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SOMETIMES WORLD events beyond your control create a hard reset point in your financial life. A before and after. For me, that point was the 2007 Great Financial Crisis (GFC). The psychological scars still reverberate into my current life.
Looking back, I was aware of something rumbling about in the financial landscape but didn’t take much notice due to being deeply involved in running my business. Little did I realize the impact heading my way.
At that point, we had finally reached a good place in life. It was ten years since founding my company and the memory of the first five tough, lean years were a fading thought in my mind. Meaningful cash was flowing into our personal accounts, and business was very profitable with dreams of life-changing expansion on my mind. Nothing seemed impossible. We were young and proud of our achievements.
Mid-2008 saw banks in my country going under and the government stepping in to prop them up. My wife Suzie worked for a large UK-based international bank. I distinctly remember one Saturday morning chatting together about the crash in Suzie’s employer’s share price and whether we should take a big personal position. We both thought the company was fundamentally strong and a massive bargain.
Any thoughts about investing went out the window by that Monday afternoon. My bankers called me to an urgent afternoon meeting. With little in the way of diplomacy, immediate repayment of loans and overdrafts was demanded within seven days. The final insult was informing me that a small, unused $100 overdraft on my personal account was withdrawn with immediate effect.
Shell-shocked understates how I felt as I left the meeting. It’s a bit of a blur, and so were the next 18 months of fighting for survival. All of mine and Suzie’s personal capital was poured into the business, and inventory was run down to the lowest possible level to generate cash flow. My suppliers had to wait for payment, and I purchased stock almost daily for over a year.
Beyond the financial strain and exhausting work schedule, there was another weight I carried—guilt. My suppliers had to wait for payment, and that violated something fundamental in me. It was a matter of my honour and honesty. My conscience gave me no choice about paying them back; it’s just what you have to do.
But the delay itself felt like a breach of my word, a compromise of values I’d never imagined I’d make. The bitter irony wasn’t lost on me: the banks who’d shown zero consideration in demanding immediate repayment had forced me into a position where I had to ask suppliers for the very grace my bankers refused to extend.
Personally, the main anxiety I felt during the first year of our struggle was the thought of approaching the tax authorities. I was terrified of telling them I couldn’t gather the capital to fully pay the corporation tax bill. Unbelievably they were the most understanding of all my creditors and accepted a three month delay without protest.
It’s hard to convey the unease and vulnerability we both felt. At least I had some agency trying to control our business. Suzie only saw our savings evaporate and me working 16 hour days seven days a week. We also had the worry that Suzie worked for one of the banks involved in the crisis. Our only dependable income could disappear with the snap of a corporate finger. We had no answers, but we had each other.
Slowly our heads peeked above the black clouds of despair. I went from juggling cash flow on a daily basis, banking every check within an hour of receipt and praying it didn’t bounce, because I wasn’t sailing these stormy waters alone—my customers had issues also and they were stretching my credit terms to breaking point. One day, more than a year into the crisis, I realised there was enough in our business account. I didn’t need to rush to lodge the check in my hand; one more day could pass…the beginning of a turnaround.
By the middle of the third year, we had turned things around and managed to get a firm financial footing, with the business now operating on a cash-positive model. This enabled Suzie and me to start refilling our personal finances. Never again would I be dependent on credit in any manner. This reset point lasted until I sold my business earlier this year and still holds sway in my personal financial life.
Undoubtedly, there was an opportunity cost to my fundamental and permanent management shift. Growth had to be slow and organic, not explosive and fueled by lending. My personal wealth would possibly be much larger if I had gone cap in hand to the banks. For me, it wasn’t a hurdle I wanted to cross. A comfortable life was enough. I didn’t need riches.
While it was a traumatic experience, I feel it was an overall positive result. Debt changed from a way of business life to an unnecessary instrument that was also banished from our personal lives. Not much good came out of the GFC, but a dislike and avoidance of debt was the best result for our long-term peace of mind and future retirement. It wasn’t a lesson I wanted or expected but it was one I certainly learned and took to heart.
Have you ever reached a financial reset point in your life? Was it, like for Suzie and me, a nearly unbearable burden at the time? In hindsight, does it now seem like a worthwhile experience to overcome? Or was it too large to overcome and still negatively affecting your financial well-being?
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Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
