We all know the wisdom in balancing risk and reward. However, sometimes people go too far and avoid risk altogether. To be frank, that may be necessary during some phases in your life, but there are many parts of your life where taking risks is the best thing for your long-term success. Not everyone has the luxury of taking risks and being aggressive, so it’s important to use that to your advantage and to take risks while you can. If you’re young and have your whole life ahead of you – now is the time where you can take on the most risk for the most potential reward.
Taking Risks Has Its Benefits
If you’re a very risk-averse person, let’s get this sorted. Taking risks definitely has benefits. In fact, not taking any risks is a big risk in and of itself. You may’ve gotten bad advice from a family member or friend. Maybe they got burned, or maybe they just like to play it safe. I get it – I like to keep it as safe as possible too. However, some risks are warranted, and the potential benefits are too good to ignore.
Financial Gain
Let’s start with the obvious. Some of the best investments, like index funds and ETFs, can be highly volatile. This puts them into a “high risk” category. Fortunately, if you invest for the long haul, index funds and ETFs have a way of making you a lot of money in the long run. That’s one example of a financial payoff.
Another is more about your opportunities. A lot of people choose to go to college. That’s perfectly fine, and possibly advisable. There are a lot of good careers which require a college degree. However, there are also many great careers that don’t require any degree. Instead of going to college, you could try your hand at one of those. Alternatively, since at that stage in your life you have few responsibilities or bills, it’s a great time to try to start a business.
Confidence
A nice little benefit from taking risks is also that you’ll have a huge boost to your confidence. Don’t believe me? Well, think about it. Usually, when you take a risk and it pays off, it helps boost your confidence and you’re more likely to believe in yourself and your decision-making abilities. Even if you take a risk and it isn’t successful, there is a confidence that can come from making a mistake and the lessons you learn from it.
Professional Development
I mentioned careers earlier. Sometimes, when you’re older and have a lot of responsibilities, you’re practically forced into certain types of positions. I get it. When you have a family to feed and a mortgage, you’re not quite as flexible. However, take advantage of that flexibility while you’re young. For example, I see a common case in tech all the time. One job pays a bit better, or has better benefits. If you have bills and children, you’ll likely take that one.
However, sometimes there is another position, with a bit lower pay, which can put you in a spot to accelerate your career. So, while it may be lower pay now, it could mean exponentially more pay later. It’s something to at least consider since you have the luxury of that flexibility which comes with a lack of certain responsibilities.
Assess Risk And Determine If It’s Worth It
Obviously, I’m not telling you to just take on risk because you can. You should assess the risk as best you can. Figure out what the potential repercussions are, as well as the potential upside. Then you should try to give an estimate of what will happen if you don’t take that risk, as well as how likely the risk is to backfire (if you can make any educated guess). Then, with all the information you’re able to pool about it, make a decision.
Is it worth it? Is it not worth it? All I can say is that I personally try to live life without regrets – so if it’s something you’ll say “what if” about for years, you might want to take that risk on.
Failing Is A Normal Part Of Life
Also, failure in an of itself isn’t something to be afraid of. Yes, it sucks. It’s unpleasant. Nobody wants to fail, after all. With that said, I want you to keep that in mind with your risks as well. If the only downside of a risk is that you’ll have failed and gotten a wounded ego – well, that’s not a good reason to bail on the idea of at least giving it a go.
Find Ways To Mitigate Risk, If Possible
There are usually ways to mitigate some of the risk. With investing it’s having a diversified portfolio – as an example. If the risk is really high, and you’re not comfortable with it, do some brainstorming. It’s possible that you may be able to mitigate the risk enough to make it worth the try. Another example of this would be a healthy emergency fund, which could give you a cushion if you tried to leave your day job and pursue your side hustle as a full-time business.
Seek Out Advice When You Can
When you’re struggling, and completely unsure how you should handle a situation, it pays to seek out advice and to listen to others. Now, I’m not saying you need to follow their advice, but it’s important to listen. They may have wisdom that can help you with your risk assessment, finding ways to mitigate the risk, and consequently your final decision.
Two Final Pieces Of Advice
There are a couple of things I want to end this on, to reinforce some key points that are incredibly important yet often overlooked.
Don’t Underestimate How Many More Risks You Can Afford To Take While You’re Young
First, stop underestimating how much risk you can afford to take on while you’re young. A lot of people think they don’t need to seriously consider an opportunity (and the risk that comes with it) because they can just do it later. That’s wrong – your ability to take on risks will decrease with time and added responsibilities. At times you may find things get rigid and you have very little freedom. That’s fine, but plan accordingly!
Inaction Is Still A Risk – And A Dangerous One
Not acting, and not taking any risks, may be the biggest risk of them all. At some point you’ll have to take some risk to get where you want to be. Assess risks properly, but don’t be so terrified that you’re afraid to act.
Conclusion
I hope that helped convince you to take risks while you can! There are a lot of potential perks to taking risks, so it’s important to consider the opportunities you get – even if they’re intimidating. If you have any tips or thoughts on this topic, let us know in the comments!
For more content like this, and a free budgeting template and financial goals worksheet, be sure to sign up for the Bitter to Richer newsletter.
