Farnoosh Torabi, creator of the So Money podcast, was scared to buy a new home at the height of the pandemic in 2020, but chose to move forward. Looking back, she believes it was the best decision she ever made. Sometimes, facing your fears can lead to unexpected rewards.
Are you scared of taking financial risks? You're not alone.
Making money moves often comes with a degree of fear and uncertainty, but sometimes, not taking enough risk can be even riskier.
The key is finding the right balance between financial security and growth.
Here are the top 5 strategies that can help you embrace financial risks:
Understand and Address Your Fears
Fear is a natural emotion when it comes to financial decisions. When fear shows up in your financial life, ask yourself where it's coming from and what it's trying to protect.
Build a Bigger Emergency Fund
Having a substantial emergency fund is like having a safety net when you decide to take financial risks. It provides peace of mind and financial security.
While financial advisers often recommend saving three to six months of expenses, the amount you need may vary based on your job stability, dependents, and other factors.
Consider saving one to two months' worth of expenses as a starting point.
Level Up Your Financial Knowledge
Knowledge is power when it comes to managing financial risks.
Educate yourself about investing, real estate trends, and other topics related to your financial decisions. Watch educational videos, read books and articles, and listen to financial podcasts.
The more you know, the more confident you'll feel in navigating financial risks.
Create a Concrete Safety Plan
Prepare for the worst-case scenario by developing a safety plan.
If you were to lose your home or job, what would your first three steps to recovery be?
Knowing how to access your savings and identifying areas where you can cut expenses can provide a sense of control and confidence during tough times.
Know When to Seek a Safer Route
Sometimes, the right amount of financial risk means ensuring you can cover essential expenses even if you lose your job or face a financial setback.
Carol Petrov, a certified financial planner, emphasizes the importance of finding a balance between risk and financial stability.
If your investments or mortgage payments are causing excessive stress, consider adjusting your financial strategy to reduce anxiety.
In today's financially uncertain world, finding the right balance between embracing financial risks and maintaining financial security is a challenge. By addressing your fears, building a robust emergency fund, increasing your financial knowledge, creating a safety plan, and knowing when to take a safer route, you can make informed decisions that align with your financial goals and risk tolerance.
Remember, there's no one-size-fits-all approach to financial risk—it's a highly personal journey.
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Written by: Tashika Chopra
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