There are certain aspects of investment that are easy to understand and get into quickly. There is nothing easier than creating a bitcoin wallet amidst the lucrative crypto craze, and without much prior knowledge, you can get trading in no time. However, while cryptocurrencies such as bitcoin are not truly reliant on stock markets, if you have invested in stocks, you may be unsure of how the current situation may affect your investments.
Being dependent on market returns can be somewhat risky. There is a clear cut checkmate against anyone who over invests, and it is an economic certainty. Stock market crashes are hardly news. If you are not prepared for this, eventually, you could face certain financial ruin. Fortunately, there are steps you can take to shield you.
The best course of action to ensure financial stability regardless of the markets is to save as much as you reinvest. You can fiddle with the exact percentages but saving around the same amount as you make, before reinvesting the rest is exceptionally prudent. Be sure to understand the difference between savings and assets, though.
Your house still costs you money to maintain; your car costs money to keep on the road. It’s great to have these debts settled, but they are not a safety net. When you get to the point that you must liquidate assets you have already been hit harder than need be. Opt to keep your savings as liquid capital you can use to see you through a bad market crash.
It is highly unlikely that you have successfully entered into the field of financial investment straight out of high school. You probably have a profession, even if you are no longer actively working in it. It is wise to keep this option open should you need to do a complete financial reboot in the future.
Even if the markets are your domain, keeping a potential channel of income at arm’s length could be what you need to rebuild capital to get back into investing after a severe market crash. If you are concerned that your profession will not facilitate the financial returns to get back to your current income, consider studying further.
It may sound like the title of some sentimental self-help tripe, but this is an absolute fact when it comes to recovering from a stock market loss. Tying into the tip mentioned above of furthering your education, you must realize that your biggest asset is your human capital. So what do we mean by social capital, and why is it essential in surviving financial difficulties of any sort?
The term refers to the amount of time you have left to actively generate income and the amount of income you stand to develop in that time. This simple equation already defines your credit rating and much of your financial life behind the scenes. By taking control and staying aware of it, you can definitively plan your financial future with far more certainty than you would ever have in the markets.
Photo: André François McKenzie, Unsplash
