Help Someone Through A Negative Life Event Impacting Income

Your guess is as good as mine as to how many millions of Canadians will be suffering from a drop in income as a result of what experts in the risk management field call a negative life event. 

Responses to a drop or loss of income are shaped by each person’s unique sense of loss and uncertainty about the future, leading to a series of adjustment stages similar to those of grief. In these situations, many people recognize the need to think carefully about their finances but lack the headspace to fully consider them.

Hopefully this isn’t you, but chances are someone in your life has already started to go through these stages. You can help them by first recognizing the stage they’re in, which will allow you to guide your thoughts on how best to provide support. 

Responses in the first month are shaped by a person’s level of confidence and their natural propensity to take positive action. 

The first pay cheque that is either missed or reduced will be an impactful moment, as a person is forced to face their new financial situation. This is the point when abstract thoughts about money become concrete and they realize they’ve got some decisions to make.

Their response to this impactful moment will depend on how far they’ve progressed through the stages of adjustment, discussed below, and on their personality. 

And their response ultimately affects their thoughts and actions with their finances because so much is intertwined with money.  

There might not be anything you can practically do to intervene but do be on the lookout because bad money management can often be a symptom of one or more of the stages people pass through. And this only exacerbates the impact of the original income drop. 

Stage 1 – Denial:

• Continuing to live life as before, making no changes to spending, lifestyle or commitments

• Fear can sometimes freeze people in the denial stage or it might even propel them quickly towards acceptance

Stage 2 – Anger:

• Rebelling by overspending and splurging 

• Being stubborn and unwilling to change spending

Stage 3 – Bargaining 

• Making mental deals, trade-offs, and short-term actions such as justifying treats, but cutting out something else

• Reviewing their own identity and apparently struggling

Stage 4 – Depression 

• Negative thought patterns leading to inaction and avoidance

Stage 5 – Acceptance 

• Making changes to lifestyle

• A sense of moving forward

• Expressing a feeling that they’re a better person after what they’ve been through

Ultimately, where they are on their path to acceptance will impact how they respond to their new reality, as will potentially be obvious in their actions following that first small or missing pay cheque. 

Some will feel frozen in the moment, while others will be more open to making changes to adjust, which would be a key opportunity to inspire people in your life.

But inspire them to do what?

Would your instinct be to think that budgeting is the first and most important action to take? That would be mine. But the idea of drawing up a budget may (will) feel off putting to the affected person. 

The challenge is to somehow suggest budgeting steps that feel achievable, but not at the expense of substance – nothing that would insult their intelligence. 

The inspiration you provide needs to tackle the main priorities and not avoid the elephant in the room such as rent or mortgage payments. 

Consider these principles or rules-of-thumb when coming up with your own plan to help that person (or potentially, those people) in your life affected by this global negative life event:

1. Suggest a tangible action – make it a physical task and not something that they simply think about.

2. Make it specific without ignoring priorities and what you know they value – your suggestion must not bypass the things that people are most worried about. 

3. Make it simple to follow and easy to take action – put effort into articulating your suggestion in a way that is easy to understand and not so complex that they’ll avoid action.

4. See if you can make your suggestion optimistic – positive language motivates action, whereas condescending tones inspire the opposite.

5. Consider giving only a few suggestions with the greatest benefit – too many steps will be hard for you to communicate and may be confusing or intimidating.

6. Or even suggest a single small step – an action that would be considered a low commitment first step that could very well trigger follow-up actions independently.

In general, encourage people to first look at what they want and need to keep in their life as far as spending goes. Depending on their stage of ‘grieving’ and maturity level, you might need to emphasize starting with the essentials of daily living and personal care. 

Initiate a gentle conversation about what they’d consider swapping or eliminating. People have told me it’s been helpful when I’ve suggested they prioritize expenses on the chopping block. 

To avoid overwhelming them, it will be important that they think about what feels achievable today versus in the future.

I’ll end this cheery and uplifting article with the following simple set of actions you could suggest:

1. LOOK at your credit card charges and direct debits

2. Plan what you’ll KEEP, SWAP, or DITCH

3. BREATHE

If appropriate, give them a checklist; tell them to take breaks rather than do everything at once, but help them prioritize what needs to be done ‘today’ versus next week or month. 

Finally, the most trusted helpers are those who have been through something similar and have come out the other side – make sure you share your imperfections.