Just a couple of weeks ago, an apartment in London was engulfed in an unsparing fire incident which claimed over 30 lives and left many more injured.
In India too, one of the worst fire incidents to have happened in recent history is that of Uphaar cinema in Delhi.
It claimed 59 lives and left over 100 injured.
If you have started to wonder why I am talking about fire on a investing blog, there is a reason to it. Just be with me.
A fire can be devastating. The effects – people are killed or injured, valuable property and other stuff are destroyed. Small businesses not able to bear the consequences can vanish in no time. It triggers a state of emergency – mental as well as physical.
If you are caught unprepared, it can be a terrible setback.
Can one prepare to face a situation like this? Yes, of course.
So, how does one prepare for a fire?
There are several steps to take.
- Fire proof material,
- Fire extinguishers,
- Proper concealed electrical design,
- Insurance and above all
- Fire drills
Yes, fire drills.
A drill is one of the best ways to prepare for an emergency created by fire. It is a simple but very helpful thing to practice and can not only save lives but also prevent loss of property and material.
After undergoing fire drills, when we actually face a fire, we don’t panic or run around or over each other making the situation worse. That kind of mob reaction is what is responsible to claim lives.
Instead, thanks to drill practice, we face the situation calmly. We take measured, thought through and practised steps to evacuate the building under fire and take any necessary action to stop the fire or bing it under control.
The fire drills that we did in the past tuned the mind to act in a studied fashion. The stress on the brain to think is reduced. As a result, almost every life can be saved and serious injuries avoided.
Do we need more?
But as I mentioned, the key lies in going through the drill. Through deliberate practice, we can prepare our minds to face as serious an emergency as a blazing fire.
Now, let’s come to the reason I am talking about fire.
Can we apply this fire drill to our money too?
What if your financial life is on fire?
Can a financial fire drill be of help there too?
If you are wondering what the heck am I talking about, let me give you some examples.
What can go wrong with your financial life akin a fire? Many things actually.
- You can lose a job suddenly with no another one in sight.
- You may face losses in your business or your startup may go bust.
- The money that you lend in the market may not return.
- There can be a medical emergency in the family that consumes all your money. You may have to even sell your utensils
- There can be a broken marriage and resulting alimony payments.
- Markets tank and remain so for extended periods of time.
No one wants to be in any of these situations. But they do happen.
To share with you, I have met people who have been through these painful periods. More than 1 in some cases.
It may easy to dismiss saying “I will never be in such a situation.” But you see there are forces beyond us working overtime and over which we have no control.
When we face our worst, even our closest ones wonder “How could this ever happen to you?”
So, instead of debating if you can be in that situation or not, we can focus on the more important part.
The preparation
Assuming the fire has taken place, how do you plan to get out? What steps are you going to take? Whose doors are you going to knock?
I am sure you don’t have all the answers ready right away and that is why I suggest that you do a “fire drill” with your money.
Check your preparedness to be in an emergency of the types mentioned before.
Will you be make it through? Will you fall?
Doing the Drill
Let me repeat. The magic is in doing the drill over and over again. It is not going to be easy at all.
I will suggest to begin small to practice this money fire drill – your current expenses.
Step 1: The preparation
- Sit down with your family for a couple of hours (You can inform them in advance about the DRILL.)
- Make a list of all your expenses individually and collectively.
- Against each, identify if the said expense is a real need or it’s happening just because you have enough money today.
- Which of the expenses you just can’t reduce? (Parent’s medication, insurance policy premium)
- Which of the expenses can you reduce (but not stop)? (Taking a bus or a shared cab instead of a private taxi)
- Which of the expenses can you simply stop? (Going to the expensive restaurant or buying the next shiny phone)
List ready. Great.
Step 2: The doing
The real win lies in execution.
Now, in a week or a month’s time announce an emergency. Of course, it is not real but we have to do the drill. The fire drill doesn’t need a real fire.
For the next 1 month, follow through the list and start working on the expenses – stop, reduce, modify.
Record your observations.
When you do it the first time, there may not be great success. Members will find it hard to do the drill. That’s ok.
There’s always next time. Yes, one time is not enough. The trick is in the repetition. Ensure that you do the drill more than once every year. Very soon you will start to see more possibilities and an even better level of preparedness.
I pray that you never have to face any of this for real. But preparation is the tool of the winner.
Let me give you a word for this. The Money ‘Fast’, the Indian ‘Vrat’.
Go ahead and do it!
Who knows the drill might just prevent such an emergency to arise in the first place.
Between you and me: Have you faced financial emergencies? How did you make it through? What else will you do? Do share in the comments section.
Serious about doing the money fire drill? I offer myself as your observer. Write to me.
Coming soon: The Money Master
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