We all like to think that our lives are well planned and well thought out. I certainly like to think that I do everything in my power to mitigate the risks and protect myself and my family against the vicissitudes of modern life. From time to time we all make major life decisions which potentially have major financial implications. However, as we make these life changing moves, we rarely consider or care about the financial impact of those decisions. Here are a few examples:
Having Kids - when my wife and I were thinking about starting a family, my main concern was whether I was ready for what everyone described as a major life change. I didn't really consider the financial implications. We have three healthy and fun loving boys - a major expense, but one that we are well equipped to handle. Some of my friends are not as fortunate. One of my friends has a child with down syndrome, another has a child with a mild form of autism, and many others that I know have a kids with a variety of other challenges. When you are planning to have a child, you rarely consider that you are also taking a financial gamble.
Getting Married - talk about taking a financial gamble. Never mind the fact that a large percentage of marriages end divorce, entitling your spouse to half of what you jointly own. The bigger gamble is the fact that from the minute you get married, your financial fate is essentially in the hands of another human being. Their bad financial decisions will reflect poorly on you. Your financial plans may not suit them. That's a big bet you are taking. Luckily, someone else is taking that bet with you. I am fortunate in that my wife and I see eye to eye on most financial decisions. We are both careful with our money and both take our credit and spending decisions very seriously. Having lived with my wife for a few years before we got married, I knew exactly what I was signing up for.
Switching Jobs - now that's one where the financial implications are very clear, and most people switch jobs primarily for financial reasons. However, even where the primary motivation for the decision is financial, I find that many people don't consider the possible implications of their decision. For example, I often meet individuals that take a job that pays more in the short term but that does not offer promising career prospects. There is also considerable risk in the very act of switching a job - e.g. there is always the risk that you will not get along with the new boss. Regardless of how well you think you understand the opportunity, you must recognize that you are taking a risk.
Getting an Education - yes, yes, getting an education is not only about improving your career prospects, and I agree that studying philosophy may be good for the soul, but I find it difficult to understand folks that choose an undergrad major (for example) without due consideration for the financial implications and career implications of their decisions. True, you may be able to find a job outside of your chosen field of study, but you must recognize that there is some level of risk here.
Now here is my point. I am not advocating that decisions must always be made for financial reasons. That would make for a very dull and sad life. However, what I am saying is that many times our decisions have very large potential financial implications which we choose to ignore.
When I moved to my current job in March 2008, I was very conscious that I was placing a financial bet. So far, I seem to be winning this bet. Back in 1999, I was very aware that by going to business school I was placing a bet on the health of the economy two years later. I lost that bet, at least in the short term, with the dot com crash. When we decided to have kids I was aware of the financial implications of having a healthy child, but did not even want to contemplate what having a child with special needs would to do our life, never mind to our finances. We all make financial gambles, more often than we would like to admit.
May your gambles pay off more often than not.
Here are a few other interesting posts about financial gambles that I spotted around the web:
My blogger friend Frugal recently wrote about a financial gamble that paid off. OK, it wasn't really a financial gamble, but she got some money in an unexpected way. It's nice when nice things happen.
Brip Blap talks about the differences between his old neighborhood and his new and about how taking some financial gambles and starting a business may have a nice pay-out.
Talk about the financial gamble of having kids. Clever Dude has a post (and video) about a man who is completely disregarding the cost of childcare. Some people should not be allowed to have kids.
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