Have you set up your budget and finances according to your income or your financial risk tolerance?
Those two things can be very different and may be the reason that you do not feel confident or comfortable with the life you have created.
Financial Risk Tolerance can be defined as the level of uncertaintity that you can handle within your finances. Okay, but what does that actually mean?
Some people like to have several smaller bills to pay each month. Some like to pay for everything in cash, have very little monthly bills, and have never owned a credit card. Most people fall somehwere in between.
It’s important to know where you land so you can build the financial situation that best suits the lifestyle that you want. Your financial risk has nothing to do with your income. You can make a million dollars a year and still have a low financial risk tolerance.
To categorize financial risk tolerance in a tangible way, I created these four categories. Where would you rate yourself?
I created a free worksheet to help you understand exactly what it means so you can determine your own personal financial risk tolerance. In the worksheet, I go into more depth on what defines each level on the financial risk scale.
Whatever choices you make, need to align to your risk tolerance in order for you to feel financially confident.
Setting up your finances according to your financial risk tolerance means you tap into and respect your emotions relating to money. According to your income, it may make perfect sense to buy a $500,000 house, but your risk tolerance may feel more secure if you spent $350,000.
On the opposite side of that example, you may feel energized when you have higher financial resposibilities like a higher mortgage and car payment. This may excite you and encourage you to make smarter decisions in other areas of your life.
Wherever you land on the risk scale, it is important to understand where you are and how you can build your life to support that.
Download my worksheet to see where you are on the risk scale and how you can build you rlife to match your comfort level!
