Wednesday Reads: Facing Your Financial Fears

A round up of interesting or cool stuff I’ve read.

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Image by Stefan Keller from Pixabay

 

Financial Fears

I took some time to ponder the latest Sovereign Quest writing challenge:

“Choose one financial thing that scares you. What’s the worst that could happen?”

After some deliberation, I realised that my biggest financial fear can be summed up as the fear of being unable to earn before I have accumulated enough money to realistically support myself.

I think it’s easy to assume that you’ll be able to work until a time of your choosing, but realistically, that may not always be the case.

 

Illness

As things stand, it will be a good 20 years before I’m in any way financially independent.

A lot can happen over the course of 20 years!

As an office worker, I guess any illness/disability I might succumb to in the future would have to be pretty bad to completely restrict me from working?

But maybe I’m not being imaginative enough! Chronic pain, mental health problems, cancer, a freak accident leading to head trauma… There are all kinds of unexpected illnesses and accidents that can cut a career short.

In the short term, I’d be eligible for Statutory Sick Pay – but that’s only £96.35 per week, for up to 28 weeks. Realistically, my current emergency fund could cover all that!

I wouldn’t have a problem if I was kept out of work for such a relatively small amount of time. The problem is if I cannot work for a year or more!

Being unable to work due to illness would mean that my emergency fund (and, eventually, my other assets) would be drained faster than you’d expect, due to the double whammy of having to pay for day-to-day expenses, as well as any care and/or treatment that may be required.

Not only that, but I’d obviously be unable to continue saving and investing. Even if I was able to eventually recover and resume work, I’d end up missing out on possibly several years of contributions and growth.

One obvious solution to this potential problem is to take out some income protection insurance. I currently have some through my employer, but that will end when my contract ends in the next few weeks.

I’m loath to start a new policy immediately after I finish my current job. But, once I’ve grown tired of my sabbatical and started the next job, I think it would be sensible to take out an IP policy.

 

Redundancy

Another potential cause of surprise unemployment would be redundancy. Imagine being mentally and physically fit to work but finding yourself unable to find employment because you’re too old / too expensive.

I suppose in that situation, I’d always be able to find *something* to do, but I can imagine it wouldn’t be fun to suffer an unexpected drop in salary (and possibly prestige).

I like to think that I’m still young enough (just!) that this is not an immediate problem. But it’s something to be aware of as I age.

In the meantime, I’ll be sure to continue saving and investing, so that a surprise redundancy won’t have quite the traumatic effect it could do otherwise.  And of course, it’s important to keep aware of work trends and my place in the working world.

I should have put this in my letter to my future self – Don’t let yourself become stagnant!

 

To do

This has been an enlightening thought experiment…

My takeaways are, firstly, I need to look into income protection insurance once I start my next job.

Secondly, it acts as a timely reminder to not get complacent with regards to my skills and employability. Never stop learning!

 

Interesting links that caught my eye this week:

• Indeedably – One hundred days
  Indeedably looks back at one hundred days of Sovereign Quest. I know I’ve found numerous blogs through Sovereign Quest that I wouldn’t have found otherwise. If you haven’t already, be sure to check it out!

 

• FI Scribbles – 5 Financial Fears I Faced Before Moving Abroad As An Expat
  Moving abroad is usually a tricky but worthwhile endeavour. Kujah shares his financial fears prior to moving to Hong Kong, and how he has managed to deal with them so far. Personally, when I moved overseas for a time, I didn’t have any investments to worry about, which certainly made things easier. The thinking that got me through was 1) moving abroad is potentially a once-in-a-lifetime opportunity, so I would regret it if I didn’t give it a try, and 2) the worst case is simply that I don’t enjoy it and move back in with my parents for a few months!

 

• Monevator – Are you childish about money? The origins of our money mindsets
  Somewhat of a follow-up to the financial origin stories that Monevator kicked off a few months ago. It’s something that I’ve seen come up a few times when reading various blogs – how do you break the habit of saving, formed over a lifetime, in order to start actually spending down your savings in retirement?

 

• Investment Moats – Learning to Die with Zero. The Last Check Must Bounce
  An indepth look at Die With Zero, by Bill Perkins.
  “It means that unless you are an exception, you ought to start spending your wealth down much earlier than what is traditionally recommended. If you wait until you’re 65 or even 62 to dip into your nest egg, you will almost certainly end up working longer than necessary for the money you will never get to spend.”

 

• Financial Times – Are ageing populations really bad for the economy? (Search engine result)
  I usually hear that ageing/declining populations are bad for growth/investing (even if good for the environment!). This is an interesting counter to those arguments.

 

• The Atlantic – A Once-in-a-Lifetime Chance to Start Over
  “If your relationships, work, and life have been disrupted by the pandemic, the weeks and months before you fully reenter the world should not be wasted. They are a once-in-a-lifetime opportunity to come clean with yourself—to admit that all was not perfectly well before. Here’s how you can make a plan not to return to normal.”

• Sign up to Trading212 via this link and we both receive a free share.

 

Thanks for reading. Hope you’re all having a great week!