What is Risk Appetite?

All consumers have different risk appetites for different things. Some consumers feel extremely confident with being able to heavily invest into various markets like equities and cryptocurrencies, while others do not. Some consumers feel comfortable carrying debt loads and maintaining credit card balances while others do not. Everything is based on our risk appetite. We all have a different appetite for different things and are all able to stomach financial decisions differently than some others might be able to.

How to Determine Your Risk Appetite?

The best way to determine your risk appetite is to gauge what kind of investment decisions you make on a daily basis. Do you enjoy paying your credit cards off as soon as you are able to or do you wait to pay them until the pay period is due? Do you look forward to investing on your payday or do you lean towards spending money on payday? These are all important questions that will help you gauge your behavior and ideally help you make better financial decisions. Everyone makes different financial decisions and has different preferences.

Investment Risk Appetite

Different consumers also have different risk preferences when it comes to retirement investments and various other financial products. Much of this can be age dependent since you are less likely to opt for an aggressive growth strategy if you are nearing your retirement age and looking to retire sooner rather than later. However, some consumers have a natural inclination to want to invest in safer asset classes and avoid what they might perceive as risky. When you have a higher inclination to take on more risk it’s important that you account for this and adjust your lifestyle.

Risk Appetite for Debt

Just like different consumers have different appetite for investments some also have different appetites for debt. Due to this some consumers will carry more credit card debt on their balances. Others will not carry the debt and will be more inclined

If you have a higher risk appetite it might be more important for you than anything else to be mindful of this and make sure that you are paying your bills early and always satisfying your “needs”. If you have a strong proclivity towards more risk-taking, consider trying to pay off the “needs” portion of your first monthly bills first and then using the rest for “wants” or other risk-related investments. This will help you always stay on top of your financial obligations and adjusting them to fit your lifestyle.

The best way for you to adjust your risk appetite is for safeguard by more proactively accounting for your budget and looking at potential ways to go against your more defined risk-taking activities. Whatever the case may be, better understanding your financial decisions will help you become better overall in touch with your financials.