No one likes to lose money, but often we’re so scared to lose money that we end up preventing ourselves from becoming rich in the long run because we don’t educate ourselves enough about the benefits of risk.
The Benefits of Risk
Risk implies there are two possible outcomes…one can be good and the other bad. I’m not sure why when it comes to money we tend to focus 90% of our time on the bad instead of the positive of risk. It likely comes with a lack of experience with positive risk.
If you never see the positive from money risk…then you stay far away from it. The crazy thing is we take financial risks all the time…we just don’t consider them risks for some reason and yet they are far riskier when you sit back and think about it.
You can’t become a swimmer without getting in the water and trying to learn to swim. Dipping your toe in the water does not make you a great swimmer and never will.
Never taking the training wheels off a bike will never allow someone the full potential to learn to ride a bike. It seems so simple after you learn…but unless you take a risk of crashing you will never learn, the benefits of letting go of the training wheels allows you to travel wherever you want.
Taking Off Your Financial Training Wheels
You will never learn to grow your money without understanding how risk can be a benefit. If you only see it as a negative then you will never realize your full potential to use your money to make more money.
Keeping your money in savings accounts is okay. You won’t lose money initially, but over time your money will devalue because of inflation. What costs $1 today will not cost $1 in 10 or 20 years and your dollar will not grow faster than the rate of inflation while in the bank.
Keeping all your money in savings is just like dipping your toe in the water and pretending you are a great swimmer and is pretty much like having training wheels on your whole life.
Risk Can Be Good
Instead of always having a negative outlook on risk what if you look at it how other people do…as an advantage to grow your money over time. You can greatly reduce your financial risk by educating yourself about finances, testing it out, and giving yourself enough time to grow your money.
You can greatly enhance your risk by trying to time the market, picking out individual stocks, freaking out when the market goes down, and having only short-term goals.
You Take Risks All the Time
You already take major financial risks but for some reason, you don’t associate it the same as investing in the market or real estate.
- Moving across the country for a job is a huge risk.
- Taking on a 30-year loan on a house is a huge financial risk.
- Getting married and dealing with finances with a spouse and children is a huge risk.
- Loading up on credit cards and other consumer debt is a huge and costly financial risk.
Test Out Smart Risks
Just like swimming, you want to go at it gradually. Yes, you can jump in and try it out but when you go all in sometimes you have the chance to drown. We taught our daughter to swim this last summer and she is amazing now but it was a challenge and took time and effort.
Now instead of crying and giving up she likes to dive to the bottom of the pool. It scares me a little bit but I know she can do it. I was there by her side and helped her when she struggled, but at the same time had to let her go so she could try and push herself and she did it even when she wanted to give up or turn back.
Isn’t it the same with finances? Obviously many people have been able to do it. Learn from them, and let them be by your side. Test the water, but don’t give up when it’s hard. Learn your financial lesson and continue on and reap the rewards that come from the risk you have taken in life.
How has your opinion/tolerance of risk evolved or changed over the years?