What If I Had To Start All Over Again With No Savings
I would have one giant shit fit! After several hours of crying intermixed with explosive diarrhea, bouts of vomiting and thumb-sucking I would compose myself, stand up, straighten out my clothes and then dramatically throw myself against the wall and slide down to the floor as I assume the fetal position for the next 7.5 hours.
How do I know this? Because I have vividly practiced it in my mind several times. In some instances I have been able to cut the fetal position down to 5 hours… replaced instead by frantically looking for change behind my sofa. Successful individuals practice such scenarios so that they can prepare for the worst. I recommend that in every aspect of your life you write down the worst case scenario and then write down how you would act/feel/behave. Such exercises I like to do with pencil and notebook, for some reason I think better that way.
My assets currently consist of a paid off condo worth around $150k, and another $400k invested in stocks, bonds and REITs. My investment assets are held in index funds, which make sense to me and don’t cost a whole lot to own. The return on these investments is low, but for the effort needed it’s appropriate.
In order for me to lose all my assets there would have to be an economic collapse severe enough to wipe out my investments as well as bring the value of my condo down to nearly zero. Frankly, should such an event occur, the value of my investments might be the least of my concerns. I reviewed the book Aftershock a while back if you’re interested in a complete-economic-meltdown scenario. Mostly importantly, I should take no action while I’m freaking out. If the structure of the economy is still sound despite this dramatic hit, I will not sell out of my investments even if their value went to shit.
I purchased my condo in order to have a place to live with very little overhead, so the value of the condo won’t matter to me. I will continue to live there in order to save on expenses. My job may or may not be affected. I find that I have enough skills that regardless of the economic circumstances I will have some sort of skill to trade for income.
In case my investments disappear completely and I lose my condo I feel that I could fairly easily find an affordable living situation either with a roommate or a cheap single apartment, my minimalist ways will come in handy. I would start working, and working extra in order to build up my savings. In any major economic collapse there are opportunities for financial growth. I will hopefully have some cash around to invest in whatever I can. If the housing market has collapsed perhaps buying real estate would be a good option. If wall street investments are low then perhaps I can capitalize on that.
I am fortunate to have no debt going into whatever unfavorable economic situation which I may encounter. My first goal will be to build up my cash reserve. Second, I will look for investment opportunities. Next, I will work as many hours necessary in order to continue to build up my savings/investments.
All in all, I don’t feel terribly worried about losing my investments. I wouldn’t say I am fully diversified, but I am getting there. Besides my primary residence I don’t have any other real estate investment, I don’t have a SPIA and I don’t have actual foreign investments. Those are categories which I will focus on over the next few years. Furthermore, except for a complete collapse of society, it’s more likely that only 1-2 investment categories will tank, thereby making the argument for diversification that much more valid.