Are you going through hard times? Winston Churchill has a fantastic quote to help with that: “If you’re going through hell, keep going.” A lot of people are going through hell. Whether it be the fallout from a divorce (either a romantic or business relationship), filing bankruptcy, cashing out retirement plans, paying the IRS on monthly installments, or just plain old struggling to make ends meet.
The recent financial crisis exacerbated people’s financial situation. Losing a job is one thing, losing it when the unemployment rate is at an all-time high is another. There is a lag time to getting a job when the entire economy is struggling. It’s always fun to meet someone judgmental and tell them your story. You get that look of “how could you not have six months of income saved?” As if most Americans have that much saved! But even with six months savings, the combination of a reduction in income by more than a third, a lag time of easily three months to get a good position and the psychological and emotional impact of financial uncertainty meant six months of income wasn’t nearly enough to hedge the downturn.
It has taken me nearly three years to recover from the dissolution of two business partnerships in one year (I know, exhausting!). The psychological impact was brutal. Anyone who has gone through a divorce, whether a personal, romantic relationship or the breakup of a business partnership knows the lingering effect it has on your psyche and life for years to come. Take divorce, add in a dash of financial crisis and mix in a pinch of betrayal and voilà — mental meltdown martini (tasty!). I’ve had to crawl my way back to financial (not to mention emotional) stability, inch by inch, year by year, and I am still not out of the woods completely.
I’m not alone. The last few years I have met numerous people that have filed bankruptcy for various reasons or cashed out varying degrees of their retirement funds. One former co-worker was kind enough to openly share his experience with bankruptcy when I thought it was the absolute worst thing that could ever happen in my life. Various other acquaintances have told me about cashing out all or part of their 401k. Average Americans either lost a huge chunk of their retirement wealth due to the market downturn or due to a crappy economy that led them to forego the benefits of compound interest and cash out their retirement funds.
The 401k money is your money. With the exception of a Roth IRA, it is deducted pre-tax so you get an income tax benefit for contributing to it. But when you take it out, you are not only subject to income tax but also a penalty for early withdrawal. Why?! I truly believe that a government who can bail out banks for taking risks and making unethical choices, should waive at the very least the penalties for anyone who cashed out their 401k since 2008. It has been exceptional circumstances. Does anyone really think we wanted to be in a position to choose retirement wealth building versus total poverty? Trust me, it was much more fun when I was rolling in the dough and socking funds away. But I have a theory for this I will touch on shortly.
So after cashing out their 401k, people file taxes the following year and they often owe something to the IRS. And since it is taking people years to rebuild their lives after the crisis, they are still short on funds to pay yet another bill. What is next? IRS installment payments… yay! After speaking with one friend about her ordeal, she said optimistically, “Apparently you have six years to pay back what you owe the IRS.” If it wasn’t paid in full after six years I presume your soul was crushed and melted and you had to begin your life anew in an alternate universe. Whatever the consequences were, I hoped I never had to find out.
Retirement funds, IRS bills and the unemployment line… oh my! People who haven’t been through hard times often give you strange looks. They don’t understand the insanity of your experience. They consider themselves smarter and wiser for having avoided the wall you hit. But what they don’t understand is if we garner the necessary wisdom and lessons from this experience, those of us who went through hard times can actually be better off. We are often more willing to take calculated risks, are substantially more resilient and often have a better perspective on so called failure. The author of the book Think and Grow Rich, Napoleon Hill, said it best, “Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit.” We just have to tap into that benefit.”
Adversity is one of the greatest blessings of our life if we seize the moment to dig deeper and evolve. And yes, sometimes the moments of adversity can last a really, really long time. But it can redirect our path, help us to find our true calling and allow us to pursue ideas that during easier times we would ignore. It can push you to find emotional stability, spiritual peace, and a deep understanding of what life means to you. As Hill also said, “People are sometimes forced to undergo all sorts of punishment before discovering their own brains and their own capacity to create useful ideas through imagination.”
Filing bankruptcy and cashing out your retirements funds? Cost: $15,496. Using the downturn to grow and evolve? Priceless! The external influence of the economy has been brutal. Nevertheless, it gives us the opportunity to turn inward and search within the vast expanse of our mind and soul for a path to a brighter future. Hill clearly stated, “Temporary defeat is not failure.” So if we can just pick ourselves up, dust ourselves off, and try again one more time, we can get through hell. The other side I am sure, will be well worth the fight.