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Risk and reward #financeFriday

My credit card bill is due today and I know it will be quite a hefty bill. There is no point in trying to ignore debts, we have to face them eventually so it is better to face them head-on. I am a bit obsessive about minimizing risks and making sure I have enough money for every eventuality. I’m a bit obsessive about saving money too. I thought about buying some insurance this week and decided I didn’t really need it just yet so I delayed the purchase. I assess the risk and reward. I even assessed the risk versus benefit of some medication I have been taking this week and I decided the benefits weren’t worth the risks. I prefer to suffer a little pain than give myself an ulcer or kidney damage.

risk and reward

Cash flow

I always keep accounts just like a small business and watch my cash flow. I don’t have to pay my credit card bill for a few weeks and during that time cash will be coming in. I won’t leave paying it until the last-minute, however. I can put the insurance on the credit card this week and I won’t have to pay that until April. This allows me to keep a healthy cash balance in my bank account, just in case. Always pay off your credit card. Why pay the bank interest when you don’t have to?

Risk and reward

The insurance I’m buying will help me reduce risk and that will be worth it at least in the short-term. I often say no to insurance because I have enough money to manage the risk myself but this time I’m insuring goods against damage and theft. The premium is quite good considering the risk. Always balance the risk against the reward.

Investments

You have to consider risk and reward when investing money too. My stock market investments at the moment tend to be too high risk but I sold off all the low-risk ones. I did invest too much in the AIM market and it could take years to correct that mistake. I still have Solo Oil and that could soar if they can actually get gas and oil to the market. The risk may be high but so could the rewards.

When considering risk and reward, consider the worst case scenario. Then try to take action to reduce the risk or improve the rewards to make the risk more acceptable.

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