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What I'm reading #3: Understanding setbacks and life transitions

By Sam Instone - January 21, 2022

When life changes, money changes.

And when money changes, life changes.

Transitions in life aren't just inevitable.

They're constant.

In fact, life isn’t linear but a set of many transitions.

And with these transitions, comes setbacks.

I’m currently moving house.

I was away with my son on the key weekend and, perhaps naively, imagined I would come back to my new home, with my wife and movers having seamlessly taken care of everything whilst I was away.

But a series of setbacks prevented this.

In my frustration and amid a sea of boxes and bubble wrap, I glanced over to see my son playing Super Mario on his Switch. He was celebrating moving up a level.

I remembered challenges exist at every stage of transition. Finishing one change means you advance to another.

As a professional planner, I commonly guide clients through over thirty familiar life transitions. From moving countries and marital issues to retirement and estate planning.

Like Super Mario, life without setbacks, challenges, opportunities, or struggles at each of these would be a boring existence. Not only would we be bored, but we would never be able to learn and better ourselves.

Financial setbacks should not only be expected but also welcomed

If you ask people what a perfect world looks like, you might get a world where life is effortless, with no stress and no worries. Even though it seems like paradise on the surface, this mythical world falls apart with just a little bit of thought.

Humans adapt to their surroundings very quickly, something known as hedonic adaptation, so being happy all the time would become our new normal. And if that's normal, then we would need to feel extra happy to feel a little bit of joy. And what we consider normal today would be sad in this new world.

There will be challenges and setbacks in your financial life. Ben Franklin said the only guarantees in life are death and taxes. Those two will happen, but Mr. Franklin missed one other guarantee: setbacks.

Setbacks will happen and pretending that they won't is futile. If you assume there’ll be no setbacks, then you, almost by definition, will feel bad when the next setback comes (which it inevitably will). But since you should’ve known setbacks will happen, feeling bad is effectively your choice. This doesn’t mean we can predict the future.

If we’re talking about investments, we know from data there’ll be a severe down market in the future. After all, an economic cycle goes around and comes around.

What we don't know is when it will happen, why it happened, or how long it will last. Those are the unknowns.

Similarly, you’ll face unexpected expenses. You don't know how big that expense will be, when it's going to happen, or why it will have happened, but it’s a guarantee there’ll be unexpected expenses in your future.

Other setbacks aren’t guaranteed, but possible

For example, my son might have failed that exam I took him away to do. I might get gazumped on the house I wanted to buy.

The promotion you wanted might go to an outside hire.

Your company could go out of business.

You can have a fight with your partner about money.

Your children might run into financial struggles and need money from you.

Your parents might need financial help.

These are all possible. Many of them aren't very likely, some of them are more likely than you think. Again, we don't know when they’ll happen, why, or how long they’ll last. Just that they are possible.

Changing our mindset so we expect setbacks will make us more resilient in the future.

It's important to understand adversity is necessary for growth. If you've never had to solve a problem, then you have no skills to solve problems.

Setbacks and adversity give us the tools that we need.

Instead of being upset when the next setback happens, we can reframe it as a learning opportunity or an invitation to solve interesting problems.

We can view setbacks in such a way we look forward to coming out on the other side with our new skill set, knowledge, and ability.

Like my moving day misery, setbacks will happen to you. Pretending they won't, isn’t going to help you.

Instead, reframe setbacks as opportunities for growth. Train yourself to reframe a setback as soon as you're aware of it as it may just prevent you from feeling angry about it. Not being angry is necessary to come up with the best solution we can for the setbacks that life throws our way.

Life isn’t linear and your plan for it shouldn’t be either. Setbacks are not our enemy; they should be welcomed. It just takes a little bit of a mindset change.


“Life is an unending series of complications, so it doesn't make any sense to be surprised by the arrival of the next one.”

- Sam Harris

Further reading

Does money make you happy?

9 of my favourite investment articles of 2021

What I'm reading #51: Focus on the things you can control, that matter