What is the first thing that comes to your mind when you think about risk? Are you thinking about your day to day and where you are risking your life? For example, your daily commute to work and back. You could also be thinking about food and the risk of food poison. There is also the risks introduced into our lives from everyday sunlight, which can cause skin cancer. What about financial risk? Are we thinking about the risk of us not having enough money to pay the bills or not enough money to one day comfortably retire? These are also big risks in our lives that we should be concerned with.
When I manage financial risk, I take a look at where I can make the biggest gains in my portfolio and weigh the risk vs benefits associated. Everyone should take interest in managing their financial risks because it is crucial in advancing financially. The majority of us are making a certain amount of money each month. It is our job to understand where this money should be used. It is also our job to make sure we have enough money stashed away someplace in case an unexpected event happens where your income ceases to exist. I personally lean in and take bigger risks by having less money in my savings account, so I can pay larger amounts into my mortgage. For me, I see great benefit in paying off my mortgage years in advanced. If I did end up with no job, I am confident I could get another job relatively quickly. I also have my personal business that would provide enough income to get me through.
I also take risks by investing in the stock market. I am not a gambling man, so I invest in safe low volatile companies that pay dividends. These dividends are immediately placed back into the stock market to buy more stock. I am aware that I will not become a millionaire overnight by doing this, but I am gaining more here than if I just sat this money in my bank account. We really need to be accountable and become aware of financial risk. If we sit back and do nothing, we are certainly going to go no where. We are not going to reach our goals and most certainly not going to become financially stable unless you are more lucky than the rest.
So you can assign risk to every situation. There may be some situations where there is virtually no risk and other situations where the risk is very high. You may also start thinking about how the calculated risks you take impact your overall goals. If a failure should happen, does this push back your efforts in reaching your goals? Does a failure mean you are not going to get there? What exactly does it mean? We need to make sure we are asking the questions and making decisions that benefit us. Never bet it all on one color or go all in without knowing for certain your risk levels.