Rules and Risks

There is an old board game called LIFE where players move along a track from start (getting a job) to finish (retirement), and are subjected to random events along the way.  Win $5,000 in a karaoke contest!  Pay $100,000 for plastic surgery!  You also have the option to purchase auto insurance and home insurance to mitigate risk later on.  Flood!  Fire!  Good thing you picked those certificates up, right?  Of course, in real life not every event can be insured against.  And there will never be any shortage of life events, random or not.  Every action has its risks, and (real) life has its rules.  Break them at your peril.

life-car-pegs

One of life’s little rules are speed limits.  Breaking them is a common risk that many people take.  The benefit of speeding is reaching your destination sooner.  The risk is of getting caught, being issued a citation, and needing to pay hundreds of dollars to the state.  I was speeding recently, and a police officer was waiting for me on the other side of a hill.  He issued me a ticket for about $300.  On top of that, I was driving a car that belonged to my passenger, and her registration was not up-to-date, so she got a citation too.  That was a risk that she took to save the $75 registration fee.  I think in both cases the risks did not outweigh the benefits.

This and other recent events have definitely influenced me towards being much more risk-adverse.  Stop speeding; slow down.  Think critically about risks and potential gains.  Always ensure you are insured.  Be prepared for the worst case scenario.  This attitude will save you money (and peace of mind) in the long run.

Here is a list of actionable items that may help you practice this attitude:

  1. Do not speed.  Speeding tickets are expensive, and you may not be shaving off as much time from your trip as you think.
  2. Keep licenses, registrations, and insurance policies up to date.  You will avoid fines by renewing the former and mitigate risk by owning the latter.
  3. Keep an emergency fund.  You will have more options for when you encounter negative life events.
  4. Follow the rules, and pay attention to authority.  Be reasonable, but keep your head down.

Most of this is common sense, but it never hurts to refine ideas by giving voice to them.  You may only be between jobs for a month without health insurance, but if you couldn’t pay a hospital fee in case of an accident (worst case scenario) you should get an individual insurance plan, even if it is just for one month.  When all is said and done, avoiding the risk will almost always be the smarter choice.

In the case of my speeding ticket, the only thing I did right was number 3 on my list: having an emergency fund to cover it.  Here is to getting the rest right also, and not letting little speed-bumps (so to speak) prevent me from reaching financial independence by 35!  Because life, unlike LIFE, does not end when you retire.

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