When Safe isn’t Safe at All

Safe.   I’ve been thinking about that word a lot lately.  It’s probably one of the most commonly used words these days.   Emails and conversations now end with wishes that you “keep safe”.  Companies no longer advertise their products or services, but rather what they are doing to keep their customers “safe” as they encourage you to come back.  Webster’s Dictionary defines the word safe as being: “Free from harm or risk: unhurt”.   Safe is appealing.   Safe implies feelings of security, peace, and of well-being.   And yet, sometimes “safe” isn’t “safe” at all.   Sometimes it is a false sense of security.

Financially, playing it safe can be one of the worst things people do.  Before we go further, let me be clear.  I am not advocating for financial recklessness.  Rather, I am questioning the wisdom of playing it entirely safe financially.   What I am concerned about is that with all the focus on “safe” in today’s world, we are at risk of people looking to achieve supposed safety in all areas of life, including financially.   Depending on the choices people make as it relates to risk and safety and money, what may feel safe in the short term, can lead to long term financial harm.

Let’s start with how you earn your income.  If you didn’t take a risk career-wise, where would you be?  Most likely the person who plays it safe in their career earns less income.   Perhaps they stay with the same company accepting lesser pay increases even though if they made a change they could command a higher salary.  Instead, maybe fear of the unknown prevents someone from making a career change. Or they choose the certainty of a salary over a commission structure where income is uncertain, but they could end up making considerably more.  Maybe you have an idea for starting your own business but the fear of “what if” keeps you from taking the chance.  Yes, it is a risk.   But the rewards could be more fulfillment, career satisfaction, and a higher income.   Higher income means having more available to save, invest, and build wealth.  Playing it safe in your career could mean less financial reward and future opportunity.

As you save for your future, playing it entirely safe can mean not actually achieving your goals.  In fact, it can result in a lifetime of dependency rather than independence.  Women need to be prepared to live and maintain their lifestyle for a long time.   Without risk, you lose out on the reward that can come in the form of reasonable long-term investment returns as you invest along the way.   Without that reward, it means you need to save more of your own money.  You become entirely reliant on your own ability to save rather than combining what you can save with growth that comes from having that money working for you.  Russell Investments conducted research that found for those retiring now, a full 60% of their retirement income is expected to come from the growth of their savings after they retire.  Even in retirement, because you still have a long time horizon, growth of your investments is still needed and the reward of growth comes from risk.   If going the safe route and not taking risk, in order to fund what could be a 30-plus year “retirement”, you need to have a lot saved to retire.  Not only will you need to have saved a lot more, you most likely will need to work longer (more years) than your counterpart who chose to take reasonable risk.   In fact, it is entirely possible that by not taking any risk you hinder your ability to ever actually achieve a lifetime of financial independence which includes the ability to retire comfortably, cover life’s unexpected expenses, help your family, or even own your own home.   In the absence of risk, rarely, if ever, is there reward.  Financially, playing it safe may put you in harms way and you may end up hurt.  The exact opposite of safe.

Instead of playing it safe, be smart and risk-aware.  Being smart and risk-aware means:

  • Protecting Yourself – financial security is paramount. Make sure you have things like an emergency fund and the right types and amounts of insurance just in case things don’t go as planned.  Having protections in place allows you the ability to assume some risk.
  • Take Reasonable Risks – for your circumstances and in your decision making.  Understand the risks you are taking financially.  Whether that is with your income, debt and/or investments. Take those risks you can live with and that are aligned with helping you achieve your long-term goals and avoid those risks you can’t live with or that could distract from your objectives.
  • Seek Guidance – input from your professional advisors and those whose insights you value can be very beneficial. They can help you talk through scenarios and the financial decisions you are making to ensure the risks you choose to accept are appropriate for you and your circumstances.

So, the next time you hear the words “keep safe”, ask yourself, what does safe mean to you?  As it pertains to your health, your well-being, and that of your families, yes, do what you can to keep well and safe.  As it relates to money and wealth, playing it “safe” today may not lead to a safe tomorrow.   Instead, be smart and risk-aware.


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