When Your Net Worth Goes Negative — The Starting Point Nobody Wants to Admit
Eventually I’ll stop referring back to it, but if you haven’t yet read My Mulligan story, you may want to do that first because it gives a lot of the background on my experience and what I did to build wealth from nothing. But first, let’s talk about what going from having something to having less than nothing feels like.
There’s an underlying psychology to it that’s hard to explain unless you’ve experienced it yourself. And if you’re dealing with it right now, then this post is for you.
It feels like abject failure. Like you were climbing a mountain, had made significant progress, and thought “I’ll reach the top soon”. Only to stumble, fall off a ledge, and hit every tree branch on the way down. Then hit the ground and continue rolling, until you finally come to a stop, 3 miles away from the base of the mountain, battered, bruised, and aching. You don’t just have to start over again. You have to start in the hole, far away from zero (the base of the mountain), and start the climb all over again.
To say it’s discouraging is a gross understatement. It can feel hopeless.
How We Lost Everything and Why It Matters to Your Wealth-Building Story
My stumble and fall came in 2010. Two years into the global financial crisis. Because I’ve posted about this story, I’ll just summarize by saying, I was a real estate investor, who borrowed too much money, and when the market collapsed my lenders freaked out. They needed all their capital back and called their notes (tried to collect), and I couldn’t pay them all back.
We sold everything trying to stay afloat for as long as we could. Much of it at a loss. We were trying to catch a falling knife. Eventually, we ran out of things to sell. We had no more assets left, and plenty of debt to repay. If you know what net worth means: basically assets – liabilities = net worth, then you understand why we were negative in that equation.
Believe me when I tell you how many times I flogged myself mentally for the poor decisions I’d made. Why did I borrow that much money? How could I think that the market would never shift? What made me think my lenders would trust me just because I’d always paid my debts in the past? The internal critic was loud, and persistent. And it lasted more than a year.
Eventually, when I found the “bottom”, I was able to come to terms with the fact that decisions were made. Poor ones. And I was going to have to live with that. But now, the only thing I could do was make different decisions. This was my “enough” moment.
The Decision That Has to Come Before You Can Build Wealth From Nothing
The first decision I had to make was the most important one of all. I had to have my “enough” moment. Feel free to click that link to read that post.
Without this “enough” moment, nothing that followed could have been possible. Why? Because the “enough” moment is the moment you decide “That’s it. No more. I’m done. I will do whatever it takes to fix this.” It’s a mindset shift from victim to owner. You got hurt. That’s real. You felt pain. You wallowed in self-pity, or hopelessness, and copious amounts of fear. And now you’re over it. You are making a definite decision that you’re done will all of that. From this moment forward, it gets better. No matter what.
The Actual Moves We Made to Build Wealth From Nothing
This decision launched a string of what Tony Robbins calls “massive actions”. I chose to face whatever humiliation necessary to ask for help. I called my creditors and negotiated whatever deals I could. Some would, some wouldn’t, and that was OK with me. I was trying. It sucked, to be sure. But it also felt empowering. I was taking responsibility and control. That feels good.
We had already sold our house. One we’d bought out of foreclosure and renovated from the studs in. We loved that place, and we sacrificed it at the alter of trying to make good on our debts. Then we moved into a tiny apartment in a so-so neighborhood. It felt bad, but it also felt good, because it was part of the “knowing” I had that I was doing whatever it takes (whether I liked it or not).
Then I took a job that paid significantly less than I had earned in the preceding several years. That also felt “bad” at first, but it also felt good, because again, I was doing whatever it took. And dammit, things were going to get better. In the long run, I’ve often looked back on that job and that apartment with fond memories. They were key components to the rebuilding of our finances.
The Compounding of Better Decisions
I’ve said this in other posts, but I genuinely believe that when you make that declaration, and then validate it with your actions, that you’re willing to do whatever it takes – people, opportunities, and things that look like fortuitous coincidences begin to show up. There’s magic in deciding and acting. You’ve probably experienced this before in your own life, but if not, try it. It’s amazing.
