Keeping All Your Eggs in One Basket is Risky – Frugal Confessions

Keeping All Your Eggs in One Basket is Risky

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My sister and I used to gather eggs from our henhouse for breakfast. On weekend mornings Mom would send us up into the ‘chicken coop’, a spacious room on the second story of our farm where we kept a handful of uncaged chickens. There were these weathered wooden boxes nailed up against one wall filled with straw that made a nice nesting place where they typically laid their eggs. On mornings when we were sent to gather breakfast, we would sheepishly extend our arms into these boxes and hope to not get pecked by the occasional nesting chicken contentedly sitting on her future brood.

If we had happened to drop all of these eggs while descending the narrow wooden steps, prancing across the rocky driveway or running the last stretch home (on a cement walkway), we would have wiped out breakfast. Though we didn’t really think of the risk at the time and I can’t remember an instance where we had to explain a heap of splattered eggs to my mother, sending young children to gather breakfast from the chicken coop had some risk to it. Even though this example does not have much risk to it aside from hungry tummies and an upset morning, it illustrates what financial gurus mean when they say “don’t keep your eggs all in one basket”. Sometimes, the bottom does fall out.

I felt this risk last week, in a very real way. Even though I am fortunate enough to be in a position where all of my eggs are not currently in the same basket, several things occurred that made both of my professional baskets faulty at the same time. It warranted the same response as if I had only one basket—a few ‘what if’ moments, the inability to focus on anything to do with work, a lot of analyzing, and a moment or two of uncomfortable heart palpitations. A glimpse onto the other side of a basket full of splattered eggs led me to think about the financial risk in our current lives, and how we are mitigating it.

There are two of us working full-time jobs so this decreases the risk to our income. However, you are talking to someone who was laid off within two weeks of Paul being laid off back in 2008. So at one point in our recent history we were both laid off from employment at the same time for a period of several months. We’ve taken the opportunity to build up a sizable emergency fund during abundant times so that if/when we experience financial setbacks, there will be something for us to fall back on. I also am working on building up my side business, Frugal Confessions, though making money at writing and blogging is a slow and gradual process. We have auto and home insurance, and I have short term and long term disability insurance due to the nature of my employment. Finally, we paid off our non-mortgage debts back in September 2010, and this decreased our monthly expenditures by about $950.

After assessing our risks this past week, I have found one weak chain link we might want to look into: life insurance. My employment has valued my life at a staggering $5,000 (that is pure sarcasm), and Paul carries a small life insurance policy that would replace one year of his income. Perhaps it is time to look into whether or not we need to insure ourselves more.

Do you have all of your eggs in one basket? What sort of risk mitigation have you done? I’d love to hear your thoughts!

12 comments… add one

  • I learned years ago that it’s never a good idea to put all of your eggs in one basket, because of the risk associated with this type of behavior. So, I am careful about my activities, and try to do a thorough risk assessment before I take any type of action.
    Anthony Thompson recently posted..Learning a Foreign Language – How to Learn Without Taking Classes

  • My wife and I work in normally very secure (medicine & education) industries. In addition, we have no debt except for a small mortgage. Last, I could change my investment portfolio from growth to income to generate income. Also, my asset allocation is diverse to avoid some of the volatility.
    Krantcents recently posted..Why Did I Start My Business?

  • Good on you for recognizing the weaker links in your financial portfolio, and actually doing something about it. I know you’ve been going through a bit of a tough time over the last week or two, but I have faith that your honesty and resolution to take action will help carry you through.
    Azra, ReadyForZero recently posted..How Does Credit Card Interest Work?

  • It’s great that you recognize the benefit of purchasing more life insurance. So many people don’t think about it until they’re older… and by then, insurance will cost them an arm and a leg.
    My husband has 150k of life insurance now, and mine is though my work – and equals 3x my salary. When we have children however, we’ll be looking to increase those policies.
    Julie @ Freedom 48 recently posted..Canadian Teens are Overly Optimistic When it Comes to Finances

    • Very true about the cost differences when buying young versus old. I’d like to run some numbers though to see how much we will be paying over time versus if we purchased later (ofcourse taking into consideration that if we don’t buy now there is risk involved with that as well!)
      Amanda L Grossman recently posted..Keeping All Your Eggs in One Basket is Risky

  • You might want to review the need for life and disability insurance. My spouse hasn’t worked since we got married, but I never insured my income until I started to bring children into this world. Then, my income was insured either if I died or became disabled. Before that, it’s a cruel world and crap happens, and my spouse had the ability to make ends meet, but certainly at a different lifestyle. And we were both ok with that.

    Being disabled isn’t as black and white as being dead. Therefore, all disability policies are not created equal. Some thorough research into what you are getting through your employer would be wise, as you will most likely find you will want a private (and supplemental) disability policy. You’ll also probably find these policies to be expensive, but your risk of becoming disabled is much higher than kicking the bucket.
    Bichon Frise recently posted..Reaching For Yield

  • Good story! I find that people who experience your situation with being laid off are in such better positions to make sure they are never unprepared for these types of risks ever again. There are so many benefits to having a safety net beyond simply acquiring an emergency fund. Good job working down your debts and surrounding yourself with insurance policies. Also, I plan next week to write a post about life insurance if you are interested in learning more about it. I plan to compare two quotes I received for Term and Whole life and compare which one is in fact a better deal.
    MyMoneyDesign recently posted..Why I Finally Sold My Apple Stock

  • Old adages are timeless for a reason. Diversification is a wise strategy in all aspects of life.
    101 Centavos recently posted..Rounding Out The Week – Cereal Killers

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