5 Things Wealthy People Do After a Financial Setback
If pressed, you’d say your biggest money problem is not having enough of it. So it’s hard to imagine that wealthy people would ever face financial setbacks. But they do.
Wealthy people are just as vulnerable to bad luck, poor judgment and broad economic forces as anyone else. The difference? They’ve got the background, experience — and, let’s be honest, the help — to bounce back.
Andrew Lokenauth, a financial expert, investor, author of TheFinanceNewsletter.com and founder of Be Fluent in Finance, has seen wealthy people handle financial setbacks firsthand. He has spent years working with high-net-worth clients navigating losses most people never encounter.
Lokenauth shared his insights with MoneyLion.
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To say Lokenauth has seen a lot during his years on Wall Street would be an understatement. He’s watched clients lose — and then rebuild — millions of dollars within 18 to 24 months.
“Wealthy people experience setbacks that would bankrupt most families but barely dent their long-term trajectory,” he said.
He has observed setbacks like these firsthand:
Business failures that wipe out $2 million to $5 million in invested capital
Market crashes that cut portfolio values by 40% to 60%
Divorces that split estates worth $10 million or more
Lawsuits resulting in $500,000 to $2 million judgments
Real estate investments that went underwater by $1 million or more
Tax bills from audits totaling $300,000 to $800,000
Failed ventures that burned through $5 million in capital
These losses sound astronomical — especially to anyone without that many commas in their bank statements. But Lokenauth says it’s crucial to assess the damage in context.
“The pattern I noticed is this: Wealthy people experience setbacks in dollar amounts that sound catastrophic," he said. "But as a percentage of their total wealth, these setbacks are recoverable. A $2 million loss when you have $15 million hurts. A $2,000 loss when you have $15,000 is devastating.”
So, What Do Wealthy People Do To Bounce Back?
1. They Don’t Panic
Lokenauth recalls watching a client lose $3 million in a bad business deal. While that client might have been justified in having what the kids call a “crash out,” he didn’t. Instead, he called Lokenauth and asked for a full walk-through of his balance sheet.
“We spent two hours on the phone," Lokenauth said. “By the end, he realized he was fine — angry, but fine. The $3 million loss didn’t change his lifestyle or his long-term plan. Most people would’ve panicked and made three bad decisions in those same two hours.”
Most people obviously can’t absorb a $3 million loss — or even have $3 million to lose — but the principle still applies. Panic leads to rash decisions with lasting consequences.
“Most people panic and make it worse,” he said. “They sell at the bottom, borrow at terrible rates and make desperate moves that compound the damage. I’ve seen people turn a $10,000 problem into a $50,000 problem in 30 days through panic decisions.”
Instead, wealthy people slow things down. In the first 48 hours after a setback, they assess the damage and call their advisers. They determine exactly how bad things are before making a move. Their first steps focus on stabilization — confirming core expenses are covered for the next 12 to 18 months, locking in credit lines and communicating with key stakeholders.
“They stop the bleeding, then they get quiet,” Lokenauth said.
2. They Play Offense
While most people are forced to play defense after a financial hit, Lokenauth says wealthy people play offense. That looks like:
Aggressively harvesting tax losses: “If they lost $500,000 in a business venture, they’re looking for ways to offset that loss against other gains,” he said. “They sell losing positions and structure losses to maximize tax benefits. A $500,000 loss can save $150,000 to $200,000 in taxes if handled correctly.”
Doubling down on what’s working: “This sounds backwards, but it’s brilliant,” Lokenauth said. When one part of a portfolio takes a hit, wealthy investors shift capital into what’s performing well. “They don’t average down on losers. They add to winners.”
Renegotiating everything: Setbacks can create leverage. “They call banks to renegotiate loan terms, cut costs with service providers and restructure deals with partners,” he said. “A setback gives them permission to have hard conversations they’ve been avoiding.”
Investing in themselves: “I’ve watched wealthy people lose $1 million and then spend $50,000 on executive coaching, masterminds or consulting,” he said. “They treat the setback as a learning opportunity.”
Buying distressed assets: “When they’re down, other people are often down worse,” Lokenauth said. “Wealthy people see their own setbacks as a signal that deals are available — and they’ve got the cash to act.”
That’s a strong offense.
3. They Have a Clear Hierarchy of What To Protect
During his decade in private banking, Lokenauth noticed that wealthy people follow a consistent hierarchy in a downturn: Protect cash flow first, then assets, and finally ego. That hierarchy shapes every decision.
Protect: Primary residences, core cash-flow-generating businesses, relationships with key banks and lenders, legally protected retirement accounts and assets held in trust for children.
Liquidate: Luxury assets with high carrying costs — such as vacation homes, boats and expensive cars — underperforming investments, speculative assets, collectibles or art for quick cash and real estate in declining markets.
Let go: Noncore business ventures, soured partnerships, ego-driven investments and assets that require too much time or attention.
“I’ve watched clients sell vacation homes they loved because the $40,000 a year in carrying costs wasn’t worth it during a recovery phase,” he said.
The takeaway? Wealthy people don’t hesitate to cut what no longer serves them.
4. They Have Rules for Debt
Lokenauth understands why most people fear debt after a setback. Wealthy people see it differently.
“This sounds crazy, but here’s why it works: Wealthy people understand debt is a tool, not a burden,” he said. “They use it strategically to preserve capital and maintain optionality.”
He describes a client who lost $2 million in a real estate deal but still had $3 million in liquid cash. Instead of using the cash, he took out a $500,000 line of credit at 6% interest and kept his money invested at 8% to 10%.
“He made money on the spread while preserving his ability to jump on opportunities,” Lokenauth said.
In general, wealthy people tend to follow strict debt rules:
Only borrow against appreciating or income-producing assets
Keep debt costs below expected investment returns
Never borrow for consumption during recovery
Use debt to preserve cash for opportunities
Refinance aggressively when rates drop
“They also use debt to smooth income volatility,” he said. “If they have a bad year, they’ll borrow against assets instead of liquidating at bad prices. They’re playing the long game.”
5. They Don’t Hide
When money problems hit, shame can make people retreat. Wealthy people tend to do the opposite.
“They pick up the phone,” Lokenauth said. “I've watched clients turn setbacks into relationship deepeners. They’d call their network and say, ‘I took a hit. Here’s what happened. Here’s what I’m doing about it.’”
That openness often creates opportunity.
“I’ve seen clients land their next opportunity because they were honest about their last failure,” he said. “I’ve seen partnerships form because someone admitted they needed help. I’ve seen deals get done because people bonded over past losses.”
The Bottom Line
Very wealthy people may not be like the rest of us, but there’s a lot to learn from how they handle setbacks. Even without an extra $2 million lying around, you can still stay calm, be strategic with debt, invest wisely — and reach out for help when you need it.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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