St. Patrick’s Day may be just around the corner, but hold off before you make a risky dive towards that pot of gold at the end of the rainbow. Every financial decision we make comes with some risk, and it’s important to understand which risks are worth taking and which aren’t. 

Be sure to speak with a trusted financial advisor before you make any big financial decisions. In the meantime, read on to learn a little more about which financial behaviors to approach cautiously, which to avoid altogether and which to do with confidence. 

Proceed with caution

There are many ways to manage your money, and some philosophies will work better for you than others. So, when we talk about risk, it’s important to remember that risk is a relative concept. The five behaviors below may be considered risky, but they may be a risk you’re willing to take:

1. Taking on a lot of credit card debt. Sometimes, credit cards can be really helpful! But when your income doesn’t match the monthly payments, you have a problem on your hands.
2. Holding on to a stock for too long. They say time in the market is more important than timing in the market, but sometimes, a stock really isn’t going anywhere! You have to take risks to get rewards, and it’s comforting to know that any losses on stocks are tax-deductible.
3. Going to your friends for financial advice. Maybe your friends are smart and doing well for themselves. But you can’t guarantee that their specific real estate investing strategy will work for your individual situation.
4. Making decisions all on your own. On the flip side of No. 3 above, making decisions without input from experts can lead to mistakes. Listen to finance podcasts, sit down with a financial advisor and read classic finance books to give yourself a better chance of success.
5. Taking out student loans. “The truth is that taking out any loan is a risk,” said Garrett Parker at http://moneyinc.com. “As long as you have a viable major field of study and a plan, a student loan is actually an investment.”

Avoid these behaviors

Now that we’ve talked about the “maybes,” let’s move on to the financial behaviors you should almost always avoid:

1. Excessively spending on things you don’t need — like that daily Starbucks or that music streaming service you don’t use very often.
2. Living on borrowed money. Interest payments are not your friend. If you’re still paying a bill long after you’ve used the item (like that tank of gas or cart of groceries), it’s time to change your strategy.
3. Buying a new car. Not only are you going into debt, but you are buying an asset that depreciates in value very quickly. 
4. Spending too much on your house. How much space do you really need? Buying a house is a long commitment, and you want to make sure it’s not putting too much of a dent in your weekly budget. 
5. Living paycheck to paycheck. Expensive emergencies can happen at any time. Strive to save a little of each paycheck so you’re prepared.
6. Not investing in retirement: Check out NerdWallet’s retirement calculator to see how much you will need to live after you stop working. It may be more than you think!

Do this!

There are lots of financial philosophies out there, and they may not all suit you, but there are two principles every non-professional investor should live by: Diversify and be patient.

By spreading your money across many different bond and equity holdings, you minimize your risk of capital loss. And by being patient and waiting to invest in the stock market when the price/earnings ratio is at a good spot, you’ll have a better outcome. Financial advisors like Merrill Financial Associates in Provo can help you!

Besides those two investing principles, the old standards hold true: Spend less than you earn, put some of your money aside into a savings account and keep track of your spending. 

No financial decision is totally without risk, but you can be informed to know which risks are with taking and which aren’t. Be cautious about behaviors like taking out student loans, avoid living paycheck to paycheck and diversify your investment portfolio. It may not be the path of least resistance, but it will help you sleep better at night, knowing that you are taking care of your future.

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