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Crisis – Proof Your cash



Shh, shh, it’s OK to admit it: nobody has any idea. The world in 2018 is a terrifyingly unpredictable place, and even if you aren’t worried about losing your job to globalisation or an increasingly freelance workforce, you’ve got to be a little bit concerned that someone’s going to invent a robot that can do it. But, listen: even if you can’t ever be entirely prepared, there are ways to mitigate the problem.

That’s why we’ve put together a primer on the latest financial theory – not about how to best stash your cash, but how to upskill, side-hustle, and, OK, invest in yourself. It’ll keep you ready for almost anything – though if it gets down to trading heirloom seeds and shotgun pellets, you’re on your own.

Expect the unpredictable
Nicholas Nassim Taleb didn’t exactly predict the 2008 financial crisis, but he did try to warn everybody that it – or something like it – was bound to happen. As a former trader, he’s made a series of fortunes betting that very rare, disastrous events will upend what he calls “fragile” systems – like the US banking system – and making investments accordingly. Life, according to Taleb, is unpredictable, marked by events he calls “Black Swans”, and the only real certainty is chaos: so, ideally, you should structure your life so that it benefits from that chaos, or at least stays resilient to it.

Er, so what does that actually mean? Well, consider what Taleb calls “lumpy payoffs” – exposing yourself to the (unlikely) possibility of huge successes with small investments of time or cash, in areas where there’s a small downside for failure (for instance, trying to convince Barack Obama your hip-hop musical’s going to be a hit: the only downside’s a bit of lost time and social awkwardness, and the upside is huge).

On the flipside, Taleb argues, you’ll want to organise your life so you can benefit from unexpected opportunities and minimise your exposure to Black Swans: for instance, by having a series of freelance side-gigs you can fall back on if your main job collapses, or enough cash to cover a sudden house-move if it seems smart. Stop thinking you can predict the future, in other words, and structure yourself to maximise upsides and minimise downsides. How? Well, start with the bad bit…

Start an Emergency Fund
Here’s a terrifying fact: in 2016, 63% of Americans couldn’t come up with $500 to pay for an emergency. Best-case scenario, that means anything going wrong involves racking up credit card debt – worst-case, it could mean homelessness, or bankruptcy. Hopefully, you’re better-prepared than that – but are you ready for a beloved family pet getting ill (without insurance), a series of things going wrong with your house or an unexpected medium-term spell of unemployment? If not, it’s probably time to skip a few non-essential expenses for a while and build up an Emergency Fund. This is cash you won’t touch unless something unexpected and impossible-to-ignore comes up – something, or someone, that needs fixing urgently, or paying the rent/mortgage if the worst happens at work.

How much do you need? It varies: some experts recommend enough to pay off one medium-to-big problem (or your insurance deductible), while others suggest aiming for anywhere from three to six months’ living costs as part of your ‘what if I lose my job’ strategy. This doesn’t have to be as high as you might think: sit down and work out what you currently spend per month, then what you’d cut from that in a genuine emergency. Pick a figure, then start putting money away towards it immediately, whether that’s five percent of your paycheck or AED50 a month.

Get into the ‘Barbell’ strategy
No, not lifting weights – thought that might save on health insurance over the long run. The barbell strategy is Taleb’s way of describing the “dual attitude of playing it safe in some areas and taking a lot of small risks in others.” That might mean keeping your tedious day job and working on a side hustle with a potentially big payoff at night – or it might mean keeping most of your cash in a stable, sensible account and investing five percent in crazy high-risk bonds

Compound your skills
Pop quiz, hotshot: if your company went bust tomorrow, would you be able to get another job doing exactly what you’re already doing? If you just answered ‘Er…’, it might be time to expand your skillset – and even if you said yes, broadening your horizons wouldn’t hurt. The key? Compound your skills by picking new ones that work synergistically with the ones you already have: if your job relies on marketing, then learning more about writing, storytelling, typography, video or design will open up new areas, or at the very least help you sound more competent in inter-departmental meetings.

And remember: it’s extremely difficult to be in the top two percent of the world at anything (being funny or able to draw, for instance), but quite a lot easier to be good enough at both to make money from it. Worst case scenario, you get a hobby that doesn’t cost much.

Make yourself indispensable
The days of following instructions at work, argues author and former dotcom exec Seth Godin, are over – it’s all too easy to be replaced by the lowest bidder in an increasingly global economy. You need to become what Godin calls a “linchpin” – by making a conscious choice to make your own decisions at work, solve problems when you see them, and over-deliver when you can. Yes, this is going to be tricky at first – you’re going to have to get over your stupid lizard-brain’s resistance to crawling out of its comfort zone – but as it becomes more of a habit, you’ll find employers fighting over you.

Have a ‘side hustle’
Fine, you’re not ready to set yourself entirely adrift on the choppy waters of being freelance yet – but if you’re looking for a way to earn extra money that doesn’t actually involve learning a whole new slew of office people’s names, a side hustle’s exactly what you need. Ideally, you’ll build on skills you already have – but if not, you’ll start by investing time and working on the rest as you go along.

Freelancing within your current career path is one option (check out for viable options), but it’s also worth asking what other resources you have available: creative or otherwise. If you don’t fancy putting your flat on AirBnB – no-one’s blaming you – consider teaching a skill you already have –, for instance, allows you to teach your native language to paying students online. Alternatively, write a mini-ebook about a subject you’re an expert on – Amazon pays 70% royalties on most Kindle sales – or, if you’re feeling ambitious, start a semi-automated business importing/selling via eBay or Etsy. The main thing is to build up a new source of income – and, ideally, one that you can upscale in the future. Who knows? Maybe one day, that bespoke retro swim-shorts company can be your main job.

…And increase your options
Does money buy you happiness? It’s arguable: but what money can give you is freedom…and options. If money’s a problem, though, there are other ways to increase your options – upskilling, as already mentioned, is one, but so is building up a friend-network of smart people with your best interests at heart. Up your options, and you’ll be better prepared when the worst happens – or even if it doesn’t.

What about buying Bitcoin?

Is cryptocurrency the future of money as we know it or a gigantic pyramid scheme? It depends entirely on who you ask – Twitter CEO Jack Dorsey reckons Bitcoin will be the only currency in the world in ten years, while JP Morgan boss Jamie Dimon says it’s a massive scam that he’ll fire anyone he finds investing in. Understanding ‘the blockchain’ is an endeavour in itself (Google Crypto Canon if you genuinely want to wrap your head around it) but there’s only one fact about Bitcoin that’s unassailable: some people have got really, really rich buying it, while others have lost a load of money.

For that reason, it makes sense to treat any cash you put into cryptocurrency as a gamble: assume you won’t get it back, and then if the price skyrockets you can be pleasantly surprised all the way to your new yacht. Let’s just not talk about the environmental implications, eh?

The content of this feature is provided for information purposes only. The views expressed in this feature are not necessarily those of the publisher or its employees. The information is not intended to be and does not constitute financial advice, is general in nature and not specific to you. Before making an investment decision, you should seek the advice of a number of experts and undertake your own due diligence. You are responsible for your own financial research and financial decisions.

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