Today, I’d like to CONCLUDE THIS VIDEO SERIES on discussing the important topic of ManagingBlack Swan Events In Personal Finance.
In this video, I will cover some examples of life altering events that can impact your finances and what families can do about it.
First, there are Health-related disasters: A sudden major illness or injury like a critical diagnosis, a debilitating long-term illness, or a serious accident, can disrupt your financial life even if you have health insurance. Unexpected and extensive medical bills can wipe out a person’s savings or exhaust their paid time off and disability insurance, and a long recovery period may lead to unemployment.
Additionally, the need to become a full-time caregiver, if a loved one becomes severely disabled or suffers from a progressive illness, may cause someone to leave their job. A sudden and permanent reduction in household income, plus new expenses related to care, can create an extreme financial challenge.
Next, are Unexpected legal events: Falling victim to fraud or identity theft can rob someone of their savings and assets. This could be through a complex online scheme, a fake investment fund, or the manipulation of a vulnerable, elderly family member by a dishonest individual.
Another example is becoming the subject of litigation. An unforeseen lawsuit, even a frivolous one, can be financially devastating. Legal fees alone can quickly accumulate and dwarf the original financial stakes, leading to bankruptcy or liquidation of assets.
There are also Employment-related shocks: A rare event could prevent someone from continuing to work in their field. For example, a sudden loss of eyesight for an artist or a rare hand tremor for a surgeon could end their career overnight, rendering their unique skills and earning potential obsolete. It may not be health related. For example, the broad adoption of Artificial Intelligence (or AI), has made professionals in a variety of fields nervous about their career trajectory.
There are Startup failures. For entrepreneurs, a personal Black Swan can present as their business struggles manifesting at the exact moment a larger economic downturn takes place. This can devalue their business, potentially put them out of business and wipe out their net worth.
Next are Natural disasters: Many viewers are unfortunately familiar with the impact of natural disasters on their lives. In 2012, Hurricane Sandy uprooted many families, causing financial devastation due to the destruction of their homes, personal possessions, and the disruption of their business. Many homeowners were underinsured for this truly unpredictable event.
There may also be Relational breakdowns: While divorce itself isn’t a Black Swan event, a catastrophic outcome that defies normal expectations could qualify. For example, a hidden gambling addiction, previously unknown to a spouse, could reveal massive debt that fundamentally reorients the entire divorce settlement. Another example is the loss of a primary income earner. The sudden death or disability of a spouse is a personal tragedy with severe financial repercussions. This is especially true if that person was the primary or sole breadwinner, and the surviving partner is left to care for the family with no savings and an insufficient insurance payout.
So, I started this video series with Noach, and I will conclude with a lesson from that story.
Noach, spent 120 years building a structure the size of a cruise ship on his front lawn, while lecturing his neighbors to be better people. He then filled the boat with countless animals to prepare for a large flood that was going to wipe out the rest of the world. Think about Noach’s gumption to go against societal norms and instead trust Hashem’s word implicitly.
Viewers can learn a lot about how to handle Black Swan events from the story of Noach. Noach prepared for more than a century, building the Ark and storing food and animals on board. This is similar to folks buying proper insurance to mitigate all the aforementioned risks, diversifying their assets in case of unfavorable markets, and maintaining a meaningful cash cushion to minimize disruption to one’s life.
However, the truth is that some events are too seismic to plan for in advance. During these situations, we learn the ultimate lesson from Noach, which, as it says in Bereishit chapter 6 verse 9, to “…Walk with G-d.”
Despite what was going on around him, Noach and his family listened to Hashem’s direction and turned to Him for guidance.
Ultimately, the Great Floor subsided, Hashem promised that something like that would not occur again, and the story of mankind continues.
Unfortunately, life throws everyone seemingly insurmountable challenges. We learn from Noach that we must do our due diligence to properly prepare, but ULTIMATLEY, we can only overcome these events, financial or otherwise, by turning to Hashem to guide us.