moneyFYI
Financial Freedom Is Merely Organized Common Sense
Society Is Becoming More Risky
Risk exists everywhere and in all times. The risk of losing money in the stock market, or having your employer move to Viet Nam is always there and everyone at least acknowledges the possibility. You cannot avoid risk, but you can understand it.
Once you understand it, you can manage it.
Risk assessment
There are two parts – the cost of the event, and the probability of it appearing in your life. In most cases you would be guessing at the outcome because we know neither of the factors with certainty. We can usually get a range of costs and probabilities though and we should assess those.
Risk management
There are several approaches to this subject.
Accept and ignore because you can afford the risk of loss. With odds of one in a hundred and a $30 umbrella the value of the risk of losing it is 30 cents.
Reduce the probability of loss. Drive more carefully, avoid penny stocks and private equity, avoid street drugs, be selective about who you work for.
Transfer the loss to others. That’s what insurance is about.
Reduce the cost of a loss. Keep your cash at home in more than one place. Have a deductible on your insurance policies.
Some risks are not manageable
You should be aware of those and you should do what you can do to find mitigating methods.
One of the big risks we have is how our governments behave. It could apply to the management in your business, or the faculty in your university. The thought of note is from famed psychologist Amos Tversky.
“It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what is going on”
The takeaway
Understand the risks in your life.
Certainty about anything is risky.
“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.” Mark Twain
Common sense is your friend
“Success is more a function of consistent common sense than it is of genius.” An Wang
Make decisions that optimize your risk reward ratio.
I help people have more retirement income and larger, more liquid estates.
Call in Canada 705-927-4770, or email don@moneyfyi.com
