A Lesson in Financial Empathy

 

“As Jacob’s net worth grew, so did his ego.   He forgot what it was like to hit rock-bottom.  In his mind, anyone could easily achieve financial independence if they followed his foolproof plan.”  

-Peerless Money Mentor

Hitting Rock-Bottom Financially

Jacob was once a member of Broke Phi Broke.  To him, money was a scarce resource.  Graduating from college during the Great Recession, he struggle to find employment.  He often joked at dinner tables about being the poorest person in his crew.

In front of a large group of his closest guy friends and their significant others, he would say jokingly, “I make the least amount of money so one of you will have to pick up the tab!”

No one at the table would laugh at his lame attempt at humor.  While his friends could relate to him while they were in college, four years had passed since then. They all believed he needed to learn how to manage his finances properly.  But no one in the group would call him out, except his friend Don.

“Jacob, being broke ain’t no damn joke.  We want you to do better.  No woman in her right mind wants a broke man.”  Don would tell him in front of every one.

Don’s words made Jacob’s blood boil.  If he were Bruce Banner, he would have transformed into the Hulk instantaneously.

Instead, Jacob chose to remain calm.  In his heart, he knew that Don was only speaking the truth out of love.  From that day forward, he decided he would transform his financial life.

Transformation

Jacob started going to his local library daily to read personal finance books.  The first three books he read were Total Money Makeover, The Millionaire Next Door, and The Wealth Choice: Secrets of Black Millionaires.

The books opened up his mind to a new way of thinking.  He learned about debt reduction strategies, lifestyle inflation, and diversifying his income streams.

Instead of just complaining about his financial position, he was now actively trying to improve it!

Later on in his journey, he discovered personal finance blogs and podcasts.  His financial knowledge compounded and he would apply the knowledge acquired to his financial life.

After two years of applying the financial concepts he learned, his net worth grew from $-40,000 to $30,000.

He started thinking to himself, “Man, financial independence is easy.  I don’t know why anyone is struggling to get by.  All they have to do is follow the steps I have taken!”

Ego

As Jacob’s net worth grew, so did his ego.   He forgot what it was like to hit rock-bottom.  In his mind, anyone could easily achieve financial independence if they followed his foolproof financial plan.  A plan that involved the steps below:

1. Calculate net worth
2. Track expenses
3. Minimize lifestyle inflation
4. Increase income
5. Develop multiple skills
6. Network
7. Save and invest

Following those steps had allowed him to purchase his first home, travel more, and attend financial conferences!  Things were looking up for Jacob, until the winds of misfortune started blowing in his direction.

A Lesson in Financial Empathy

In August of 2016, Jacob’s hometown of Baton Rouge, La experienced a catastrophic rain event.  A slow moving system dumped 25 inches of rain within a 48 hour time span.

After the rain event ended, major flooding began.  Jacob was forced to evacuate his neighborhood.  As he was leaving, he remembered that he did not have flood insurance.  His home was not in a flood zone.

When he arrived at his destination two hours away, he turned on the news to see boats rescuing people in his neighborhood.

It took days for the flood waters to subside.  Jacob checked on his home when it was announced it was safe for him to return.

When he arrived at his home, he broke down in tears. The water had destroyed all of his belongings, even the ones he placed at the top of his six foot closet.

Since he did not have flood insurance, he was forced to take out an SBA Disaster Loan to repair his home.  A loan totaling $70,000.  His net worth dropped to $-40,000.

Mother nature humbled him in more ways than one; it taught him to have financial empathy for others! Instead of dismissing those struggling, he now listened to their stories.  He considered their unique circumstances.

After listening to their stories, he would still encourage them to create a financial plan but he realized that his financial plan was not foolproof.

Baton Rouge Flood

Although the character in the story above is fictional (based on real events), the Great Flood in Baton Rouge was real.  This catastrophic rain event destroyed countless homes in Baton Rouge and surrounding areas.

Houses flooded that were not in flood zones, and those without flood insurance had to take out small business loans to fix their homes.  One of my closest friends had a foot of water in his home.  It took him half a year to rebuild.

In the video above, my cousin and I are driving to pickup my grandmother and two aunts from their home in Zachary, La.  We were able to get them out safely.  Luckily for my grandmother, her house did not flood!

This was written to serve as a poignant reminder of how the unknown variables of life can ruin us financially.  Let us be mindful of that bad things happen to good people, and show more empathy towards people who are struggling to get by!

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Author: Jerry

Jerry is a Business Insider Contributing Writer who is obsessed with personal finance. He believes you can improve your financial situation by applying principles taught by the financial independence community to your financial life.

If you are having trouble saving, he recommends that you join the SaverLife Savings program where you can get a $60 reward after six months (no income requirement). All you have to do is put a minimum of $20 a month into a savings account. Easy, right?

For a fun read, check out his article 10 Signs You’re a Personal Finance Addict to see if you are a personal finance nerd.

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