we read about plant closures, increased numbers of foreclosures and bankruptcies. The economic news is deeply disturbing and is stimulating questions about where it all will end.As disturbing as they are, these headlines do not begin to reveal the personal implications of the downturn for literally millions of Americans - including many Church members - caught in the financial squeeze. For many, the recession translates into lost jobs, inability to find acceptable employment, inadequate cash to cover basic living expenses, increased reliance on credit cards, regular contacts by collection agencies, lawsuits and bankruptcy. These are new experiences for many individuals who, until only recently, prided themselves in their self-sufficiency.
The problems clearly transcend the purely economic as those beset by the pressures of just "getting by" attempt to cope with feelings of inadequacy, hopelessness, discouragement and depression, and even with deterioration of their health.
The Church's counsel in the area of personal finances has proceeded on the theory that an ounce of prevention is worth a pound of cure. In numerous talks and articles, we are advised to always pay our tithes and offerings, to be self-sufficient, to avoid debt, to live within our means, to have a supply of food and other necessities, and to avoid speculative investments. (One helpful publication detailing these and other money management suggestions is One for the Money: Guide to Family Finance, recently re-published by the Church.)
All of this is wise, inspired counsel, and it can go far in minimizing the harsh impact of an economic downturn. It is not, however, a guarantee that the problems will entirely pass us by. Sometimes even our best efforts seem inadequate, and we then must find ways to cope.
Eighteen years as an insolvency lawyer has heightened my sensitivity to the problems stemming from an economic downturn. Of course, most of that experience has been in connection with troubled companies. Even that work did not fully prepare me for work the past year with several close friends and associates who were attempting to cope personally with the fallout of hard times. Before some significant reversals, these were highly successful people who were well educated and trained, held positions of significant responsibility and influence in both their work and their community, and who over the years had succeeded in accumulating some of the nicer material things in life. Dealing with them has taught me some important lessons about coping with economic distress.
One particular situation comes to mind. Through a variety of unfortunate circumstances, the head of a large professional firm, after many successful years, found matters unraveling. As his business pitched toward collapse under the pressure of unpaid creditors, the partners argued with each other, found that their conflicts interfered with their ability to manage their way out of the problem, and then, as things collapsed, scrambled to shift financial responsibility to others and to attempt to "shelter" their assets from the expected onslaught by creditors.
The initial reactions of the partners were much like those of a patient just learning of a serious disease - denial, anger and feelings of inadequacy. Many of the partners openly expressed concerns that their world was ending, that their creditors would take everything, that they would never again find gainful employment. On virtually every one of those points, their preliminary assessments have proven inaccurate.
From this and other similar experiences, I distill a number of lessons that, to one extent or another, are transferable to all who are experiencing financial difficulties.
- Financial problems frequently are not a manifestation of character flaws or bad judgment. Those confronting financial difficulties for the first time can be devastated by the experience. Feelings of guilt, worthlessness, inadequacy, tentativeness in decision making and inability to cope are common. This frequently seems to be a factor of the commonly held misconception that individuals are always responsible for the financial problems they experience. This, however, frequently is not the case. Many times the financial problems are more a factor of debilitating health problems, industry or business collapse, or the misconduct or mistakes of others than they are of personal weaknesses or errors of judgment.
There obviously are occasions when the "law of the harvest" takes hold and we reap the problems we have sown. Even then, however, it is important to put the situation in perspective. Some of the most successful have at one time or another faltered financially, only to learn from their errors and rebound to new heights. In short, as we attempt to address the problem, it is important that we are not too hard on ourselves.
- Situations rarely turn out as bad as expected. There seems to be a natural tendency when under financial duress to anticipate the worst. The commonly held concerns include the possible loss of a job, inability to borrow in the future, forfeiture of personal assets, personal embarrassment and ostracism by friends and associates.
Although it is almost inevitable that difficulties will be encountered during periods of financial stress, rarely do the problems measure up - or down - to the expectations.
Creditors frequently are not in a rush to enforce their claims and often are willing to explore ways to avoid a confrontation, particularly if you are acting to address the problem in a responsible manner, consistent with your current abilities.
Although there are exceptions, family, friends and associates tend to be understanding and supportive during difficult times. In short, while addressing problems, it is important to remember that most situations can be addressed constructively and at a "cost" lower than expected.
- It is important to address problems rather than expect that they simply will go away. It does not help to disregard problems and pretend they do not exist. This is a surprisingly common reaction when individuals are confronted by financial difficulties.
In the face of significant reversals, many, faced perhaps by the consequences of their mistakes, seem almost paralyzed by indecision. In some respects, their reaction is understandable. Unfortunately, it is an attitude calculated to compound and not resolve the problems. Although creditors may move at a slow pace, if a problem goes unaddressed, a constructive solution cannot be crafted, and creditors usually do take action. This can create tensions that only increase the problem and unpleasantness of the situation.
Generally, it is more prudent, as early as possible, to initiate a dialogue with creditors. Opening the lines of communication avoids "knee jerk" reactions by creditors who, anticipating the worst, launch into action to protect their rights.
- Candidly assess the problem and develop a realistic strategy. It is important to delay prescribing a cure until you understand the cause and manifestations of the problem and the range of possible solutions. Under the pressures of the moment, there is a tendency to react quickly, emotionally and without all the facts. You are immeasurably better off if, before acting, you can calmly asses the causes and magnitude of the problem, the possible solutions, available sources of assistance and support, and your ultimate and hopeful realistic goals.
In assessing causes and possible solutions, the assistance of competent professionals and also Church leaders can be invaluable. Even though it may be difficult to believe at the time, many of your problems have been experienced by others. Leaders and professionals provide substantial experience in dealing with problems like yours, whether they be financial, legal, emotional or spiritual. They can provide helpful insights into both causes and solutions.
- When you are under financial pressure, concealment, transfer or other manipulation of assets almost inevitably compounds rather than resolves the problem. In evaluating alternatives, you should disregard the "quick fix." By that I am referring to the countless asset sheltering schemes concocted by debtors under financial duress. Such activities rarely avoid detection and are sometimes dishonest and/or illegal.
Most transfers of assets made in times of financial crisis can be invalidated under both state and federal law, and such transfers often strain relationships with creditors.
- Maintain flexibility and faithfulness while crafting a solution to problems. The process of resolving financial difficulties can be highly frustrating to individuals who are wedded to a particular solution or timetable. Many clients come to me with very specific views of the various strategies they will pursue, the sacrifices they are prepared to make and the time they are willing to commit to resolve their problems. It is especially difficult for those individuals when matters do not proceed exactly according to plan, as they rarely do. There are almost always a variety of unexpected twists and turns. The process is far less frustrating to those open to alternative approaches, solutions and timetables.
It also is important to remain faithful and seek spiritual strength during times of extreme financial pressure. Prayer, scripture study and counsel from inspired leaders can help buoy up individuals and families during times of difficulty.
In the end, this spiritual strength combined with the realization that many others have survived similar difficulties and the recognition that the problems, if overcome, can contribute to personal growth and improvement, represent probably the most important coping mechanisms to dealing with extreme financial hardships.