They say: “Whisky will kill you.”
But I don’t think it will.–Dylan, “Hattie Moore.
Taking Risks by Leaving Home
There was nothing wrong with the neighborhood I grew up in. I knew that I wanted to leave it as soon as possible. I was influenced by songs and movies that suggested that that was the thing to do.
One way in which what I did was wrong is that I allowed myself to be influenced too much by those songs and movies. It would have been braver in a way to have gone against the tide of conventional thinking and stayed home.
One way in which what I did was right is that leaving home made it easier to make other life transitions. If you don’t make a break from home in your early 20s, it gets harder to do so as you age. If you make that big break, it’s not nearly as hard to make a second break from a place you have called “home” for only a few years.
Because the pace of change is swift today, there’s a benefit to be had in reinventing yourself occasionally. That allows you to jump on the latest trend. The other side of the story is that, if you make too many changes, you can lose sight of what you are and you can go to pieces.
Taking Risks by Getting Married
I remember an older person telling me not to get married young. I didn’t hold off getting married as a plan. It wasn’t until I was 35 that I was sure it was the right thing. Actually, I wasn’t so sure. I was sorta kinda sure and sick of not being sure.
Getting married is not taking the safe path, in my assessment. Getting married settles you and gives you roots. Being secure in this one area of life frees you for taking risks in other areas of life.
I don’t meet as many interesting (in both the good and bad senses of the word) people now that I’m married. I don’t go to Blues Alley nearly as often. I think it has made me a better person, though. And I have someone with whom to talk over my adventures who is better able to follow the storyline because she recognizes a significant theme when it resurfaces.
Taking Risks by Having Children
People say that they are not quite ready to have children. It’s something that no one can ever be ready for. Being ready to have children is like being ready to be born. You have no idea what’s on the other side. How can you prepare for an experience you cannot imagine?
Having children is the anti-consumer choice. It’s the opposite of everything they try to sell you on TV. I don’t object so terribly much to a lot of what they try to sell you on TV. But we need a break from that sort of thing. Children definitely provide a break.
I miss vacations that I haven’t taken a little. I miss cars that I haven’t driven a little. I miss houses that I haven’t lived in a little. I miss kids that I haven’t raised a big bunch. I have two and I thank God for those and I wish I had four.
Taking Risks by Changing Jobs
I’m never satisfied. There was a time when I wanted a job as congressional correspondent for Daily Tax Report more than anything else in the world. God answered that prayer. Six years later I was plotting my next move. Does it have to be that way?
I think that it has to be that way. There is no permanent perfect job; there are only jobs that are perfect for a time. If the job doesn’t challenge you, it’s not perfect. If it does challenge you, you are forced to rise to the challenge to survive. If you rise to the challenge, you now possess a new skill set and can only be satisfied by a new brand of challenge. If your only thought is to stand still, you’re not happy, you’re dead.
There’s a lot of risk involved in changing jobs. You need to learn new skills. You need to fit in with a new group of people. You need to tie your future to a new corporate entity. You often need to move. I would be very much disinclined to change jobs solely to obtain an increase in pay. If I were stagnating at my current job, and the new job offered the promise of more long-term fulfillment, I would find it hard to say “no” no matter how great the risks.
The trouble is that it can take years to figure out whether the risk involved in changing jobs was justified or not. By the time you know for sure, you are beginning to wonder about the new job. And the stakes get higher with each job change. Walk away from the specialized sort of job that you can only obtain when you have a good bit of experience in the field, and you may be walking away from something that will prove hard to replace.
This logic chain argues for sticking with a good-enough job if you are up there in years. The counter-argument is that when you are up there in years, you don’t have too many more grabs at the brass ring left in front of you. Each chance is precious when there aren’t so many left.
Taking Risks by Buying a House
The house you live in makes a big difference. You are far more likely to exercise regularly if you live near a bike trail. You are far more likely to have people over if you live close to town and run into people daily. And lots of people have accumulated a good bit of wealth as a result of their investment in their house.
One big downside of buying a house is that having the space to store stuff encourages you to accumulate junk. I suggest buying a house not too much bigger than what you absolutely need.
I resist moving. I need a really good reason to go to all the hassle involved in a making a move.
