Most of us take financial risks every day, even if we don’t always recognise them as such. Choosing to spend money on something or not spend money on something can have an impact on our finances further down the line. Those are examples of minor financial risks. But there are also much bigger ones that we can choose to embrace or ignore as well. Some of these can help you, but others are more likely to leave you with nothing more than regrets.
Below, you will find all you need to know about the risks that are always worth taking, as well as details of those that you should stay away from. There is no way of being 100% certain about which risks you should and shouldn’t take. But on balance, it’s possible to predict which risks will pay off and which won’t.
The Risks to Take
Paying for Higher Educational Attainment
Spending money on education always seems very risky because there is no guarantee that by spending that money, you will make yourself more employable or more like to earn a large wage. However, you can never know for sure until you try it. And most of the time, this is a worthwhile gamble. It’s still the case that employers are willing to pay people more when they are more highly educated. As long as you are able to impress at interviews and demonstrate your talents, you can earn a lot, so this is a good risk to take for most people.
Investing Rather than Saving
Saving your money away in a bank account is not particularly useful if you want your money to grow. Sure, maybe you could do this successfully in the past. But that’s simply not the case anymore. Because of the low interest rates that now seem immovable, the only way to get ahead and make enough money is to invest rather than save. If you are willing to trade stocks and shares, your money can grow rather rapidly, which is surely what you want to happen. It’s tricky to get the hang of it at first, but in the end it’ll be worthwhile.
Making a Big Move That Could Improve Your Career and Income
Making a move can take the form of moving to a bigger city where there are more career opportunities. Or it could mean moving into a new job entirely. These kinds of moves can be pretty daunting. It means completely changing your current approach to life. And that’s never an easy thing to do. You might have to live in an area you’ve never lived in before. You will have to meet new people and work in a new environment and do new things. There is no guarantee that the move will go well, but if you have the chance to improve your career prospects, you’ve got to jump at the chance.
The Risks Not to Take
Listening to Tips and Propositions That Are Too Good to be True
If you invest a lot and you have friends who invest, you probably get give a lot of tips and recommendations. Let’s face it; every investor thinks they’re an expert, but that doesn’t make it true. You should be careful when listening to tips offs from people who claim that they have inside information and that you can make a lot of money if you invest now. These people often have ulterior motives; they’re not most interested in you making money. And if something sounds like it’s too good to be true, then you can bet that it most probably is.
Living Without the Backup of Insurance
Insurance is easy to dismiss. It’s an added monthly cost to pay, and no one likes the idea of adding even more things to their pile of regular outgoings. But it’s all about spending a little money now so that you don’t have to lose out big time later on. Insurance backs you up and provides with the safety net you need when something does go wrong and your life alters dramatically through no choice of your own. Places like the Smart insurance company can help you find the kind of solution that’s most suitable for you if you need assistance. But don’t rule out the idea of getting insurance entirely.
Failing to Diversify Your Income and Your Investment Portfolio
If you were to lose your job tomorrow, and you couldn’t get a new job for whatever reason, what would you do? It would be much easier for you to answer that question if you had a more diversified income. It’s not ideal that you have to do this and think about these things. But with automation taking over, there will certainly be job losses in some sectors. You should try to make sure that you have a plan B if this problem strikes you. The same applies to your investment strategy. If you choose to put all your eggs in one basket, you could find that you lose all your money if the investment falters.
Having No Emergency Fund
Assuming that you won’t need any money to fall back on in the future is risky. You can’t tell what will happen tomorrow. And if you don’t have an emergency fund to call upon when your finances are in bad shape, it won’t be long before you find yourself in a very trick situation. I’m sure that’s not what you want, so you should think twice about this. Yes, I know I said that you should invest rather than save. But that applies to general saving only. You can create a separate account that you slowly begin to funnel money into, and this will be your emergency fund. You can then sleep easier knowing you have more financial security in place.
Keep the things you learned in mind when you’re making decisions and deciding which risks are worth taking. Ultimately, it’s up to you to make the judgement that is going to be right for you. But some risks pay off more commonly than others, so be aware of that.
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