We know the stock is riddled with risk. Because the world is riddled with risk! The future is uncertain and markets know that. Just looking at these past 4yrs alone and the risks were enough to last us for a lifetime. And these 3 emergent risks are top of mind right now. But risk isn’t just kept for the stock market. It’s everywhere in our personal lives, too.  

Risks come in different shapes and sizes but the big risks are: job loss, illness, divorce & death. We know these things can happen to anyone – we just never think they’ll happen to us. And may they never. But you gotta be prepared for the worst to survive anything that gets thrown your way. 

When it comes to our personal life, we can’t diversify away from that risk. We can’t juggle 5 jobs (though according to TikTok, Americans all seem to be juggling 3!) nor can we marry a bunch of people!

Most of us rely on one job and one spouse. We can’t help but be super-concentrated in these areas which leaves us more-than-exposed should either of those break apart. 

It can happen to you, too

There’s an old quote that goes something like “it’s a recession when your neighbour loses his job; a depression when you lose yours”. We have a weird way of assessing the probability of financial loss.

And because we’re like, hey, my job is rock-solid it means we won’t do what we need to incase that job goes bye-bye. (Psst: embracing the barbell strategy will give you the best chance at long term wealth + peace of mind.)

Know that it can happen to you too. Look at your personal life. Think about the people in your inner circle who have a) lost jobs b) divorced c) lost loved ones d) fell ill. I can fill in the answers for all 4.

At just 23yo, I had already lost 2 people close to me. My mums cousin lost his job in the recession of ’08 and he honestly never recovered. My aunts got divorced. And relatives fell ill. From parkinsons to cancer. And this is just in my family alone! 

Thank Gd my dad’s been employed all his life. But we have friends who haven’t been so lucky. We all know that one person who seems to be jumping from one job to the next and can’t seem to hold one down.

Now, if the entire family relied on him and him alone, they’d be in trouble. Instead, have a back-up plan – this is a good place to start!

Where the other partner builds a safer, more stable career to support their haphazard one. But you have to plan for the plan not going to plan. Because that’s life. We plan and Gd laughs! So much of life is beyond our control so do yourself a favour and control what you can.

Saving more money means you have it when you’re force to use it

A friend of ours has a child who was born with severe disabilities. He goes to a private school to cater for his needs. And the parents are in the process of having a swimming pool built in their house so he can use it. They’re lucky since they have savings. They aren’t big spenders and they’ve always had cash.

So when they needed to foot the bill for his school, they didn’t blink an eye. They got the best of the best. Because they had the money to do that. Insurance won’t cover these sorts of things. So a lot of the financial burden fell on them.

But then I’ve also seen the tragedy when families can’t hold it together because their finances can’t hold them up. And I bet you’ve seen this too. So they turn to credit cards or worse form of borrowing. Or they have to give up on the best treatment plans money can buy or downsize to cover the costs.

Or when one parent is the sole earner and they suddenly fall ill/die, what then? Usually, the family is left with bills (usually a mortgage) with no means of paying it back. Psst: this is why life insurance is so important, especially when you’re the main-earner.

Money makes most our problems infinitely easier to deal with

When awful life events happen to us it usually means financial loss. Or in extreme cases, financial ruin. Having a spouse pass away who is the main-earner leaves the family suffering. They have to fill in the big gaping holes. With $$$.

When someone in a family falls ill, it usually means specialist care is required and all sorts of treatment plans. Again, this costs money. 

Having a financial cushion and a lifestyle you can support without killing yourself will make all the difference. It will protect you against risks in your life you’ll never be able to predict nor forecast will mean you can get on with your life (and live it to the full) knowing you & your loves ones will be OK should the worst happen. 

Debt can make or break you. Literally. I’ve seen this 1st hand. And so living a care-free life (one without stress of things blowing up) can be easily engineered by taking on less debt than you can afford. That means squishing your ego into a tiny ball and leaving it where it belongs.

You don’t need to set yourself up for having gigantic fixed costs each month that rely on the one thing holding it together (your job) to keep on giving. It relies too much on the plan going to plan.

Having a smaller mortgage gives you more wiggle-room should things go wrong and also means you’re more able to be debt-free earlier on. Don’t upgrade your lifestyle too soon or else you’ll be paying that tax forever (putting a ceiling on your happiness).

Your savings can save you

But you also gotta save like you think the worst will happen. Structure your savings in a way they’ll be able to support anything that comes you way.

Since you can’t predict or forecast any of these risks to your personal life (not with much success anyway!) and it’s also too gloomy to think about it too much you’re better off having more savings than you think you need. Save like a downright pessimist. 

My friend lost her dad at 16yo. He was a software developer and her mum was a nurse. So her dad carried much of the financial burden. He suddenly passed away in his mid-40s. But he had taken out life insurance and his wife was involved in the financial decisions they made.

So she knew exactly what to do with the lump sum they received. She paid off the mortgage. That way, their main residence was debt-free and she didn’t need to worry about monthly bills. 

Whether you’re the financially-savvy one in your relationship, engage your other half and your kids. They need to know what’s going on. They need to be able to make financial decisions in times of stress and when one partner loses the ability to do that.

Or if they divorce and then they realise they haven’t the foggiest about where to begin. Always build in contingency plans. By saving more than you think is normal and by taking on much less debt than you can. 

It might sound so depressing but the depressing part is being hit in the face with something you never came prepared for. Build your finances to be rock-solid to be able to handle almost anything. Giving you the best life.

Able to deal with (almost) anything that comes your way and not to be bogged down by financial stress. And not having the money. 

So start saving and living a little smaller. It always helps to lower your liabilities (mortgage, credit card bills and so on) so you’re finances are loads more flexible.

Should they need to stretch a little more than usual! 

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.