If you don’t take risks you cannot change your financial life!

Published: February 22, 2021 at 11:19 am

Many of us cannot stand the thought of losing money; we cannot stand the thought of not getting regular income. This prevents us from taking career risks or investing risks. Some recognise that they are making a mistake but cannot break out of this mental barrier. The “logic” is quite simple: If you do not take on risks, you cannot change your life. We will stick to the financial aspects of this!

Harry Potter and the Half-Blood Prince has an insightful episode: Harry stumbles upon an advanced magic potion making book. It has hand-written tips on brew potions, and often these tips state the opposite of what is given in the standard text.

The motion making class teacher presents a challenge: brew a potion (we will leave out names) and get a prize. While the rest of the class struggles, including the star student Hermione, Harry follows the tips in his book and gets it right and wins the prize.

Hermione is annoyed at this, but their common friend Ron says, “Harry took a risk in following the tips and got rewarded for it. It could have resulted in a catastrophe”. This episode offers an insight into why so many of us fear risk-taking.

We want a guarantee that our choices will turn out the correct ones. Whether it is selecting a life partner for our children or choosing a college education or job, or when it comes to investing our money. We need to know if we are making the right choice.


We refuse to believe it is not possible to know this beforehand. We discourage our children from getting interested in unpopular topics; we prevent them from making unconventional career choices. Why? We are scared of the unknown.

Fearing failure is a guaranteed way to fail

We force children to take on courses with “guaranteed placement” without considering their happiness or the fact that space for personal development or career growth would be absent – if you are surprised if this still happens in 2021, I can assure you it does.

Then we chase after-tax saving and guaranteed returns -always living in the present: thinking about risk today and not the risks tomorrow.

Fear is an excellent stimulant for both good and bad decisions. The only way to encourage ourselves to take on market volatility is to fear the future. The danger of losing financial independence to inflation is much more significant than the value of our money eroding from daily price fluctuations.

If the danger of a bleak future does not prompt to take corrective steps, nothing would. Some of us get lucky and get an insight into this bleak future. When I sat down for my interview at IITM, another faculty member was there for his promotion interview.

We got talking, he asked how I was, and I had mentioned that I was in debt, almost out of a job with hefty monthly expenses due to my father’s illness. He listened patiently and said, “pattu, you should be happy that you face so many problems when you are young”.

I did not appreciate what he said then, but a few years later, I realised these problems were an insight into the future: what my life would be if I do not change it. This difficult time sowed the seeds for my financial independence journey, helping me take career risks and investment risk. My money story is covered in this video.

I had the easy out: life gave me a glimpse of the future (just like Dr Strange could see what a world dominated by Thanos would look like). Others who did not encounter problems early in life will have to imagine a bleak future and take corrective steps forcefully.

I say this in my seminars: You hit a fork in your road. On one side, the journey with be smooth, but you are guaranteed never to reach your destination. On another side, the trip will be rough, and you have a chance (only a chance) to reach your destination, change your life. What will you choose? Will you take a chance without know whether it will work or not?

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
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