Their family certainly didn’t approve. How could they quit without a plan? Didn’t they want to get ahead? What about their future? How could they just throw it all away?
When it comes to money,people often struggle to discern the difference between actual and perceived risk. It could be holding you back.Simon Letch
This person had plenty of savings. They didn’t have financial responsibilities like kids or a mortgage. They had a stellar resume at a respected company,and it would likely have been fairly easy for them to find another job in the industry.
But none of that seemed to assuage their (or their family’s) fear of leaving.
Having worked with hundreds of people in improving their finances,I frequently notice that most people struggle to discern the difference between actual and perceived risk.
In the story above,the actual risk is much lower than the perceived risk. What’s the actual risk? What is the likelihood that a senior professional with a stellar resume and reputation in a high-skilled industry won’tever get another job? Pretty low.
The bigger the gap between the actual risk and your perceived risk,the more suboptimal your decision-making will be. You’ll either unwittingly take on more risk than you want (when your perceived risk is lower than the actual risk),or you’ll unnecessarily rob yourself of the payoffs of taking risks (where your perceived risk is higher than the actual risk).
Here are some common examples of an incongruence between actual and perceived risk:
Improving your ability to identify and assess actual risks starts with questioning your perceptions of risk so you can close the gap between the two. Here are some questions that will help:
Investing has certain risks associated with it,and not investing has different risks associated with it. Buying a home and taking on a mortgage has certain risks associated with it,but not buying a home and continuing to rent has other risks associated with it.
When you start to get clear on the risks associated with the alternative option,it forces you to get a clearer picture of the risks involved on both sides of the fence.
Misperceptions of risk thrive on emotions and assumptions. When you start to challenge and question your perception of risk,you give yourself the opportunity to make more informed and balanced decisions,paving the way for better outcomes.
Paridhi Jain is the founder of,which helps adults learn to manage,save and invest their money through financial education courses and classes.
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