Are you risk-averse or risk-seeking? If you asked a handful of people, you would most likely have varying answers. Risk isn’t inherently bad.
Take Tesla, for example. Tesla has been willing to take risks from day one, having several “firsts” under its belt. From being the first to be aggressive with emerging technologies to the first to actively pursue the idea of electric cars, Tesla is a great example of a risk-seeking company.
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Risk can be a powerful tool in your wealth-building arsenal, helping you take leaps of faith with confidence. Recently, personal finance expert Ramit Sethi talked about how he took a risk when he moved out of his affordable apartment in Palo Alto and moved to San Francisco. That led him to think about three ways that successful people think about risk and how these actions build wealth.
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When you look at a tripod or triangle, there are two grounding points and one point at the top. People who use risk to build wealth adopt this same mindset. By keeping the major things in their life stable — the grounding points, they are able to be ultra-risky in a few core areas — the point.
What does this look like in real life? Maybe you are considering taking a risk and investing in a startup with a positive growth outlook. Instead of putting every penny to your name into the startup, you leave your emergency fund untouched. This gives you a solid foundation to fall back on if you lose your job or the startup goes under.
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Another necessary mindset to build wealth by taking risks is confidence. Being confident in a risky decision allows you to jump feet first into any situation or decision with confidence that you have the skills to figure it out. Take Sethi’s recent move to San Francisco. Was it scary to give up his affordable place in Palo Alto for uncertainty in San Francisco? Of course!
This move was daunting, but he was confident in his ability to figure out whatever was thrown his way. Maybe he would have had to work harder or cut his takeout order frequency in half, but he was confident in his decision to take the risk.
Wealth-building with risk also requires the ability to pivot. Risk-taking doesn’t always work. What’s the worst that can happen if your risk doesn’t work out? Are you able to weather the storm? If his move to San Francisco didn’t work out, he could have simply moved back to Palo Alto.