Over time each of our decisions, to sacrifice, to downsize, to scale back, to live incredibly frugally, while asking for help, being vulnerable with people about our situation, and committing to being consistent with these actions for as long as they took – began to compound. A raise here, then a promotion. A former investor partner having a vacant house they’d let us rent for less than fair market price. The opportunity to relocate to a new city and join a growing company. And on and on.
It wasn’t overnight. It took a lot of time. But also, we enjoyed the ride. Things started improving almost immediately from the time I had my “enough” moment, and chose to face my demons, fight the dragons, and humble myself to anyone that was willing to accept where I was in life at that moment.
What It Cost Us — and What We’d Do Differently If We Were Starting Over
At this point, I hope I’ve been completely transparent about the sacrifices I (we – I’m married) made, and how many crap sandwiches I had to eat to start from below zero to begin to build wealth from nothing.
It wasn’t always pleasant. Especially at the lowest point. In fact, it was rather unpleasant. But each action, each step, each conversation, each vulnerable moment, was a little bit more fuel in the tank. Momentum gathered. Energy increased. It felt good to start making traction up the mountain again.
Oh there were setbacks. A few stumbles, but no serious falls. I’d learned from my mistakes, and I was smart enough (or at least determined enough) not to repeat them. I never used debt like that again. Or bit off more than I could chew. I built a pattern of being so incredibly transparent and open with people that it attracted people into my life who valued those characteristics. And unexpectedly, this openness and humility brought me some of the best friends I’ve ever had. They loved me for who I was, because honestly, I didn’t have anything to offer them other than my friendship.
What Financial Freedom Actually Looked Like When We Got There
10 years later, life was a completely different picture. As I said, it had gotten better very soon after we started the climb again. But at this point, we were up from the point we’d been at prior to the huge fall. And this time we were smarter. Experienced. As well as more open, more vulnerable, more transparent. It wasn’t yachts and Ferrari’s, or private jets to our island in Aruba.
It was peace. Calm. Less stress. The ability to sleep at night. Freedom from debt. The knowledge that if things ever got that bad again, I knew what to do. Clearly our Instagram world has created the impression that financial freedom is glamorous. It isn’t. It’s quiet. And humble. It’s knowing you can buy a Porsche and opting for a Toyota anyway. Or being able to sit and have coffee with friends without the fear that your phone is going to ring from yet another collection company call. It’s knowing that your bills are paid, even if you lose your job, get sick, or the economy crashes again. And although this may sound cliche’: it’s priceless.
If You’re Starting From Nothing Right Now, Here’s What I’d Tell You
First, make your decision. Have your “enough” moment, so that you know you’re making the change. Know that you mean it. And that you believe it.
Then, get humble. Yeah, sh*t sandwiches taste bad. But they’ll keep you alive until you’re able to afford something better. Be vulnerable. And open. Ask for help. Tell people the truth about where you are, and what you’re doing to change it.
Listen and observe. You’ll be surprised how people, circumstances, and opportunities show up when you’re ready for them. Watch for them, and be curious. You never know when that next door is going to open.
Stay committed. “Whatever it takes” is easy to say and hard to do. Do it anyway. It won’t take long before things will improve enough that you’ll be enjoying the climb again. And as I said, the actions feel empowering, and this alone can feel pretty darn good.
Persist until. Until what? Until you reach the goal, become free, or know you’ve achieved permanent, lasting change. Tony Robbins used to ask, how many people learn to walk? The answer: all of them (barring disabilities, of course). How is that? Because a child keeps trying until they do. That simple. They persist UNTIL they walk. And adults don’t judge them. They don’t give up on them when they stumble. They just let them keep going until they get there. Be like you were when you learned to walk. Decide you’re going to, and never quit until you do. This should carry over beyond rebuilding your finances, too.
Are You Ready to Build Wealth From Nothing?
Need support? Have questions? Want to talk about it? Don’t know where to begin (aside from my suggestions above)? I’m here. Reach out. I’ll respond.