Taking Risks by Buying Stocks
You already know that you need to take valuations into account.
Another risk is that the world is changing and that makes it hard to anticipate how stocks will perform. I use the history of the U.S. stock market as my guide to what to expect, but I am not sure that that’s a completely reasonable thing to do today. The problem, of course, is that it is not at all clear what better guide is available to those of us buying stocks during this transition to a world economy.
I don’t fret about this too much because I don’t see that those of us pursuing early financial freedom have an alternative to investing in stocks. However, I think it makes sense to keep your eyes open and to avoid becoming too complacent.
Taking Risks by Starting a Business
The potential payoff is huge. The potential downside is also huge.
One way to look at this is that it is best to start a business when you are young. That way, you cannot lose too much even if you fall on your face.
The counter idea is that it makes sense to work for big corporations when you are young and learn what you need to know to give it a go on your own down the road a stretch. Do it that way, and you can view any learning experiences from your corporate days as part of your compensation for having to turn over to someone else (often not even a someone else but a something else — a corporate thing lacking a spine or a heart or a brain) the right to make the calls.
I chose the latter path. Some swear by the former path. Of course, they would, wouldn’t they? The ones doing the swearing are the ones who made it to the other side of the river in one piece.
Taking Risks by Retiring Early
It’s still a live question as to whether I should have stayed at my corporate job a few years longer and thereby accumulated a good bit more financial security before making the shift to the far-more-risky writing career. The plus of having more money in the bank is obvious. The downside is that I would have been several years older by the time I got to where I am now in my writing career. Not good. One complaint that you rarely hear come from my lips today is that I wish I were older.
I of course understand that the sorts of risks that I took on are not for everybody. However, I am uneasy with the idea of retiring in your 40s or 50s with the thought of never again working for money. I worry that the amount that you think is enough money in your 40s or 50s might not seem like so much later on. You greatly reduce your risks if you stick with some kind of money-producing endeavor after retiring from full-time corporate employment.
I don’t like the idea of being totally dependent on a paycheck and I don’t like the idea of being totally independent of a paycheck. I am drawn to a middle-ground somewhere between the two. If I sold my book for $1,000,000 to a big publisher, my guess is that I would craft new goals that would keep me working hard on the second and third books. As noted above, I’m never satisfied. When they’re taking me away for burial before the body begins to stink, I’ll be asking if I might have the time needed to complete just one last post on safe withdrawal rates.
Taking Risks by Going to School
School was a great deal for a long time. It was fulfilling work, you met lots of interesting people, and you increased your income-earning potential in big ways. I think that school was so good a deal for so long a time that it earned a reputation that it couldn’t live up to. I see too many people today going to school because they are not sure what else to do and school is the most respectable of a number of not-too-compelling choices.
There’s no more expensive way to find yourself than to find yourself in school. If you are not sure why you are there, you probably will not be learning that much. School takes you out of the job market for years, which means you give up not only years of earning a salary but years of learning experiences. And schooling is expensive today; the availability of loans just makes it more expensive in a long-term sense.
Schooling provides a fantastic payoff in the right circumstances. However, I see going to school as generally being a high-risk move today.
Taking Risks by Saving Money
The domain name for this site has the word “saving” in it. So I feel obligated to put forward a comment relating to that topic from time to time.
Saving is risky. If you go on a vacation today, you know what you are getting; the value proposition is solid and clear. If you save, you don’t know how much that money is going to help you out later on. It might be that it will keep you from going hungry. It might be that it will allow you to pursue an opportunity that will make you rich. It might be that you will get so many raises between now and the day you retire that the money you save by not taking the vacation will end up just being extra money to give to your heirs.
I believe that a big reason why people don’t save is that they appreciate on some level how risky a money move it is. What people need to understand is that risk is not bad. The trick with risk is to calculate it. It’s smart to avoid unnecessary risks or risks with far more downside than upside. Risk itself is unavoidable, however.
The more you pay attention to the questions involved in taking risks, the more likely it is that you will come to appreciate the strong value proposition offered by saving. In the right circumstances, the payoff from saving is huge. Spending is the money allocation choice that permits you to enjoy life a bit more. Saving is the money allocation choice that takes you to a place to which you have never been before, that sets you on fire.