Avoiding a big mistake

Photo by Kenny Eliason on Unsplash

When a combination of hard work, skill, and luck over a number of years puts you into a position of financial comfort and confidence, a new question tends to become top-of-mind.

How do I maintain this feeling?

I think it’s important to start by recognizing that the approach that helped you achieve financial comfort and confidence won’t necessarily be the same as the one required to keep you there.

Maintaining financial comfort and confidence is all about avoiding a big mistake.

Avoiding a big mistake often means shifting your focus to minimizing your downside rather than maximizing your upside. I’m not suggesting that you avoid all risk nor am I implying that it’s even possible to do so if you wanted to. Rather, avoiding a big mistake often requires being able to let go of potential upside in exchange for additional flexibility and breathing room on the downside.

For example, getting a much higher interest rate on your cash cushion by using stablecoins can be very appealing. But is earning that higher interest worth exposing your cash cushion to a level of risk you can’t quite yet wrap your head around? Probably not. That’s why sticking with boring I-Bonds and comparatively lower interest rate bank accounts for cash cushion could make more sense.

Avoiding a big mistake doesn’t mean becoming overly negative or pessimistic. But it does require being more open to the full range of known – and unknown! – possibilities. When evaluating a financial decision, we naturally envision the best outcome. But avoiding a big mistake requires that we open up our minds to the full range, likelihood, and probability of outcomes, not just the best one.

I’ve personally found it helpful to categorize bigger financial decisions into one of two categories.

It’s either a “hell yes” or it’s a “no.”

This framework for decision-making can help you stick to what works and only replace what you’re currently doing with something that is clearly and objectively better. As you can imagine, this framework is helpful when applied beyond just your financial decisions.

So if you find yourself in a good overall financial situation and headspace, take a minute to look at your situation with fresh eyes through the lens of avoiding a big mistake. Hopefully you’ll find this new framework helps you maintain that feeling of financial comfort and confidence you’ve worked so hard to achieve.