Abandon Losing Strategies
Popular culture praises persistence. We go so far as to invent words like "sticktoitiveness" and repeat aphorisms like "try, try again" and "who dares, wins" and "never give up, never give in." (See also: Not the Sort of Person Who…)
The fact is, giving up is often the right strategy. If you're spending more than you earn, the sooner you give up, the less of a hole you'll be in. If you're living in a house you can't afford, the sooner you give up, the sooner you'll be able to put your finances right. If you're working at a dead-end job in a declining field, the sooner you give up, the sooner you'll be able to make the changes to put yourself on a path to success.
I wrote a four-part series on getting by without a job (it starts here: Part 1 — Losing a Job) that walks you through the specific moves you need to make when your income collapses. It's all about preserving what cash you have, cutting expenses, finding ways to bring in some money, and getting what you need to survive without money.
That doesn't mean it's going to be easy, and not only because popular culture is so opposed to "giving up."
Obstacles to Giving Up
The two biggest obstacles I see are self-image and the design snowball effect.
I've read many accounts of people whose income collapsed, but who took no action to cut expenses. They simply rode their life into the ground, even when they could see disaster looming ahead. When you ask them why they didn't take the sort of drastic action that could have averted total collapse, the answer almost always has to do with their self-image: they're not the sort of people who take in borders, have a roommate, move in with their brother-in-law, send their kids to public school, do manual labor, etc.
If you're not the sort of person who does those things, then you can't do them — even when they're the solution to your problem.
Design Snowball Effect
Everybody's lifestyle has critical dependencies on a few early decisions. I call this a "design snowball," because of the way a few small decisions produce a vast avalanche of consequences. An example I've talked about in the past is the decision to own a car, which locks in thousands of dollars a year of expenses, but enables a much wider range of employment and housing options. Abandoning that decision requires that you change everything else. The decision to own a house is another one, if for no other reason than that abandoning that one will require you to abandon most the stuff that used to fit into that house, but that won't fit into wherever you end up living. (I have some personal experience with that one.)
How to Abandon Losing Strategies
Whichever obstacle is keeping you from abandoning your losing strategies, I have two ideas that might help.
The first is to suggest that you look at your life as an adventure. Whatever the losses in abandoning a losing strategy (and they may be huge), big changes also mean big opportunities. When you're confronting the avalanche of changes the design snowball can produce, be sure to include on the list all the things about your life that you want to change — because this is probably the best chance you'll ever have to escape a boring career or a bad boss or an oppressive neighborhood or acquaintances who drag you down.
The other is a purely tactical idea, drawn from a post I wrote long ago — set aside part of your emergency fund as untouchable . . . until you make drastic changes. (The post was A Second Emergency Fund You Never Spend.) The idea is that a few thousand dollars isn't going to make much difference now, if you've got a losing strategy. But a few thousand dollars will make a huge difference later. When you're looking for a tiny apartment to replace your big house, you're going to need a damage deposit. Money that wouldn't even pay the registration on your car will buy you a perfectly adequate bicycle. (Heck, money that would pay the insurance on your car will buy you a perfectly adequate motorcycle.)
Make a plan up front that you'll never spend down the last of your emergency fund (or use up your retirement savings, or go into debt), just to stave off collapse for a few more weeks. Abandon losing strategies. Abandon them ruthlessly.
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