Cavalcade of Risk – Separating the Good Risks from the Bad

Life is full of of risks. Nothing in this world is assured, and a life spent seeking certainty will almost certainly lead to dissatisfaction.

Some of the very best things in my life have come as the result of taking risks.

Just about three years ago I asked my wife to marry me.

Only a few months later, my wife and I decided to try and have a baby. In just over a month we will have our second.

At the start of this year I decided to swallow my fear and finally start the blog I’d been thinking about for all these years.

I’m a person who tends to stay inside my comfort zone, but through all of these experiences, I’ve learned the value of taking risks. Life will pass us by and leave us with nothing but regrets if we aren’t willing to put ourselves out there every now and again.

But it’s also important to remember that we aren’t invincible and that there are some very real risks we face every day that we can and should protect ourselves from. The reality of that risk is why I keep a large emergency fund and why I’ve come to love insurance. I want to be able to take risks that have the potential to enrich the lives of me and my family, but first I want to create a stable base. That stable base is what allows us to jump off and seek opportunity.

Today I’m fortunate to be able to share some articles that talk about creating and sustaining that stable base.

Featured articles

Over at the Riskviews blog, they talk about the very interesting relationship between risk and return. Translating the point into a relatable personal finance message, imagine someone just starting down the road of responsible money management. In the beginning there’s often a lot of low-hanging fruit that will generate large returns with minimal risk. Things like starting retirement contributions or cutting out wasteful spending come to mind. But over time those low-hanging fruit disappear and the quest for better performance will only come at the cost of increased risk. The message? Make sure that your quest for continual improvement takes the risk of your actions into account. Good financial management takes into account the downside of an action as well as the upside.

There’s a lot of talk in the media about the amount of fraud that exists in government programs like Medicare and Social Security. But what about the other side? What happens when the government tries to prosecute you for a fraud you didn’t commit? Bob Wilson tells the fascinating and tragic story of the man who had to die to prove himself innocent.

From what I’ve seen, the talk surrounding the start of Obamacare is all over the map. Some people love it, some people hate it. Many people have some wild notions about where it will take us. My take is simple: we’ll see. It’s far too early to start making any conclusions about the long-term impact of these new laws. Over at the Healthcare Economist, Jason Shafrin wonders whether our health insurance system will start to look like Germany’s, with stronger caps on the number of patient visits a doctor will be reimbursed for. My only question here: do all those visits from Kobe Bryant count towards the cap?

Interesting to learn that the people hired to help individuals understand their choices in the new insurance exchanges aren’t required to go through any kind of background check. Henry Stern has the details. Moral of the story: be very, very careful before deciding to give out your personal information to someone you don’t know.

Michael Stack writes about the audit process for workers compensation, and in particular how the entire process can benefit from more real-time analysis. This is something I’ve seen myself in the healthcare business, where providers want information they can act on now, not just a summary of what they did in the past. It also has relevance for us in our personal financial lives. It doesn’t do you much good to look back on your life at 60 and realize you should have started saving for retirement. Start evaluating your financial situation now so that you can make the appropriate adjustments while there’s still time to have a positive impact.

Thanks to all who participated in this week’s Cavalcade of Risk. Next week’s host is Jay Norris over at Colorado Health Insurance Insider.

Photo courtesy of Angelo González