It is much easier to position your life before, rather than during, an economic crisis.

It’s also truly amazing how fast a credit crunch can sweep across markets.

This month, a decade ago, was the mid-point for the toughest 90-day stretch of my financial life. Taking it back to October to December 2008…

• My prospective earned income went to zero at a time when…
• My Business/Personal cash burn rate was $10,000 a week. Simultaneously…
• My net worth dropped by 67% and…
• I was facing a potential claim 20x in excess of what remained. The one bright spot was my family life…
• Our first child was born and we were very happy within our marriage.

The only reason I didn’t follow a friend into bankruptcy was a pre-crash restructuring. I had been scared by four events :

1. The US was offering loans without income verification.
2. The UK was offering loans without bank covenants.
3. Down in New Zealand, I used both of the above and borrowed to pay my living expenses at a time when…
4. I had a personal guarantee outstanding that covered most my assets, and all my net worth.

There is a line in Fooled By Randomness about Russian Roulette. It goes something like…

Even if the gun has a million chambers, there are some games you don’t want to play.

I was enjoying my life and didn’t want external circumstances to force a financial reboot at 40-years old. So… 2005-2007 was a time of significant change.

The restructuring took three years (2005-2007). It prevented ruin, but still resulted in a lot of pain when credit markets slammed shut in 2008.

At the time I was working in the UK. The entire chain of my business life went from Great-to-Insolvent in 180-days (bank, joint venture partner, developer, general contractor, sub-contractors, employer, CEO).

Just like that.

Gone.

2009-2012 were spent clawing back.

Key steps:

• Downsized family home, spending and aspirations. Embrace Your Hubris!
• Invested the downsized capital into a Downtown Boulder rental property. Two units, where the little unit’s rental income would enable us to live for “free” in the larger unit.
• Invested our remaining funds in a redevelopment opportunity that I could hold FOREVER, because it was debt-free and cash flow positive.
• Turned a loss making triathlon hobby (draining $75k annually) into a cash generating consulting business ($4,000 per month).

By 2013, we achieved cash flow break even. We were so blasted from our young family (up to three kids) that I don’t remember appreciating the significance of what we achieved.

Within my financial peer group, our story is not unique. Lots of people had a similar ride. However, they don’t necessarily blog about it.

Financial memories are short.

Remember.

You don’t get killed by prices falling — price volatility is emotionally painful but not financially fatal.

Companies, Your Personal Ethics, Friends and Families… All can get crushed by running out of cash in a banking crisis.

Where’s your cash flow statement?