We may not realize it, but we all make risk assessments everyday in almost everything we do. For example, some folks will drive nothing but the safest car on the road, typically a Volvo with airbags in every direction, while others ride motorcycles without helmets.
It’s no different with personal finance. Some of us are very risk averse - shying away from stocks, investing in bonds, wanting to secure our futures with reliable investments. While others love taking risks – day-trading stocks, shorting stocks, chasing returns. Ideally, a smart investor finds a middle ground that will allow for some growth while still maintaining a strong core.
When I first started investing, I would often say that I was willing to take on more risk because I wanted to build a portfolio that would allow me to retire early. I knew I had to invest in stocks to achieve that. And I reasoned that if I failed, then I would simply continue to work like every other poor slob until my normal retirement!
In those terms, it seemed like a no-brainer. Why not take discretionary income and invest it instead of spending it? While my friends and co-workers bought bigger homes, lavish vacations and more toys, I enjoyed having a "higher goal". Whenever I mentioned retiring early to them, they looked at me like I was speaking a foreign language. For many, the concept had never occurred to them. And as they gave it some thought, you could see the painful realization in their faces that they will never be able to do such a thing.
Many of us have similar goals in life. We aim to graduate from high school, then college, then we want to land a good job. What comes next is not so well-defined. Some wish to climb the corporate ladder, others want their own business, while others seek challenging assignments. For me, I never desired to ascend into corporate bureaucracy, I never wanted my boss’ job ( even though I did eventually get it). I wanted interesting work, but even more, I wanted security. Typical woman, eh? My goal to retire early was driven by that need and the fact that I prefer to work for myself. I like my job, but to this day, I would much rather spend time working on one of my personal projects than going in to work. I craved that freedom and early retirement was the answer.The real bonus is that now that I have the means to retire early, I also have new-found powers. I can pick and choose my work assignments, I call more shots, I take off when I want to, I don’t worry about where my career is going, what the boss might say, what co-workers might think, I can walk out any day, any time. I am in charge! My job is so much more fun.