Sean’s six question process for learning from and bouncing back from setbacks:

Managing Emotions

Usually when I have a setback it is unexpected and I am affected by this in some way through disappointment, upset, confusion, etc.  I want to be able to think objectively about the setback I’ve had and in order to do so I need to remove the emotional reaction/attachment I have to it.  To do this, I use a nice new Microsoft Word document, but you can use anything that will allow you to get your thoughts out: a pen and paper, a word processor, the comment section of this post, or a friend who will listen (without commenting) all work well.

Next, I answer the following three questions.  It is important that you do not judge your answers and you keep answering until you have nothing left to say.  This is more of a feeling exercise than an exact science, so just keep writing or talking until you feel like you’ve said everything you have to say about the setback.  The three questions are:

Question 1:  What did I expect would happen that did not?

Question 2:  What did I intend to accomplish that I did not?

Question 3:  What would I like to say to [a person involved in the setback] that I did not?

Example

About six weeks ago I tried to refinance one of the properties I own.  The market has turned around in the neighborhood this property is in and at this point I have a fair amount of equity.  I went to my bank’s website and filled out a loan application.  The loan program I chose would have cut my interest rate in half and reduced my mortgage payments significantly.  Needless to say I was excited about the prospect of such a positive change in my finances.  Unfortunately, two days later I got a message from the bank stating that I had been denied due to insufficient income.  I was disappointed by this and would definitely consider it a setback.

Question 1:  What did I expect would happen that did not?

• I expected that I would be able to refinance my property.
• I expected to be seen as a good loan prospect for my bank.

Question 2:  What did I intend to accomplish that I did not?

• I intended to save a substantial amount of money each month.
• I intended to pay off my credit line as part of the refinance.
• I intended to be in a better financial position.

Question 3:  What would I like to say to my loan officer that I did not?

• To the bank:
  • Can’t you see that I will be better able to pay you if you allow me to refinance into a lower interest rate loan?

Depending on the setback, I may have much more to say.  For this setback, acknowledging each of the thoughts I made above was all I needed to get past the rejection and disappointment I felt.

Learning From The Setback

With my head cleared, I next ask myself the following three questions:

Question 4:  What did I learn from this setback?

Question 5:  What will I do differently if I am in the situation again?

Question 6:  What is the next step I will take to achieve my goal?

Example Continued

Question 4:  What did I learn from this setback?

• I learned that my debt to income ratio (DTI) is currently my biggest limiting factor in qualifying for a mortgage.

Question 5:  What will I do differently if I am in the situation again?

• If I am in this situation again, I will call the bank and ask how they calculated my income and what the maximum DTI I can have is.
• I will determine whether or not my DTI falls within the bank’s lending guidelines before applying for a refinance.

Question 6:  What are the next steps I will take to achieve my goal?

• Call the bank and determine the following:
  • How did you calculate my DTI? (I want to make sure we are working with the same numbers)
  • What is my DTI as you calculated it?
  • What is the maximum DTI I can have to qualify for this refinance? (It turns out I was over by 4%)

• Decrease my debt and/or increase my income to become eligible for the refinance.
• Check back with this bank and other banks regularly to see if their lending guidelines have changed.

Conclusion

Going through these six questions can help get you through a setback and refocus your energies on the achievement of your goal.  Answering these questions has helped me countless times and I hope they help you as well.

What is Failure?

If you ask the average person to define failure they might describe it as the opposite of success, a flaw or the inability to accomplish what they set out to do.  However, if you ask a highly successful person to define failure you would hear something very different.  Here are a few of my favorite quotes on failure from some notable people:

Success consists of going from failure to failure without loss of enthusiasm.

- Sir Winston Churchill, Prime Minister of the United Kingdom and Nobel Prize Winner

The only failure is not to try.

– George Clooney, Academy Award Winning Actor

Success represents the 1% of your work which results from the 99% that is called failure.

- Soichiro Honda, Founder of Honda Motor Company

Failure happens all the time. It happens every day in practice. What makes you better is how you react to it.

