The post responding to Saving Ninja’s Latest Thought Experiment. Never mind mulling on what you’d do if you won loads of money. How would you deal with total financial loss?
As many of you reading this will know, Saving Ninja posts bi-monthly “Thought Experiments”. This time round the scenario is this:
You wake up one rainy morning and after checking on your accounts you find out you’ve been “wiped out” by a cybercriminal. You’ve lost all of the money and assets you’ve ever owned and you can’t get them back. What will you do?
As usual I’m going to make some assumptions. The question is, what kind of weird world is this where I can’t get any of my assets back? Is there no Financial Services Compensation Scheme, no regulator, no obligations on my bank? What about the Land Registry? Boy were they asleep at the wheel! Surely they can get my flat registered in my name again? What the hell are the police doing?
Are we in some kind of post-apocalyptic world? For the purposes of the Thought Experiment I’m going to assume not and the lack of remedy is just a hypothetical of the scenario. Otherwise my only action would be to head towards my dad who, of the people I know, would probably be best in a survivalist world (although that’s not saying much).
I don’t really have “nothing”
Even in this worst-case (financial) scenario, I’m still more fortunate than many. After all, I still have:
A supportive family who can help me out when I’m in a bind. Not so much in terms of giving me money, but I’d always have a place to stay.
A good job that will allow me to build my assets back up reasonably swiftly.
Time on my side. I’m still relatively young and early on in my “journey” towards early retirement. This really won’t hit me as much as people who are already retired or coming up to retirement.
Just keep swimming
My Plan A would probably just be to carry on working as I am and build things back up from scratch.
As at the time of writing I have about £45,000 equity in a property, a meagre £23k (ish) in my workplace pension and about £15k in cash.
It’s taken me about 10 years of full time employment to get there, thanks to all of those wasted years of shitty jobs (as to which, see the last Thought Experiment I responded to).
The crazy thing is, I reckon it would only take about 2.5 years to build myself back up to that position again (perhaps a little less).
As an aside, it just goes to show how big a factor income is in determining when you achieve financial independence.
For all the FI bloggers that insist cutting down your expenses is way more important than increasing your income; a high income sure helps!
I earned sweet FA until I was about 28 and saved pretty much nothing before then. If I’d been much more frugal (I was never a big spender) I could have saved a bit more. But I’d have been looking at maybe pulling together enough to retire a couple of years before state pension age. We’re certainly not talking feet up at forty.
However, I digress. My point is that if I keep going as I am in the same job and revert to a similar shared housing situation to before I bought my flat, I’d be back to “normal” in about 2.5 years.
But I treasure my sanity so I’d live by myself
Life is too short for me to be spending any more of my time feeling all anxious and miserable in a shared house, so I’d live somewhere by myself. I think this would push my “equilibrium” date back by another year (so I’d be there in about 3.5 years) but it would be totally worth it.
And now for something completely different…
There would be a temptation with a major incident like this to completely re-evaluate your life. I’ve mentioned before the lure of foregoing buying in London and instead use the deposit money to buy somewhere outright in Spain.
I’d still need to hang around in London for a few years doing my job in order to build the funds back up, during which time I’d need to find some way of earning money remotely from a Spanish village (and I’d need to learn Spanish of course). Or I could push on in London for, say, 10 years, after which I could probably retire to said Spanish village.
This option isn’t exclusive to me losing all of my assets; I could aim for this now (and I do keep considering it).
But I think the big upheaval would give me the guts to make a big leap rather than plodding along in my Plan A lane.
What’s the point in slogging your guts out if everything can be taken away from you in an instant?
Given my name I wouldn’t be this logical
As a final thought, if this actually happened to me I wouldn’t be so sanguine or dwell on the “it could be worse” aspect. I would be completely losing my shit. I am Fretful Finance, after all.
Check out Saving Ninja’s post for his own response, plus an up to date list of all the other bloggers who responded as to how they’d deal with total financial loss.