To know less or know more: which is a boon or bane when it comes to personal finance? Some things concerning personal finance do not attract one beyond just academic interest. However, others are so important to know that your financial decisions will be made based on those things. Fundygo shares these details.
Money is Not Always the Biggest Concern
The main concerns of the rich class do not involve money. It is simply a magnifying glass: all things great about you become bigger, in addition to everything bad about you. Money comes and money goes. However, wealth refers to more than just money. It is wealth in your relationships, and wealth of your knowledge.
The True Nature of “Risk”
The word “risk” does not sound good to most ordinary people. Most of us are encouraged from childhood to avoid it at all costs. Just like our elders, we try to mitigate risk in life as much as we can, hence we purchase insurance, avoid “risky” jobs and investments.
In finance, though, risk equals reward. At least, that is what every finance student learns in classrooms. You will not be able to gain something without giving up something else. Take on risky careers, risky investments, and be ready to embrace risk in matters of personal finance.
Even lenders evaluate credit risk on consumer loans by looking at potential borrowers’ credit history, capital, capacity to pay back, associated collateral, and at the loan conditions. This is how lenders assess whether one is a good risk, and if the borrower succeeds in repaying them, then lenders earn reward in the form of interest on the loan. The higher is the risk of being unpaid, the more will be the rate of interest. Lending is risky, so some charge higher rates of interest and often those lenders do not offer small business loans to those with a “risky” profile.
Cash is Unsafe
In one way, cash is safe. However, no matter what, with cash, you take a risk. Each year, your cash’s value goes down by 2.7%. Get the point? Your cash is also safe for the reason that it is predictable. However, do not be fooled by those who say it is not safe. Cash is losing value. It has a role in life, but it is not to keep your wealth. Besides, just do not keep cash idle; invest in something whenever you see an opportunity.