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Risk management, not elimination

10/7/2014

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Editor: Crass Cash

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All of risk is management of risk, not its elimination.

-Walter Wriston

You may control the future to some extent, but you don't know what it holds.  Humans since the beginning of time have been fighting risk.  Death, diseases, drought, starvation, war, accidents, you name it we've been trying to fight it.  But that's where it ends.  Risk is like cancer, we fight it, but we never truly beat it.  

As a result you need to find ways to mitigate it, but won't be able to totally eliminate it.  Hope for the best, plan for the worst. You could die tomorrow or you could live to be 100.  You just don't know.  Consequently, you could run into two problems.  Dying with too much money or retiring with not enough.  You have to plan for both.  

In order to solve this you have to do two things.  Plan conservatively and spend correctly.  You first need to find out how much money you're going to need.  Then save at least that much and probably a little more just to be sure.  

The rest of your money you can blow on anything you want (assuming you have an emergency fund, no debt, etc.).  Here's the key, you should still only spend it on things that matter.   If you're the type of person who enjoys vacations and family gatherings then that money should go towards that.  Stocking your house with the latest electronics when you're never home doesn't make the grade.  Neither does going to the most expensive restaurants by yourself.  Spending money for spending's sake doesn't bring you happiness.  Regardless of whether you have plenty of it to blow or not.    
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    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

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