How Do I Calculate The Impact of Losing My Job Scenario

Brett Alegre-Wood
April 29, 2020

Losing your job is an emotional event but it doesn't have to be, that's why we use this simple tool to give you confidence before it happens. Making it one less thing to worry about.

Use this simple calculator to work out the impact on your portfolio.

At Gladfish we specialise in Set and Forget Portfolio Management of your properties. From the research through to the letting and management as well as the strategic decisions about the market. Our team has over 20 years experience.

For all Brett's Coronavirus resources **including the Excel in this Video** https://www.gladfish.com/recession/

Video Transcription:

Hey, guys welcome to Portfolio Management Rant so basically today I want to continue on looking at our scenarios for our portfolio. A lot of the tools that I'm going to take you through a lot of the strategies and a lot of the mindsets we're gonna be talking through over the next few weeks are things that we use for our clients our portfolio management lines who are building a portfolio for a lot of people with one property it's not that much of a drama but for when you've got 5 10 20 30 40 50 properties this becomes absolutely critical and crucial because the reality is a 1 percent interest rate increase can mean 10,000 a month or 5,000 a month or whatever it is which you know sitting there and if your entire income is 2 grand a month and all of a sudden you know you lose 10 grand that's dramatic obviously you're not going to be in that situation.

Today we're going to look at losing your job the 30% drop in income ok so this is a simple tool that we use with our guys and effectively all it does look a lot of these tools they're there to let you sleep at night and I keep saying this, okay because what happens is if you don't use these tools if you don't work out the numbers you know then you're sitting there not knowing and that uncertainty can breed fear, it can breed you know silly reactions that are emotionally based it can be you know making decisions based on things that don't actually exist alright.

What we want to do is we want to give you the hard data of this all right now we've already been through normally take people through what if interest rate rises you know 1% 2% 3% and look at that and the impact on your portfolio and see just how long you can survive at various levels that allows you to make decisions early and all this sort of things so the reality with all of these tools that I'm going to be presenting to you and that we're going to be discussing the design of them and the way they're there to do and I'll take a look if you want the full-blown cash flow speak to the team and we're at a full bar cash flow worksheet there which covers a full cash flow of a property and it's called a two-year cash flow worksheet that's the granddaddy of them all okay I've never seen it as an advanced one and I've had plenty of plenty of investors who've asked me you know grab my worksheet we're on the back you know change things on it but the reality is is you know that does everything it needs to do for most properties okay the reality is what it doesn't do is it doesn't look at a portfolio basis when things are happening dramatically and that's why we go into these scenarios because it allows you to get clarity to get certainty and to be able to sleep at night.

Let's get into it anyway so this one is all about losing your job so you can imagine how a motor that is you know you walk in one day and they say sorry guys redundancy you know and potentially you're out yeah so you may have got to pay out you may have got a redundancy you may walked out with nothing and maybe you know it may just be that you've quit. Who knows yeah so then the first thing is and before actually before you look at this let's just talk realistically. Realistically, what is likely to happen and what we say in this scenario when we run out with our portfolio management clients is this is that you will get another job yeah just as good if not better I say but the reality is even if you don't what we account for and what most clients when we say to them you know if you were desperate and you needed to get a job could you get a job at 60%, 70%, 80% and most people will say 70% yeah I could you know so so most people say yes I can go get a job probably within three months and we say you know three months at 70%. That's the figures that we generally work on in this scenario all right is that your gonna be able to get a job at 70% after about three months so you need to cash flow and look this is basic you know my personal finance rant one of the things that you'll see is that I talked about having three months set aside so you can survive yeah now for most people what ends up happening if they lose their job or they don't have money set aside all of a sudden now their lifestyle gets cut dramatically so now got all the stress and worry of finding another job another source of income but also you've got the fact that now your income has to change dramatically because having like the cash flow so my suggestion is always get at least three months you know in whatever way you can set aside as emergency money.

So you know that the lifestyle doesn't have to change or maybe it changes a bit but not that much okay because you don't want it you know one thing changing is massive three things at once is probably too much for most people yeah because then you add the stress and the worry and you know everything like that all right so that's the personal finance rant if you like. But this is you know the portfolio management so let's get into it so they see what we do here it's really really simple so we type in what we've got now I've put 10,000 in there all right so what do we got how much of our savings 10,000 now look we can get really really advanced for this you say but hold on I've got this which is cash and this which is shares and I can liquidate those and I can do this right and do that and I probably got a hammer grab look I don't care what you put in there.

