How would you cope if you lost everything?

September 20, 2019
Taryn Lee-Johnston

Although the highs and lows of the stock market can make for great entertainment, in reality, being up one minute and down the next can be enough to make the average person feel seasick, if not worse.  Investment tends to be about incremental progress over time and the principle of diversification is often taken very seriously precisely because it helps to protect against losing everything.  Let’s say, however, that the worst did strike and that you lost everything but had to find a way to get back on your feet again.  How might you go about doing it?

The difference insurance can make

Your road to recovery could be made hugely easier if you have solid insurance cover in place.  Depending on your circumstances, products such as Income Protection Insurance and Critical Illness Cover could all help to tide you over (comfortably) while you were getting back on your feet.

Replacing your income

Your first priority would probably be to replace your income.  If you didn’t have insurance cover in place, you might still be able to get help from the benefits system, but it is not known for its generosity so you would probably want to find an alternative as quickly as possible.  How quickly this might be would depend on your ability to monetize your existing skills and/or to learn new ones.

Finding a market for your skills

Having skills is all very well but you need to be able to turn them into cash in order to pay your bills.  Social media can be great for this and you should never underestimate the value of a solid social media presence, but equally, you should never underestimate the value of real-world connections.  In fact, if you are starting the ball rolling right from scratch, you may actually find it easier to make connections in the real world than in the online one.  The reason for this is that the digital world is now so crowded that it can take a very long time to make a real impact, although it is certainly worth trying.  It’s also worth noting that people you know in the real world may become online followers while people you know online may appreciate the opportunity to connect with you in the real world, at least from time to time.

Maximizing your income

In the beginning, you may have to focus on earning active income, which is basically to say swapping your time directly for cash.  Often, however, you will want to start developing passive income streams, which is to say selling the same amount of your time more than once, for example by giving group classes or by making digital products which only need to be created once but which can be resold an infinite number of times.  This sets up a virtuous circle of giving you more income which allows you to reduce the amount of active work you do and so leave you with more free time to focus on creating more passive income.

Getting back into investment

Once you have some disposable income again, you can start to get back into investment.  While your funds are still limited, you may want to play safe and stick to the likes of blue-chip stocks, but as you start to have more money available, you may be prepared to look at taking a bit of a gamble on some high-growth stocks to help get you back where you were before.

In short 

While nobody wants to lose everything, thinking about what might happen if you did can be a useful way of working out where you should be focusing your resources in the present.

 

For Investments we act as introducers only.