Or taking more risk by doing something?
Following the vote to leave the EU, the word risk has assumed more prominence in everyday conversations amongst the British public. We are in uncertain times.
The definition of the word risk is: “a situation involving exposure to danger”.
People’s interpretation of risk varies enormously. I’m sure we all agree on the definition but our particular tolerances for risk are personal.
I’m the only one in my family who is scared of heights and doesn’t like flying. My wife has bungeed down deep canyons, parachuted from great heights and enjoyed wing walking! I don’t get it and it’s certainly not my idea of fun. Why take the risk? Yet when it comes to other areas of life I’m the one who is prepared to take risks. After all, I run my own business!
My point is that it is really difficult to tell someone what they should be doing and what risk to take. Yet I hear it all the time when it comes to financial matters. The media, colleagues, friends and family are experts in volunteering information but demonstrate significantly less expertise in listening and understanding the subtler dynamics of the individual’s tolerances and needs. This can also work in reverse.
Yesterday, new clients were presented with their comprehensive financial plan which involved modelling various financial scenarios. He was pretty relaxed but she was worried about money. I felt that they were in a good situation but she was going for a job interview the next day because she believed that she needed to return to work to earn more money!
You guessed it… we informed her that there was no need to go back to work but they could also spend twice as much as she would have earned, on holidays and helping family, each year for the rest of their lives! Not only this, they are able to gift a significant amount of money to help their children get on the housing ladder.
At the end of our Financial Planning session, they couldn’t believe what was possible and they were genuinely excited about the future. The lady in question then said, “I’ve never heard of anything like modelling financial scenarios before. Why doesn’t everyone do it”? They admitted they were wary of investing following the Brexit vote and were thinking of doing nothing. One session of planning however, laid such fears to rest and they realised that no matter what happened in the investment markets they have enough money to live the life they want.
With increased uncertainty there is more need to plan than ever before. I implore anyone not to sit there worrying about the negative news flow and use this as an opportunity to take control. Inertia may just create more fear and anxiety and exaggerate your view of risk.
Managing the risk of passing money to your loved ones.
Another example of how doing nothing increases your risk is when you don’t have a Will. Studies have shown that approximately two-thirds of the adult population don’t have a Will and a third will die Intestate. Leaving a Will means you can be sure that everything will be dealt with in the way you would wish following your death, rather than leaving a mess for your loved ones to sort out.
