Even the best-laid plans veer off course occasionally. As a triathlete, you probably know all about things going wrong in a race. If you haven’t had to change up your race plan in the middle of a race, you probably know someone who has.
In the same way, you need a contingency plan for your triathlon, you need a contingency plan for your finances. In this episode of Money Mile, we’re going to level up the risk management aspect of your financial training plan. Listen in to hear what you need to consider beyond insurance.
You will want to hear this episode if you are interested in…
- Adapt to changing circumstances [2:32]
- A risk management example [5:38]
- Can you impact change [8:20]
- Optionality [10:55]
- The homework [13:06]
Optionality comes in many forms
We already discussed the importance of insurance in the sprint distance risk management episode. So, in this long course training plan, we’ll go beyond insurance into different planning strategies and scenarios for you to visualize how to implement these strategies.
In a triathlon, you may hedge against the risk of a flat tire by packing a tire repair kit. In your financial life, one of the best ways to prepare yourself for the future is by ensuring plenty of optionality. This can be done by having cash reserves on hand in case a challenge arises. Another way to build optionality into your financial life is by having a taxable brokerage account with investments separate from your retirement accounts
What is the likelihood that an unforeseen event will happen?
Another way to look at risk management is to consider the likelihood of something happening. Is there a high or low likelihood that a type of financial catastrophe may happen? Would the event have a high or low impact on your finances?
Consider whether something that has a high likelihood of happening would have a low or high impact on your finances.
The higher the risk and financial impact, the more you need to be prepared for that risk. Consider ways that you could mitigate that risk by evaluating your choices.
Learn how to adapt when things don’t go as planned
Risk is a part of life. The best way to mitigate risk is to be prepared. Make sure that you can adapt when things don’t go as planned. Download this episode to play on your next long steady run so that you can hear how to mitigate risk beyond insurance. Remember that what you do is even more important than what you know so don’t forget to do the homework at the end of the episode.
Resources & People Mentioned
- Episode 26 – Contingency Planning: The Risk Management Aspect of Your Financial Training Plan
- Episode 25 – Investments: The Strength Training Component of Your Financial Plan