Entrepreneurs are often thought of as the ultimate risk-takers. It takes guts to leap into the unknown without a regular paycheck and cushy company benefits.
Starting your own business is certainly one big calculated risk. And things can go wrong fast if your calculations were off before you took that leap.
I speak from experience: I recently took this calculated risk for financial gain myself. I was working in a low-pay, dead-end job, and started thinking that I could do better with my career and my earnings if I tried to go out on my own and work for myself.
I decided the risk was worth it because I was prepared on all levels.
I had run my own business on the side of my day job for seven months before I quit to become a full-time entrepreneur. I focused on bootstrapping my way from side business to full-time business and have always kept my overhead as low as possible.
These actions helped me see that my business was sustainable and low-budget. I was well on my way to financial gain!
I also considered the flip side: what if I wasn’t successful? What if I failed?
For me, the worst-case scenario was not making enough on my own and needing to return to working for someone else. But even that was likely to lead to a better financial situation. With all the new skills I had acquired in growing and running my business, I had made myself more marketable if I ever needed to go back to working within someone else’s business.
So far, my risk has provided a big reward. I’m making almost twice what I did at my old job, and I’m endlessly happier, more satisfied, and more fulfilled than I was before I decided to make this change. The risk was completely worth it — but only because I had planned ahead first.
Here some other examples of common risks you can consider taking for financial gain.
Making a Big Move
Just as scary as facing the uncertainty of starting your own venture is facing the uncertainty that comes with moving to a new place. It goes against all our baser instincts to willingly give up a place we’re familiar with and comfortable in, in exchange for one we don’t yet know.
If you’re looking to take this risk for financial gain, there’s likely a job prospect in the mix somewhere. To determine whether making a big move is worth it, you need to honestly assess the situation.
Are you moving on a whim without a plan (or financial safety net)? Or did you identify a handful of companies you want to work for who offer positions for which you’re qualified?
Did a friend tell you how amazing their current city is as they assured you they could get you a position with their employer? Or
Are you seeking better opportunities? Or running from something unpleasant in your life that you’re just hoping won’t catch up to you in a new town?
It’s important to sit down and evaluate your motivations and goals. Making a big move to a new place — even without a job already nailed down — can be a calculated risk that leads to financial gain if you’re determined to work hard and you and your finances are prepared for a job search. If you’re not motivated to hustle, make new friends, and find success, the risk isn’t worth it.
It’s also not worth it if you think the move itself will solve all your problems. While it may be a tool you can use to find solutions, remember that real change and answers come from within.
Of course, all this assumes you want to move because you’re looking to earn more. When it comes to where you live, financial gain can also come in the form of big savings if you move from.
If this is the case for you, you still need to consider how you’d earn money in a new place. If the cost of living is lower, the job market may not be as robust. Or companies might not offer the same level of pay that you expect in an area where living costs are higher.
Do your research and make sure you won’t simply be trading high cost of living with a low earning potential. That’s not a financial gain — just a wash.
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Going to College
Not too long ago, college was a kid’s golden ticket to financial gain. A college-educated young professional would never have a problem finding a job!
That, of course, was before the Great Recession, and attitudes about higher education may be a little different now.
With our collective student loan debt burden on the rise, many young Americans question the value of a degree. After all, how many twenty- and thirty-somethings have we seen struggle to find a job — any job — after graduating with a fancy Bachelor’s degree and tens of thousands of dollars in student loans with no way to repay them?
But earning your degree is a calculated risk that does set you up better for financial gain than skipping college courses. College-educated individuals still earn more than those who only have a high-school education.
This isn’t permission to have a four-year free-for-all. Keep your risk calculated by determining how much school you can honestly afford and finding ways to save on tuition and expenses. Stay in state, apply for scholarships and grants, work a part-time job, and only take out student loans for education expenses as a last resort.
Making Investments in the Market
Recent studies show that while Millennials are warming up to the idea of investing their savings in the market, Gen Y is still reluctant to pull money out of the mattress.
It’s true that all investing comes with risk. There’s no guarantee of a reward — or even a break-even return. Investors can lost it all, any many have in the past.
But remember, we’re talking about calculated risks. This means you’re not throwing your cash into stocks willy-nilly.
You also shouldn’t be trying to pick stocks on your own, invest in companies because a coworker who fancies themselves the next Oracle of Wherever You’re From told you it was hot, or engaging in tactics in an effort to make a lot of money in a short amount of time (like short selling).
Smart investing is a calculated risk that is well worth it for the rewards. The long-term rewards, that is.
Investing your money into the market is worth it if you’re willing to be a long-term investor. You make regular contributions into a low-cost investment, like mutual index funds that track the performance of an entire segment of the market (or the market itself). You don’t try to time the market and you don’t panic when the talking heads on TV do.
That’s because you understand whatever stocks are doing today will be insignificant in 30 or 40 years, which is your investment time frame. Investing is worth the risk if you’re willing to ride out the highs and lows and make sensible — not sensational — investments.
Make the risk even more calculated by establishing a cash emergency fund you keep in a regular savings account that’s easy to access.
Don’t Forget Plans B through Z
If you decide that a calculated risk is worth taking because of the potential for financial gain, go for it. You won’t gain anything by sitting on the sidelines and waiting for opportunities to come to you.
Sometimes, you need to take a risk and take action before you can enjoy your reward.
That being said, there’s nothing wrong with having Plan B waiting in the wings. In fact, a backup or escape plan is part of what makes a risk a calculated one.
Just as I considered what I would do if my business failed and plotted an escape route if I needed it, you should think about what the worst-case outcome could be for your calculated risk. If you can handle it and you’re looking at earning a financial gain, the risk is likely worth taking.
But if you don’t feel confident or can’t come up with a backup plan? It may not be worth taking that leap and risking financial security.
In the end, you face the same reality with any risk you take: things may not work out as you had intended, hoped, or calculated. A risk is much more worth taking if it comes with plans B through Z ready and waiting to be deployed.
Image Credit: Thomas Hawk