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_{Exploring the risk glasses, trust, and reducing errors}

Happy Thursday! Thanks for reading Intentional Dollar — where we look at old money ideas through a new perspective.

What’s inside?

• One idea to experiment with

• Two quotes from others

• Three questions to dig deeper

• Four lines of poetry for the point

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

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_{One idea to experiment with:}

The Risk Glasses:

Risk surrounds us, yet we’ve desensitized ourselves to the magnitudes of common risks due to their low frequency. We know it’s risky to drive a car, yet we don’t think about it each time we journey to the store because most of the time we don’t get into an accident.

We’ve accepted the risk as a cost to the freedom that we want. Never step into a car? No car accident. Don’t speed? No speeding tickets. But to get what you want, you take the risk with the pursuit.

This in mind, there are four strategies to manage risk:

• Risk retention: self-insure and pay for any loss events as they arise

• Risk avoidance: don’t play football and you won’t break your arm playing football

• Risk transfer: pay a small premium/deductible so the insurance company covers your risk

• Risk reduction: controls you implement to limit the chance or severity of a risk event

Every one of us should have a piece of each one of these strategies in place. And if you look closely at your life, you’ll find the vibrant threads of each strategy at play.

How do we think about deploying the four strategies?

• We retain risks we can afford or those with extremely low probabilities and low costs. My $2,000 vehicle doesn’t need full coverage with a $500 deductible — so I should retain this risk.

• We avoid the risks of at-fault accidents by not texting and driving. We avoid the risk of getting hurt bungee jumping by not bungee jumping. This is the easiest risk management strategy, the most effective too.

• We transfer low probability and high cost risks like freak auto accidents, expensive medical care, untimely death, libel, slander, defamation lawsuits, etc. Anything that typically comes with expensive property damage or lawsuits is cheap to transfer relative to the potential ruin that could result.

• We reduce the severity of risk for the things we still want to do. Rules, controls, and safety precautions limit severity. Think seat belts for cars, helmets for sports, and the bungee cord for bungee jumps.

With your risk glasses on, peek at the risks around you. Do you have enough coverage? Are you taking unnecessary risk that should be avoided? Are you paying for coverage that you should and could retain? Are you not doing enough to reduce the potential severity?

Ignorance may feel like bliss in the risk world. It’s uncomfortable to think about your own death and the need for life insurance. However uncomfortable, indecision is a decision to retain the risk — and this is often the suboptimal decision.

Of course we can’t insure or avoid everything — even umbrella policies have their limits. It’s necessary, though, to run these periodic tests to see what you have and what’s changed.

As you start a family, you have new risks. What happens if you die early? Who pays the mortgage or future tuition?

When you get a new car, you have new risks. Comprehensive coverage makes more sense than it would on an old clunker.

As your asset base builds, you can retain more risk, but you also have more to lose. Retention and large umbrella policies make sense as your assets grow.

Try to be a little more aware of risk this week. Not so that you become catatonic and reside to building a permanent home on the couch, but to bring awareness to the subconscious risk you take daily.

Also note, this is not limited to money: Is your running route that crosses the busy street worth the risk? Is a quick text, or notification check worth the potential cost? Is speeding to arrive one minute earlier worth the ticket or accident risk?

What do you see with your risk glasses on?

_{Two quotes on trust:}

Making decisions that involve risk and time requires trust. Uncertainty is a blockade against making the first move. Faith transcends fear.

_{Three questions on reducing errors:}

1. What types of errors do I make frequently?

2. What would it look like to build a self-review system to mitigate 80% of the common errors?

3. What manual inputs can I link or automate, and how can I draw obvious attention to the manual inputs that must change?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let me know which one shined light on a previously dark cave.

_{Four lines of poetry for the point:}

Contact Me:

Content ideas, questions? Reply to this email or reach out to me at [email protected]

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

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*The Deloitte rankings are based on submitted applications and public company database research.}