If you find value in these articles, please share them with your inner circle and encourage them to Sign Up for my Rich Habits Daily Tips/Articles. No one succeeds on their own. Thank You!
[email protected]
All risk, whether good or bad, shares one thing in common – both require an investment. That investment typically includes time and money.
Good Risk vs. Bad Risk
- Measurable/Quantifiable – Good Risk is risk that can be measured and quantified by doing Due Diligence (Homework). If the cost of potential outcomes is not measured/quantified, measurable/quantifiable, then you are taking a Bad Risk.
- Identify Uncertainties – When you are able to identify all of the potential outcomes, whether good or bad, and you are able to plan for all potential outcomes, then you are taking a good risk. When Uncertainties are unknown or unknowable, that’s Bad Risk.
- Probability of Success – If there is a high probability of success, then you are taking a Good Risk. If the probability of success is low or unknown, then you are taking a Bad Risk.
- Fundable – Risk that can be adequately funded, under the worst case scenarios, is Good Risk. If under the worst-case scenarios you run out of capital, then that is a Bad Risk.
- Probability of Failure – If there is a low probability of failure, then you are taking a Good Risk. If there is a high probability of failure, you are taking a Bad Risk.
- Comprehensible – If you can understand the nature of the risk you are taking, then that is Good Risk. If you cannot understand the nature of that risk, then you are taking a bad Risk.
Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, Effort-Less Wealth, Change Your Habits Change Your Life, Rich Habits Poor Habits and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”
