Be prepared for the disasters you can't imagine

Published: 2022-03-28

If you're only preparing for the disaster you can imagine, you're going to be unprepared.

No one expected the economy to crash so hard during the Great Depression until it did.

No one expected (or maybe they did but didn't prepare) for a disease to put the entire world at a halt until it did. So, we had a lack of protection equipment for doctors, nurses, and other first responders. Hospital's had no idea how to handle the high capacity. Businesses had no idea how to sell to customers who couldn't come into their stores.

No one prepares for the disasters they can't see.

That idea stems from something Morgan Housel said on The Tim Ferris Show this week. They were talking about risk and how to not lose all your money when you're financially panicking. Housel explained it's important to have more savings than most people would think is necessary.

If cash returns 1% and stocks return 10%, that 9% difference your cash could be earning will eat you up every day of the week. But if the cash on hand ensures you don't have to sell your stocks at a loss because you need the money during a financial crisis, that cash actually returned much more than just 1%.