At the end of the day whatever you put in will change the results here so if you've got ten grand cash and you go actually I think that's enough fine if you've got something that you can liquidate and it's gonna take a month to liquidate well then fine add that in it's up to you to what to do with that but let's say it's ten grand okay then what I can do now that a couple of choices here the current situation is there I can just put one line in such as I've done here or what I can do is I can actually go down I can put my business income and bla bla bla bla bla now I've got 10 levels of income there alright which for most people is way way too much, it's ridiculous. Most people never have ten streams of income in their life okay but the point is here is that if you haven't and if you're just stuck with earned income then the sooner that you can get different types of income whether that be from multiple jobs whether that be from you know investments shares whether that be from whatever it is property income you know and start multiple streams of incoming that will give you more security.

So again these are simple principles that we talk about in finance property rents are personal finance rants bought across into this because we want to start building those out and that maybe through not just one property but multiple properties through building a portfolio. But anyway look you can put as much detail those little details there it doesn't matter all of these yellow boxes here simply add up to go into that box so if I had business income another you know 2K and I wrote that there that'll change the seven grand and it'll change all of the figures across the the thing sorry it won't us so it'll change the figures for here alright and bottom line is is that yeah you've got that income then you've got your expenses and there's twenty spaces for expenses I realize you can have more than that but what I'd say is it's up to you you can put one line okay it doesn't matter because the results only determined by the total of those twenty things or the total of those ten things.

You can put in specifics if you want it's up to you alright this spreadsheet is open you don't have to worry about um you know security and all s of stuff it's there it's pretty simple mathematics is pretty simple formulas it's pretty simple Excel okay and so basically is so in this case what I've got now is seven grand of income expenses of five and a half for making we've got remaining 1,500 per month so actually, with the savings we've got an indefinite timeline that we can worry about so right now we're looking pretty good now let's say we weren't quite as good as that and let's say we're now in this we were actually already in our current situation under five hundred shortfall per month. Maybe interest rates are high maybe we've made a few mistakes got in a few debts who knows whatever okay bottom line is is that now we're negative so it's going to take 20 months I have whittling away at that 10 grand okay to get a you know at five hundred a month alright so you know that's where really you know we've got to be making some changes because either our income has to increase or our expenses have to decrease inside that twenty months and that's what that tells us.

Now and let's say I'm gonna say actually that's not the case let's say for most people they're not really saving much but they've got two hundred fifty so you know they're indefinite in other words they've got enough to survive under their current situation that's the current situation now what we've got a choice we can either go into a detailed scenario or when you don't go into a simple scenario because let's say we've lost our job, so what do we do well bottom line is we've got a choice to detail so the detail is simply you just type whatever you got in there so it may be the your earned income has dropped down to 3,500 or maybe let's say 3,000 but let's say in this case you've got some business income which might be a thousand that hasn't dropped you know or whatever so you can put all these things in there or you can just put a figure because these figures just simply get put into that figure and that figure comes those so let's say we're in the same situation our incomes dropped by two grand a month but our expenses which were 14,750 let's say we dropped them to you know 14 ,250  so we've carved 500 bucks off our spending alright. So now we've actually got 10,000 savings as we said before up here and so we're shortfall now of twelve hundred and fifty per month so we're got about eight months before we're at zero yeah so my suggestion is we need to make decisions now about how we change that.

That's the detailed scenario or what we can do is we can actually just go in here yeah and we can you'll notice it starts off with the figure that you put into there okay but once you delete that so if I change that now, yeah it's gonna change everything well 35,000 that'd be a nice thing but let's just say we start what was it let's let's say we've got 5,000 so you what I would do is I put the current figure in here and then I say right I reckon what's a 10% drop look like but and also my expenses I can get down a 4250 so now at that rate okay that's the current situation but now if I take out ten percent of my income I can look down here and see what is happening to my cash flow all right so this is the current situation yeah but then we're gonna take off ten percent and 10 percent that takes off obviously in month one we're down to four and a half grand which obviously carries across for there and month thirteen onwards so this does for two whole years and the reason I only do it for two years is because two years a long time in finances.

If you're in a situation and let's say I'm going to take it down by thirty percent which is not what we generally do so you can see now if we're going across and I'm just gonna sort of bring this up a bit so a month one you know we're only three and a half which is our income which is five thousand dropped by 30% our expenses are four to five-oh yeah have done that so we're short for 750 so we've got 10 grand the first month 10 grand less 750 is 9250 Oh next 750 off next next next next and you can see that all of a sudden now at month 13 we got 250 pounds left and then we go negative all right and then obviously we're negative now if there are no credit cards if there are no things like that is no other borrowing you can't go into here so you have to make some decisions in these early stages all right.

