The most financially successful people have been dirt broke at least once. What lessons did they learn that helped propel them from a place of rock bottom to the peaks of success today? Perhaps there is something to be said for experiencing financial hard knocks.
We're not advocating being reckless with your money, but if you have experienced a setback going broke, don't be too hard on yourself - it could turn out to have been the best money lesson.
Here are ways in which going broke can sometimes manifest in good outcomes for you.
Understanding What it Means to 'Rough it'
Being broke means adjusting to living within the small amount you have and you'll be forced to start either cutting back, finding creative ways to juggle or alternative modes of earning interim money. Some who are particularly resourceful, may even do all three.
This balancing act and creative financial problem solving will surely hold you in good stead even in better financial days. You would have learned how to get by on a small sum; ways to realistically increase or stretch it to survive. You can be sure that these real life lessons cannot be easily replaced by controlled study.
Knowing these crucial steps when the going gets tough could be the know-how you need to keep your new business afloat or apply it to your other wealth building strategies. The art of stretching a ringgit should be no end useful.
Open to Consider New Income Opportunities
Do you have a creative hobby making clothes, food, or other knick-knacks that strangers have been praising and offering money for? Perhaps many people have been consistently contacting you to tutor them in topics or skills for pay.
Some of us may have stumbled upon these opportunities in the past, but we manage to produce several excuses to not pursue them. If you're at rock bottom, chances are you would have tried many ways to earn extra money and this willingness should help open you up to the possibility of pursuing new income opportunities including the ones you earlier dismissed.
Learning to Make Better Financial Decisions
Being at rock bottom teaches you many things: it teaches you how to climb back out as well as what missteps made you fall in, in the first place. Playing it safe doesn't always equate getting it right but making outright mistakes often teach us much more durable lessons.
Did you overspend to become broke? Or perhaps you foolhardily entered an agreement without first knowing the ropes. Whatever misstep you made to end up in the financial mire you did, you now know the consequences and hence, you know better.
Prevention is Better than Cure
The above outcomes are handy no doubt but people are inherently different and not all of them may respond to financial adversity in the same way. How many broke people remain so for the rest of their days? A large number we bet you won't find in a Business Insider article.
We've painted a pretty good picture of how going completely broke can help you but that is only if you have successfully gleaned the right lessons from the experience.
If you have been broke before, we hope you learned the good lessons above from it. But if you haven't, please don't go out to recklessly attempt it! There is another way to learn about financial management as per the above by taking calculated risks.
Financial advisor Ramit Sethi posits the method called the “Tripod of Stability”.
He suggests that by taking absolute care of the big three things in life (which for him are his car, his relationships, and his home), you can be more comfortable with taking risks in the areas outside of those three.
You can modify this concept to fit your finances of course. It doesn't have to be three areas. It just have to be enough for you to feel secure. One example would be to have an emergency savings, adequate insurance policies and a good backing of untouchable assets, be it low risk investments or property.
Having this cushioning allows you to experiment with new opportunities, business ventures and learn what you need with the adequate backing of good crisis prevention assets - just in case one round of financial rum luck doesn't teach you enough.
At the end of the day, it isn't how badly we've faltered in our efforts to manage and build wealth but what we've taken away from the experience that counts for much more.
Have you bounced back from being broke yourself and would like to share your story? Let us know in the comments section below.