For the next week (or two), we’ll be sharing “audition” pieces from folks interested in being new staff writers at Get Rich Slowly. Your job is to let us know what you think of each of these writers. Pay attention, give feedback, and after a couple of weeks we’ll ask which writers you prefer. This article is from Kristin Wong, who also writes at The Heart Beat blog for MSN Living. Her first audition article described how saving money cost her money.

After years of living well below my means, I’m finally a few weeks away from reaching a personal savings goal and rolling over my 401k. I’ll hold for applause.

Yes, I’m almost in a secure place financially. But this has left some people close to me offering their input on what I should do with my income, now that I’m a grown up and all.

The suggestions are interesting. I’ve been told I should open my own business, something I’ve never had a desire to do. I’ve been told I should completely change careers, something I’ve already done once, recently. I’ve been told I should invest in real estate, and, well, let me put it this way. Yes, I’m close to being financially comfortable. That doesn’t make me Donald Trump.

My loved ones’ advice, basically, is that I need to use my money to make more money. But I think this is getting way ahead of myself.

Taking Financial Risks
On our journeys to getting rich slowly, the slow part is easy; we can’t really control that. But we often forget the steady part–keeping our eye on the prize and ignoring distractions like expensive cars. Or financial risks we’re not necessarily ready for. Like buying rental property.

That being said, risks can also be worthwhile. Financial risks may even be a part of the GRS journey. But how do you know when you should take a risk? It’s a question I’ve been pondering, so here’s what I’ve come up with.

  • Make a budget: Have to give my Dad props for this one. After having this whole “risk” conversation with him and professing my skepticism, he suggested saving up for it. After taking care of your emergency savings, retirement, etc.–everything that gives you peace of mind–begin saving for endeavors/investments you may want to pursue. Make sure you can afford the risk in the first place. Call it your “risk budget.” Or something less ominous. If you lose the money, knowing that it was set it aside for a risk may help soften the blow.
  • Take a timeout: If you have an idea of something you’d like to invest your money in, write it down, and revisit it in a few weeks. Months, maybe. Still excited about it? If not, it’s unlikely you’ll give the investment its due diligence, making the risk enormously riskier. Example: I wanted to start a website about cheap date ideas in Los Angeles, based on happy hours, free events, etc. I was very excited, even knowing that I’d have to invest copious amounts of time and money. But after revisiting the idea a month later, I decided that I’m actually not that excited about it. Good thing I didn’t spend money on a domain, hosting or web design.
  • Make a pro/con list: I have pro/con method that’s helped me make some big decisions, none of which I’ve regretted. I left a bad job and rented a lovely apartment based on this method. Start by making your pro/con list as usual. Why should I do this? Why shouldn’t I do this? (For financial risks, a con would be: “I could lose a buncha money.”) Then, review the items and rank how important each one is to you, on a scale of 1-10. After ranking, add up each side. Whichever side has the greater number–that’s the decision you should go with. So it’s not just about quantity–which side has the most items. It’s about which side carries the most importance. Simple, and maybe not too scientific, but hey, it’s worked for me.

If you decide to take the risk, whether it’s going back to school, starting your own business, buying wholesale jeggings and then reselling them on eBay, whatever, consider these tips:

Be steady and patient: See your commitment through, and put everything you have into it. Make your investment worthwhile. This is the best way to make the risk less risky. And remember that success with anything takes time.

Prepare for the worst: And hope for the best. The worst is that you fail. You have to be okay with that, and you have to be okay with the possibility of investing all of that money for nothing. Having a “risk budget” set aside probably helps with this.

And hey, it wasn’t all for nothing. If you went back to college for a degree and ended up not being able to find a job in your field, for example, you’ve still furthered your education. When I left a lucrative career to pursue a freelance writing dream with only a small cushion saved, it was a huge risk. But the risk of never attempting to pursue my goals outweighed the risk of failure. My decision has been worthwhile, if only for trying alone. But hell, I’m still prepared for the worst.

Slow and Steady
I realize that when talking about financial risk, one may expect to learn something about investing. Frankly, it’s an overwhelming topic I’m still learning about. Financial risk in the context of investing requires an analysis of one’s own situation and more research than I can fit into the rest of this post.

Anyway, as much as our culture glorifies the short road paved with instant gratification, success–financially or otherwise–is a long and steady journey. I don’t care how many episodes of “Lottery Changed My Life” TLC airs.

My point is, financial risks aren’t all bad, but they shouldn’t sideswipe you clear off the GRS path. Getting rich slowly is about saving your hard-earned money and adapting a frugal lifestyle so that your bank account can reap the rewards. For me, the more I progress, the easier it is to get distracted and start to think I have more money than I actually do. But remembering the diligence I’ve invested into my journey, along with how far I have to go, keeps me levelheaded.

Stay steady, my friends.

This article is about Advanced, Odds and Ends