Have you lost all your accumulated wealth before or almost lost all your accumulated wealth? Do you know what that can feel like? I know and it is in no way pleasant. It’s also not a position anyone prays to find themselves. Yet, often, some people find themselves there. But it isn’t the end of life and it requires some level of courage and self-belief to pick oneself up again.
What can make one lose all?
Charlie Munger is famously known for saying “all I want to know is where I would die and I wouldn’t go there.” Maybe the man knows it indeed. He’s 97 years old now and still well. The quote is relevant here because knowing something that can make you lose all your wealth is a step closer to not losing it all. So here are a few:
- Unproven investment scheme – if you put your money in an unproven and uncertified investment scheme, you’re likely to lose it all. We know many people have experienced this in the past via pyramid schemes or just bad investment decisions.
- Emergency health issues -“we are all one medical emergency away from poverty” is a common saying among Nigeria Twitter users. This is so true. Medical emergencies have shown to be one thing that is quick to take wealth away if not properly planned for. Maybe you even have first-hand experience.
- Trusting the wrong person with your money is another very common cause. Remember the days of someone running away with people’s contributions or the days of giving your money to someone to invest it for you? Yes, those times left a lot of people in financial ruin or at least cost them financially.
- Being generous to a fault. Wealth is accumulated on frugality and can only be preserved on the same principle. If you give out too much in the name of being generous without making as much back, soon you will lose it all and have to start all over.
This list could go and it includes excessive debt, lack of good money management skills, getting scammed, etc. But the important point to note is that it is possible to lose everything and when that happens you need to start from scratch again.
How to pick yourself up again
The first cause of action to engage in if you find yourself in this situation is to access where you missed it. The reason for losing it all can come from two different angles. One, losing all based on ignorance and two, losing all while fully aware or knowledgeable. The latter might surprise you but it is possible. And a quick example of that is losing it all due to medical emergencies that you couldn’t have prepared for (like surgery not covered by insurance).
Losing it all because of ignorance
If this was your case, meaning you lost all your accumulated wealth due to making an uninformed decision(s), then the first thing you want to prioritize is financial education. Financial education in all it forms as you deem it necessary. And if you need to speak with some professionals, please reach out to them. Because if you don’t fix this, even if you accumulate wealth again, soon enough, you’d lose it all again.
As you embark on a journey to getting more education, I want you to know that you are not the first person to have had to start all over again and you won’t be last. For the sake of an easy example, I’ll use Charlie Munger as an example. He lost all his wealth at a point to divorce and medical emergencies and is now worth more than $2 billion. You don’t even need to make the billions to be fine. With just some hundreds thousand dollars, you will be whole again. So have some self-belief and start all over.
Lost it all with much awareness
This is a scenario where you lose your accumulated wealth to something like a medical emergency or to a promising business venture that you bet on. In both scenarios, the assumption is that you couldn’t have prevented the loss with all your knowledge.
So what can you do? Like the other scenario, this also has to start with a genuine belief that you could pick yourself up again and make the wealth all over. Naval is famous for saying “wealth is a skill and if he was stripped of all his wealth and he had to start all over again, he’d make wealth again.” You also need to believe that.
Once you believe that, the next task is to understand that the world doesn’t care about your background as much as it cares about the value you can create. And as long as you can create value, the world is ready to pay you over and over again. So the value you create for the world is left for you to figure out. Figure it out, create it and you would have set yourself up for another opportunity to accumulate wealth.
But how can you prevent losing it all in the first place?
- Always buy insurance for things that you could buy it for. This includes health insurance, fire insurance, car insurance, life insurance and so on. Buy insurance!!!
- Don’t put all your eggs in one basket. Don’t invest all your money in just one stock or one fund. It’s the reason why the Rise Stock Index has on average 35 stocks in it per time. It’s also why we have 3 buckets of investment: real estate, fixed income and stock. Diversification is important to preserve wealth.
- Don’t trust your money with someone who has not proven themselves to deserve such trust. This includes someone whom you can’t certify how they manage their money or who have mismanaged theirs or others money in the past.
- Save your money with a reputable platform. Not one that would run away with your money.
- Don’t gamble.
- Don’t be overly generous. Do all things in moderation.
Many pitfalls can bring one into financial ruin. And there are different ways to prevent them. We’ve explored some major ones here. However, no matter how careful one may be, occasionally, life happens. And when life happens, I want to assure you that with enough self-belief and determination, you can pick yourself up again and put your finances in better shape.