Ask Nimi: Help, I’ve lost my life savings!

It is important to build up about 6 months of your expenses to meet unexpected needs or emergencies. This will give you peace of mind and will be the foundation of your savings.

Dear Nimi
How does one bounce back after investing all my life savings in a failed investment due to inexperience?
Kind regards,

Dear Richard,
I am sorry to hear that you have lost your life savings. For some people, failure ruins them; for others, it is a new beginning, with new opportunities, that is, if you have learnt from your mistakes. It is important to understand what got you here in the first place, so you can avoid it recurring in future.

Many inexperienced, uninformed investors get badly burnt by jumping on the bandwagon. Putting money into instruments that you do not understand or getting involved in popular “get-rich-quick” scams can have devastating consequences. Invest only in what you understand and try to make financial decisions based on your goals and objectives, adequate research and advice from experienced and tested professionals.

Every investment comes with risk but there are ways to mitigate risk; diversification is one of them. The adage “Don’t put all your eggs in one basket” illustrates the need to spread your money across different asset classes to protect you against fluctuations, volatility or total loss.

The good news is you can start again armed with your new knowledge. A brighter financial future hinges on what you do today and on getting started. Start with what you have.
How much do you earn?
How much do you spend?
How much do you owe?

Track your spending
Write down everything that you buy, for a whole month; a picture will emerge of where all your money is going. When you do this, you will have a clearer idea what you need to cut back on, or do without altogether.

Establish a budget
One of the best ways to control your expenses is to budget. List all your routine monthly expenses, and other spending, and subtract those amounts from your income. By making small, manageable changes in your everyday expenses, by prioritising your spending, you can make a huge impact on your financial situation and begin to build savings again.

Can you earn extra income?
You will probably have to work extra hard to increase your income. This may mean working longer hours, taking on additional work at weekends and looking for opportunities to monetise your skills or talents. It is only for a season and is necessary to get you to a point where you aren’t so vulnerable.

Pay yourself first
Try to save at least 10% of your income. If your income is regular, automate your savings by transferring to a savings account or a money market mutual fund account each month as soon as your account is credited; If you wait until the end of the month, there may be nothing left. It is important to build up about 6 months of your expenses to meet unexpected needs or emergencies. This will give you peace of mind and will be the foundation of your savings.

Don’t ignore your debt
If you are in debt, you do need to be proactive about paying it down. Meet with your lenders and see if they will be willing to adjust the terms to make it more manageable.

Make every effort to pay off your high-interest debt first. This will ease some of the pressure and you will feel a sense of fulfilment seeing the significant difference it can make.

It will need discipline, consistency and sacrifice on your part to get yourself back on track. It will not be easy, but once you get started you will see the savings begin to grow, and you can confidently start to invest for the future.

Please always remember to seek professional advice.
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