- Mia Hamm, 2 time Olympic Gold Medalist and All-time Highest Soccer Goal Scorer

If you search for the word “failure” on any quotation website you will see many more quotes like these from other highly successful people.  These people don’t see failure as something to be avoided; they see failure as a prerequisite to success.

The fact is, we can define failure as anything we want.  The more empowering our relationship to failure is, the more powerful, effective and successful we can become.  The goal of this post is to define my own empowering relationship to failure.  Before doing so I want to distinguish the difference between experiencing a failure and being a failure.

Having a Failure vs Being a Failure

For much of my life I attempted to avoid failure by not attempting things far outside my comfort zone.  I did this because I thought if I failed at something it would make me a failure.  At the time, I did not see a difference between failing at something, which is a temporary occurrence, and being a failure, which is an intrinsic quality.

To clarify, this post is about having failures (verb) which is distinct from being a failure (noun).  You can fail as many times as you want and never be a failure.  The only times you are a failure is when you give up or refuse to try.

Defining a Setback

If separating having a failure from being a failure is difficult for you, that’s OK… it is difficult for me too.  Because of this I have redefined failing and being a failure for myself.  In doing so, I no longer use the word “failure” to describe what happens when I don’t achieve the outcome I desire.  Instead, I call this a setback and describe it as follows:

• A setback occurs when my understanding of something is inconsistent with what that thing is.
• Anytime I try something new I will experience setbacks.
• A setbacks only become a failure when:
  • I refuse to learn from it.
  • I stop pursuing my goal. (A.K.A. quit)
• Setbacks are a good thing and I welcome them.
  • The more setbacks I overcome, the closer I am to achieving my goal.

I will always have setbacks, particularly when I am learning a new skill.  However, I will never give up and I will never quit.  Therefore, I will never be a failure.

How I got here

When I was 29, I spent 3 months in Barcelona, Spain.  It was the last year of my 20′s and I wanted to commence this decade of my life knowing I hadn’t left anything on the table.  I went out a lot, I drank a lot and I met and became friends with many amazing people from all over the world.  I had an absolute blast there and while I have fewer brain cells to show for it, those three months are how I remember my 20′s: carefree, energetic and yearning to experience as much of the world as I could.

While I was in Barcelona, I reflected on what I wanted the next decade of my life to be like.  I had spent most of my professional life working in IT, providing desktop and network support to companies in the Washington, DC area.  While the IT field is lucrative, I don’t have a passion for it like I have a passion for other things in my life such as travel, martial arts and dessert… I can’t pass up a good piece chocolate cake!  I knew I wanted my work life to be filled with the same passion I have for the other things I love.

At this point I realized there is a field that I have been interested in for as long as I can remember… real estate.  I love seeing new buildings sprout up out of the ground and take shape.  All the aspects of real estate development including construction, financing, negotiation and business fascinate me.  With this realization I decided I would pursue real estate investing and development as a career when I returned to the US.

Why Momentum?

When I returned to DC, I had a conversation with my friend David Groemping from Gemini Executive Coaching in which we discussed my plans to get started investing in real estate.  David told me that in any new undertaking there are three phases we go through as we move from beginner to expert.  These phases are formulation, concentration and momentum.

In formulation, we are learning the basics and getting a feel for what this new undertaking is going to be like.  In this phase every 10 units of effort we put towards furthering our progress yields about 1 unit of result.

In concentration, we have moved beyond learning the basics and are experimenting with our new knowledge of the field.  This phase is filled with setbacks and with personal growth.  In concentration, every 1 unit of effort we put towards furthering our progress yields about 1 unit of result.

In momentum, we understand the field and our specialties within it.  Who we are is consistent with what we want to accomplish in the field.  In this phase every 1 unit of effort we put towards furthering our progress yields about 10 units of result.

Currently, I am somewhere between formulation and concentration.  I have purchased two residential investment properties and I am aware, now more than ever, how much I still have to learn.  The reason for calling this blog momentum is because it is about my journey to the momentum phase of becoming a real estate developer.  I hope you enjoy reading it and you find the posts helpful in whatever you are trying to accomplish in your life.