Expect The Unexpected: The Risk Myth
How often we fail to protect and prepare for what we want
One of the main reasons people fail to reach their full potential is because they are unwilling to risk anything. -Zig Ziglar
This quote from Zig Ziglar is the best way to start a conversation about wealth and risk. I understand the influence of money fears, I help people with their money mindset and that usually means tackling money fears. Fears of money particularly manifest around risk. That’s why I want to equip you with new ways to think about risk.
There’s a mixed bag of risks. One is pure, and the other one is speculative.
The good ones are pure — you can’t prepare for them but can protect yourself; the bad ones — you can prepare but cannot protect yourself.
What is Risk?
Speculative risk means there’s a chance for a gain or loss. The best example of a speculative risk is gambling, where in a game, you have specific odds to win or lose.
Most of the financial decisions we make are speculative risks; however, humans are risk averse, so we prefer the sure-fire gain over a loss even when there are equal odds of a gain or loss.
Pure risk means a guaranteed loss, and in simple terms, it is a good risk.
The risk is “good” because you can’t prepare for them and loss is inevitable.
For example, it will be a loss if your house burns down.
Because a loss is inevitable, you can purchase insurance against it, home insurance, car insurance, life insurance, etc.
Humans and Risk
Human nature is such that we’re impatient and want to get paid quickly, a behavior that conflicts with the time value of money.
The time value of money is a fundamental money concept. It means money will be worth more in the future than it is today.
Knowing about future costs or spending means I can prepay anything based on money. It’s difficult to rush this process.
Therefore, you won’t find professionals guaranteeing quick returns.
Although many want more money sooner than later, to do so, the only option is to assume more risk. But instead of assuming more risk, many simply become the victim of scams.
Scams have resulted in
- $1 billion in losses from 46,000 people since the start of 2021
- Crypto-related crimes amount to about one out of every four dollars reported lost to fraud- 60 times higher than in 2018 and more than any other payment method
- Fake investment opportunities were behind $575 million of all crypto losses reported to the FTC
Individuals can have peace of mind and avoid scams.
Individuals can protect against pure risk with insurance, so it’s essential to protect yourself and your property against loss outside your control.
But to build wealth, the speculative risk is a necessary evil; although it seems against human nature, assume risk.
When your mindset assumes speculative risks are incapable of producing a gain and only capable of producing a loss, you place yourself in an unwindable situation.
The loss is uncertain; you cannot protect against it. You have as much of a chance for a gain as a loss.
What if I told you that risk is not the enemy but fear?
Many have an avoidance tendency that prevents us from thinking about what can go wrong and staying prepared.
This desire often manifests itself in a misconception: the “perfect” chance has to come for me to assume risk. A chance where everything will go well, where everything works just right.
It is, however, a myth.
Seeing what could go wrong helps us prepare for the unexpected and gives us peace of mind.
Fear is there for a reason. It’s a normal emotion that helps us self-protect, survive, and avoid danger or financial loss. It is here to be a protection for our well-being.
Individuals can protect themselves from the danger or loss coming from outside, but what if that danger or loss is inside? Preventing you from seeing the possibility of success, opportunity, or gain.
Give yourself better odds by accepting that there will be risks. Accept these risks, don’t avoid them.
There is no unicorn, climactic ending scene, or ancient secret with money concepts.
Know how to articulate your goals, plan to achieve your goals in a reasonable time frame, and assume a comfortable level of risk.
Although you may want to be entertained, money matters are not entertainment.
The best we can do is invest in real people, listen to them, share our expertise, take care of their worries, and give them satisfactory answers. Trust is more important than products.
George Blount coaches indivuduals on wealth building strategies, money tips, overcoming money blocks, and passive income strategies for the new generation of wealth builders. Sign up for my newsletter and take the Money Mask Quiz at https://moneymask.ck.page/gmblount .