Even the most adventurous people don’t enjoy the idea of being risky with their income. We all like to see our money spent well. Unfortunately many of us become so paralyzed by fear of risk that we start working on building wealth way too late and miss out on the great opportunities our youth provides us. We at MCP would argue that being careful with your money is half the battle, and the other is knowing the financial risks worth taking.
1. Starting to invest even when you’re not exactly sure what you’re doing
You have probably heard the term ‘analysis paralysis’ in home-buying but the concept extends to our investment strategies as well. When you’re at your first employer (post military) that offers a 401k program or have been thinking that you might want to start your retirement savings, many of us see so many options out there that we go into research mode and then become overwhelmed by the options. Even options within the new military blended retirement plan can be confusing and overwhelming. You could spend years researching investment strategies, different types of funds and failure and success stories, in fact many people do.
However when you allow the overwhelming amount of information keep you from starting, you’ve done yourself a much greater disservice than choosing a poor investment. There are some simple ways to avoid a volatile individual stocks portfolio, (mutual funds, index funds etc) and a multitude of people willing to help you. The worst thing you can do for yourself is nothing, so take this risk. Start. Even if you don’t have all the answers and you end up changing your strategy in a couple years, you’ll be far better off for having those years under your belt.
2. Sticking with your investments (even in a recession)
Even though it’s scary when the stock market starts to decline and your investments lose value, it’s still worth your money to stick with it. Knowing our audience is largely in their 20s and 30s, this isn’t even that risky. You have decades to balance out your retirement portfolio, and when you’re closing in on retirement age and want to shift things around to be more conservative that’s your choice and probably a wise one. Even after the worst recession we’ve seen in decades the S & P 500 has bounced back and seen record highs.
It might feel frustrating, especially when you’re starting out and you feel like you’re throwing money into a black hole, but emotional investing is more dangerous than risky investing. We aren’t financial advisers and we wouldn’t recommend you do something that completely puts you outside your comfort zone, it is your money after all. However we would invite you to look throughout history to see who has faired better – those who pulled out in a panic from their investments and those who held strong and waited things out.
3. Creating a passive income stream
Passive income is the best type of income, you can earn it while you’re sleeping! Passive income could mean owning a rental property, starting a business that you get to be hands off with, or renting out unused space in your home through airbnb. We risk a little bit of stability when we undertake a passive income venture, however NOT changing your plan, taking a risk or not adjusting to the opportunities presented to you or new information as it comes in is not really living. The most successful people are equal parts prepared and flexible. Would you take a financial risk if the payoff could be that you get to stop working 5 years earlier? Your willingness to come up with a new plan and generate passive allows you to keep shaving potential time off your working life.
Do you love the idea of having foreign investments? Rental income? Blogging income? Go with it! Try things. As long as you use common sense, trying new ways of realizing your financial future will not damage you, it will give you essential experience and probably create more wealth and opportunity than if you stuck to one idea throughout.
What financial risks have you taken? Any plans to re-envision your financial future?