Life is full of risks. There are social risks, like inviting an acquaintance to join you for coffee. There are physical risks, like driving without a seatbelt or drinking excessively. And, of course, there are financial risks, like investing money in the stock market.
While some people enjoy risk more than others, the truth is that most people spend little time thinking about why they take certain risks and avoid others.
As a psychotherapist, I see what happens to people who constantly avoid risk — they live far beneath their potential. A 2008 study published in the Journal of Behavior Therapy and Experimental Psychology found that some individuals become so risk-averse that they actually grow depressed as they dodge social invitations and avoid exciting opportunities.
Other people are impulsive risk-takers. To them, carefully examining the facts can seem tedious or anxiety-provoking, so they jump into new situations without thinking.
And then there are the people who always convince themselves that nothing will go wrong. They disguise their impulsivity as positive thinking while insisting everything will work out just fine. Yet in reality, they just don’t want to invest any time into thinking about the risks they’re taking.
But no matter which end of the risk-taking spectrum a person lands on, almost everyone makes one common mistake — they calculate risk based on their level of fear. If they feel nervous about the slight possibility of a negative or embarrassing outcome, they refuse to take the risk. However, the truth is that the level of fear you experience has nothing to do with the actual level of risk you face.
Risk and fear
Anxiety isn’t rational. This is why so many of us are afraid of non-poisonous snakes, but don’t fear getting behind the wheel of a car. Yet we’re much more likely to die in a car crash than from a nonvenomous snake bite.
We’re not all afraid of the same things, because we can’t all agree on how risky certain things are. For instance, is eating non-organic produce a risk? What about investing in real estate? Is it a smart idea or a definite way to go broke? The answers depend on who you ask.
Anxiety is meant to keep us safe. We have an anxiety alarm bell that warns us against doing certain things — like running into traffic.
But all of us also experience false alarms — those times when our anxiety alarms ring even though we aren’t in any real danger. Speaking in public, meeting our partner’s parents, or reviewing our financial statements are a few examples of times when our anxiety alarm might put us on high-alert, even though we aren’t about to die.
Too often we allow these false anxiety alarms to affect our behavior. We think that if something feels scary, it must be too risky to do or too uncomfortable to handle, so we avoid it altogether. In these cases, our anxiety causes us to overestimate the level of risk we face.
On the other hand, when something doesn’t feel scary — like when we’re excited about something — we might take the leap. This is why so many people fall for get-rich-quick schemes. When our excitement is sky-high, we have the tendency to underestimate the level of risk we’re taking.
How we calculate risk
You will best calculate risk when you balance your emotions with logic. If you make all decisions based on logic alone, you’ll likely live a pretty boring life. There’s no guarantee you won’t get hurt when you fall in love, and investments are never a sure thing. But if you’re willing to go on that first date, or invest those extra savings, you might find that you hit the jackpot in both scenarios.
But on the other hand, if you base all your decisions on emotion alone, you probably won’t take smart risks. You will only do the things that feel good right now, without understanding the long-term consequences.
How to make balanced decisions
The best way to balance your emotion with logic is a two-pronged approach:
- Label your feelings. Acknowledge whether you’re anxious, excited, happy, or sad. Not only will naming your feelings take a bit of sting out of your emotions, but it can also help you recognize how your emotions are likely to cloud your judgment.
- Create a list of pros and cons. Write down all the potential pros and cons of taking a certain risk. Then, write down all the pros and cons of not taking that same risk. Seeing this list on paper raises your logic and ensures you’re thinking about the potential benefits as well as the reality of the risk you face.
Learning how to balance your emotions with logic takes practice. It will sometimes require you to face your fears head-on. At other times, you might need to say no to an attractive opportunity, even if in the moment you really want to say yes.
Of course, each mistake you make is an opportunity to learn and get better at taking risks. With practice, you can learn to take the best risks — and to tolerate the distress you experience when things don’t work out the way you hoped.
Originally published on Business Insider.
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