Common Cents # 45 - Life's A Gamble

 Life’s a Gamble

Life is a gamble. We pay our money and take our chances, or as my Dad used to say, “speculate and accumulate.” The Bible says in James 4, “Now listen, you who say, 'Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.' Why, you do not even know what will happen tomorrow. What is your life?”

If we talk to a financial counselor or investment advisor, they will try to determine our “risk tolerance.” How distressed will we be if our investments lose money? That is a similar question to how much money do we want to make. We need to know the upside and the downside of every purchase and investment to determine if we are comfortable with the risk involved or if it causes us to lose sleep.

We can buy insurance to protect against unforeseen losses such as a house fire or a serious health crisis, but the amount of insurance we end up buying is largely a factor of our risk tolerance. Can I afford to pay for a root canal if that is recommended, or do I need to enroll in dental insurance even if my dental health has been excellent?

This principle applies to many areas of our lives and to organizations big and small. A merchant gambles on how much merchandise to buy or what will be in style next spring. It is really impossible to know. We are trusting our experience, but it is still a gamble.

We saw this on a large scale recently in the State of Texas. Some years ago, the state government deregulated the utility companies which allowed them to set their own rules and maximize their profits. Then the utility companies bet against cold weather in deciding not to winterize the energy equipment and supply. Certain types of equipment and upgrades that would be routine in cold climates were ignored because sub-freezing temperatures seldom occurred in much of Texas. The result was millions of people were without power, heat, and clean water for days. It was a gamble that was lost because pipelines hadn’t previously been freezing. The same weather conditions had different results in Minnesota, Wisconsin and Canada where sub-zero temps are expected and planned for. The risk there is obvious.

We never know with certainty what the weather will be, what our health will be, or what our job or work situation will be like in the near or distant future. We should plan and hope for the best, but prepare for the worst. Expect that spring will arrive on time, but have the furnace serviced for the cold weather to come. Expect that our kids will earn college scholarships to help defray the cost but save for college expenses anyway. Make wise investments using the best counsel available but keep some cash on hand to be used for an immediate need.

We can’t guard against every possible occurrence, but we can make wise choices, insure for the worst case scenarios, and enjoy life without fear as a result.