They are not what most imagine which is understandable given the general level of financial discourse in the UK.
Here’s my list, based on the thousands* of discussions, meetings and emails I have had with clients and prospective clients over the last 19 years.
My guess is that fewer than 4 or 5 of them have been properly taken account of and dealt with by 95% of the population:
1. Risk is not knowing EXACTLY how much money you need to retire comfortably and STAY comfortably retired. Why wouldn’t you want to know this?
2. Risk is not doing something about the point above. The average retirement lasts three decades. That’s the AVERAGE – you might need funds to support you for 40 or 50 years (longer than you’re likely to work).
3. Risk is outliving your money and losing your dignity and independence. Is there anything more important than your dignity and independence?
4. Risk is making panicky, knee jerk, expensive, value destroying, short term decisions based on today’s headlines when it’s the long term that matters. Guilty as charged but now cured.
5. Risk is inflation. Having your purchasing power reduced = a permanent loss of capital. Do you want to have to live on less 10, 15, 20 years from now?
6. Risk is not having an emergency fund.
7. Risk is not having your debts under control. There is no debt reduction fairy. It’s up to you.
8. Risk is leaving your family without enough money because you have died unexpectedly or can no longer work. No-one has enough insurance. See this blog.
9. Risk is thinking your property or inheritances will bail you out. Fingers crossed!
10. Risk is having to rely on your children to look after you in your old age.
11. Risk is having to look after your parents in your old age.
12. Risk is not having a will and dying intestate and the aggravation and cost that goes with that. What are you thinking? Do you really not like your family?
13. Risk is not having a financial plan that takes account of ALL OF the above.
14. Risk is not knowing what you’re doing.
Risk is NOT how much the stockmarket goes up and down. That’s volatility and it’s to be embraced – it’s your best and only realistic way to grow your wealth.
*c30,000 = 19 years x 200 working days per year x 8 meetings/emails/discussions per day.