So this just gives you a bit of an idea of what happens if I get 30% or 20% it will change the figures 50% drop you know you can see 50% drop you've got roughly five months probably five and a half months before you start having to worry. So Chuck about 30 and and so that's how that operates okay and it's a simplicity of that and all wants to do it just wants to give us a bit of visualization about when we need to make decisions if we need to make decisions and you've got either all you know you either go that simple or the details you know and it's up to you this is all about letting you sleep at night allowing you to make decisions early

So hopefully guys that gets you if you've got any questions make sure you subscribe you know if port building a portfolio is something they're really interested in and really something you want to learn about a lot of the principles that are behind this because you know I've talked about three or four principles that come out of this particular spreadsheet but I think if you want to get in real depth of how to build and when to build and what strategies to build to meet the market and how to change your strategy or even what decisions you need to make around this you know in this situation where you're heading to zero. It's one of the things we talked about heading to zero it's one of the biggest fears when you've got an amount of money there and each time you know each month it disappears disappears disappears you know that stress that it causes on your body and you know your psychology you know is not a good one so we talked about strategies to turn that around on its head to both increase your income decrease your costs and get more out of your investments and in fact maybe even change so many investments for them you know there's strategy you operating with them maybe exit some of the the ones you know I mean we always talk about the extra strategy you may have to be in a situation where you've got to activate that exit strategy in a recession or in a time when you really don't need to or want to but in all cases the sooner you have the information to hand you know you can manage what you can measure so this is about measurement so you can manage and make proper decisions and then working with the team you'll actually be able to make those decisions.

So guys remember to subscribe ask any questions I'm happy to either respond with videos I'm happy to respond with comments you know and you know you got a whole team there that are experienced in using this an experience in talking about these sort of things and these principles so you know if you're interested get in touch you know if you've got an existing portfolio happy to work with you if you've got you know an ex portfolio you want to expand if you're just stuck in you're going what the hell am I gonna do what you know I started off doing this it hasn't really worked out the way I wanted you know I'm stuck in this situation you know in all those circumstances portfolio management and talking about strategy talking about structure that is what you need to do.

The worst thing you can possibly do is start getting pitched new properties yeah deal with the problems you've got in the first and then look to expand your portfolio but don't think expanding the portfolio in most cases is gonna help the existing portfolio yeah. A lot of times it's going to end up turning to me that's salesmanship and actually those issues are still gonna be there and the worst thing is if you don't learn you in you you know that what got you into the problems here then you're just gonna take those problems forward and you gonna have a bigger problem so we don't want to see that and that's why portfolio management is so damn important you know we talk about a done-for-you solution and that's one of things we offer is you know we're there to do it all for you. Obviously you'll be involved in making decisions but you'll understand those decisions alright guys have a great day live with passion and before the chatting and real soon hope you enjoy the Excel spreadsheet but actually there's a link down in the in the description if you want to download the this and also the one from yesterday and there'll be a couple other tools added - as well all right guys totally I see you later


Tags

Portfolio Management


You may also like

Where To Invest In UK Property in Q4 2020?

Beginner Investor Live Property Webinar Series

How to Make Property Investment Effortlessly Done For You!

Join our resident experts - Dan, Ritesh & Ryan 

Dan Ritesh Ryan
__CONFIG_colors_palette__{"active_palette":0,"config":{"colors":{"62516":{"name":"Main Accent","parent":-1}},"gradients":[]},"palettes":[{"name":"Default Palette","value":{"colors":{"62516":{"val":"var(--tcb-color-3)","hsl":{"h":225,"s":0.82,"l":0.01}}},"gradients":[]}}]}__CONFIG_colors_palette__
Reserve your Seat Now!
__CONFIG_colors_palette__{"active_palette":0,"config":{"colors":{"c162b":{"name":"Main Accent","parent":-1}},"gradients":[]},"palettes":[{"name":"Default","value":{"colors":{"c162b":{"val":"var(--tcb-skin-color-0)"}},"gradients":[]},"original":{"colors":{"c162b":{"val":"rgb(19, 114, 211)","hsl":{"h":210,"s":0.83,"l":0.45,"a":1}}},"gradients":[]}}]}__CONFIG_colors_palette__
Previous Article
__CONFIG_colors_palette__{"active_palette":0,"config":{"colors":{"c162b":{"name":"Main Accent","parent":-1}},"gradients":[]},"palettes":[{"name":"Default","value":{"colors":{"c162b":{"val":"var(--tcb-skin-color-0)"}},"gradients":[]},"original":{"colors":{"c162b":{"val":"rgb(19, 114, 211)","hsl":{"h":210,"s":0.83,"l":0.45,"a":1}}},"gradients":[]}}]}__CONFIG_colors_palette__
Next Article

Property Investment... Effortlessly Done For You!

>