We all need to spice it up a bit now and again – but can be wary to do so with our money! The idea of risking your financial health or carefully built up nest egg can be nauseating.
So, how do you know if a financial risk is indeed worth taking? Here are three that generally stand up to the challenge!
1. Living in a big city
Life in a major metropolis can be painfully expensive at times, but it also can come with a lot of financial gain. Salaries are often higher to match cost-of-living, but, more importantly, networking and career advancement opportunities are plentiful. Plus, you can more easily hone other skills and partake in educational and cultural events – many of which can be free or fairly cheap.
Not to mention, some cities can be great ways to also reduce huge expenses – like transportation – if you’re able to use the city transit systems to get to-and-from work. Ditching the cost of a car is a huge boost to your bottom line, which helps subsidize rent or other costs being higher.
Whether city life is right for you long term or not, there is certainly a lot of life-long lessons to be learned from spending some of your early life cutting your teeth in a city.
2. Putting some risk on your money (aka invest!)
Investing often presents itself as scary and intimidating. After all, don’t you need to be a finance genius in order to dabble in the market? Or worse, isn’t it like gambling?!
Fortunately, neither one of those myths are remotely true. There is no longer a high barrier to entry to get into the stock market, and it’s also easy to start learning the basic language and concepts needed to begin investing.
Putting some risk on your money by investing it is a critical (and calculated) financial risk you need to take to harness the powers of compound interest. Investing for retirement is often the first step, but you may not think of yourself as an investor because the language “save for retirement” can be confusing for a rookie. But you certainly shouldn’t be only saving your money. You should invest it into a well-diversified portfolio with some risk!
It’s also important to mention there’s no need to be overly conservative with your investments, especially if you’re young and have decades until you need to use the money you’re investing. In fact, being too conservative could be quite detrimental to achieving your long-term goals.
3. Starting your own business
The old adage “invest in yourself” doesn’t always mean literally opening a business. But, for some, starting a business may make sense.
If that’s the case for you, just know it isn’t a financial risk to enter into lightly. Rather, it should be carefully calculated as well as preceded by test runs and the dutiful accumulation of a healthy emergency fund.
One of the best ways to minimize the downside of starting a business is to build it up while you’re still working a day job. That way you can test whether or not your idea is viable without the added pressure of needing it to generate a profit.
Once it’s off the ground and running, another way to experience the volatility of entrepreneurship is to simulate living off a variable income for a few months before committing to it full-time. Try putting your regular job’s income into savings (which helps bolster your nest egg for when you do actually quit), and do your best to experience the ups-and-downs of living on an irregular income.
Just because you’re taking a risk, doesn’t mean you have to do it haphazardly!
Source : TaxAct Blog