3 Ways Getting Real Would Have Saved Sondra’s House

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We can complain about the shattered economy or we can take responsibility for our part in it. I choose taking responsibility, because at least I have some power. And it can be the first step in moving on, and in making decisions that will prevent it from happening again.

“It” being debt.

I’m going to start with the easiest to see: abuse of home equity lines of credit. I’m seeing a lot of this around, and there are some tragic stories. I feel sympathy for these women, because we all make mistakes. Where my sympathy ends is when they refuse to see how they were complicit in their own downfall.

Let me introduce you to Sondra No Plan. Remember how easy money was to get? It seemed like a fine thing to do, to start a business using all that lovely home equity. It felt like access to money was unlimited. Who needs a budget? Who needs to do profitability calculations? Who needs a plan? Without a road map, this businesswoman was at the mercy of the shiny objects. Whatever got her attention, that’s where her money went.

And now Sondra’s losing her house, and her business is not viable. She can’t figure out what went wrong.

It was the lack of a plan.

In general, we don’t understand how important a plan is. When you add in the illusion of unlimited resources, it’s even harder to see the importance of a plan. But a plan tells you what to pay attention to.

How would a plan have helped our sad ex-diva?

1)            Business Truism: If you’re not paying attention to it, it’s is going to catch up with you. (In this case, “it” is debt.)

2)            Not paying attention means you don’t have the information to make good decisions.

3)            With a financial plan, Sondra would have seen three months before that things were going south. She would have had the flexibility to choose whether to increase her payments on her mortgage, or shut down the less profitable product areas of her business. But by the time she saw what was happening (and shook herself out of her denial) it had all come crashing down. It was too late to make any smart moves.

4)            Those financial numbers she ignored? They are the markers you use to track the bigger picture of how your business is doing.

 If you don’t have a plan, drop everything and get one. If you do have a plan, make sure it’s on your desk. Meet with your financial counselor once a month to see how those numbers are tracking. You’ll be amazed at how good it feels to get real.