There are some people who suffer from selachophobia. Quite a number, actually. Whilst we don’t necessarily know the exact ratio, the fear of being bitten by a shark is surprisingly high. There are people who won’t swim at the beach because they’re afraid of a shark attack.
They perceive it as a real risk.
But here is a fascinating, slightly absurd statistic: globally, sharks bite less than 70 people every year. Meanwhile, New Yorkers bite approximately 1,600 people annually.
This quirky comparison reveals a profound truth about human psychology. We are hardwired to fear the dramatic, highly publicised threats, while completely ignoring the mundane dangers walking right past us on the pavement.
When it comes to our money, we do the exact same thing. We can easily look for risk in the wrong places. We are so focused on scanning the horizon for the dramatic "sharks" in our financial waters that we completely miss the real dangers swimming right beneath our feet.
Here are three ways we fundamentally misjudge risk, and how it quietly sabotages our financial plans.
Let’s keep with the sea theme…
The illusion of the safe harbour
When markets get turbulent, our instinct is to pull our capital into cash. We view the stock market as shark-infested waters, and assume a bank account is the safest possible harbour. But playing it entirely safe is actually incredibly dangerous.
While market volatility is loud and scary, inflation is silent. It eats away at our purchasing power every single day. Keeping our wealth entirely in cash is like standing on a tiny sandbank to avoid the sharks, while ignoring the rising tide that is guaranteed to submerge our island.
Waiting for the perfect calm
We often tell ourselves that we will invest "when the time is right" or when the markets settle down. But waiting for the perfect economic moment is like waiting for the ocean to be completely flat before learning to surf. That moment simply never arrives (and we actually need some waves to get any movement!).
The real risk isn't poor market timing. The real risk is the time we are not invested. Every day we wait on the sidelines is a day our capital isn't working to buy back our future freedom.
Staying in boats that aren’t right for us
We often stay in demanding, unfulfilling careers much longer than necessary because we are terrified we haven't saved enough to retire. We treat the transition into our second act as the ultimate financial risk.
But what is the bigger risk? Diligently planning a transition so we can reclaim our time, or spending the best remaining years of our cognitive and physical vitality doing work that drains us?
Integrated, lifestyle financial planning requires us to completely reframe how we view danger.
Risk isn't just about losing money in a market correction. Risk is also about not having enough capital to fund a healthy life. Risk is missing out on shared family experiences because of financial anxiety. Risk is playing it so perfectly safe that we never actually live.
Sometimes, we need someone to hold up an objective mirror.
By helping us understand which risks are actually worth taking, an objective thinking partner ensures we stop fearing the sharks, and start protecting our capital from the things that truly matter.
If you need to check in again and review the real risks to your own blueprint, please reach out soon.