I’m not asking if you go to a casino and drop $500 down on the table for one hand of Black Jack or one roll of the dice. I mean do you like your income, expenses and debt to be consistent every month or are you OK if they fluctuate?
Even though I’m young and I work in personal finance I am what you call risk adverse – with both my money and my life. I don’t like change and the possibility of the unknown makes me uneasy. I like having a daily routine, I like knowing what I should expect throughout any given day and I don’t like to see major spikes or declines in the value of my investments.
Are you OK with changes when it comes to money?
Taking a balanced investment approach
I’m not a high risk investor, not by any means. I take a balanced approach to my long term retirement accounts which means I invest 60% in equity and 40% in fixed income. I have a good 30 years until I retire; I know I should be taking more risk because it can be very rewarding over the long term, however that’s just not my style.
I prefer to see my money grow a little bit each and every month. I know I could potentially be making more but that would require me to take more risk. I prefer to sustain small increases over time as oppose to big spikes and big drops in the value of my investments. The thought of losing a substantial percentage of my savings in one day or over a short period of time makes me feel sick. After all you know what they say, slow and steady wins the race.
If you have a fixed income you also need to have fixed expenses, that’s just the way it is. People who spend more than they make end up in debt and I don’t want to go there again.
In our new apartment Nick and I now have to pay a hydro bill every month and this makes me uneasy. I don’t like not knowing what’s to come, especially when it relates to money. This is partially due to the fact that I’ve overspent in the past and my bad habits landed me over $50k in debt. It’s also probably due to the fact that I’m a control freak and I always like to know what’s coming.
Variable mortgage rates
One of the biggest debts we will ever have in our lives is our mortgage. Even though our home is also a huge asset I can’t imagine taking a gamble with hundreds of thousands of dollars.
As a financial planner I have to always offer variable mortgage rates to clients but personally I think they’re a bad idea. I know the thought of low rates is appealing but the fact that payments can change at any time if interest rates change makes me nervous.
However recent data from Rate Supermarket confirms that variable rate mortgage holders have no reason to be nervous – at least not in the immediate future. “The U.S. Federal Reserve clearly expect that they will not be raising their administered rates anytime soon, which means that interest costs for variable rate mortgages rates should change very little during the coming year.”
How do you handle changes in your money? Do you freak out like me or do you take it with grace?
Photo from Flickr