I’m taking a break from the New Year Money guides to riff a little. This week has been filled with stories of stock market crashes, crypto circling the drain, and general doom. Quick reminder that when weeks like this seem long, do join me for mindful money hacks and positivity over on Instagram @brilliant_ladies_money. Now with added Barbies and reggae!

So I wanted to chat a bit about risk, opportunity and how growing into your power means making decisions you really believe in: feeling your way through the different options and trusting that you have your foundations on point, whilst still showing up with courage.

If you spend enough time on social media it is easy to believe that we are all missing out on the ability to make easy millions through crypto, NFTs (IKR?), or indeed being eight years old and making videos of oursleves opening gifts. I don’t believe it’s all snake oil though. My parents, like many working class people, refused to have anything to do with investing or the stock market because of deep suspicion, and it harmed their finances in the end. On my mum’s side I think it was partly her left wing politics but for both of them it was definitely lack of trust that the system could benefit them in any way, as well as lack of confidence. I think I’m the only person in my family to have investments, and it still causes my mum to freak out.

I thought a lot of this was historical, but a study by Forbes shows that 65% of people aged 18-40 say that investing in the stock market is scary or intimidating. But this is the interesting thing about perceived risks: that age group is also the most likely to be familiar with cryptocurrencies; have holdings or expect to buy crypto in the future. There are a lot of brave investors out there as well who see engagement with Wall Street as part of the great Battle Between Good and Evil. Whilst it’s not totally clear who is on which side, the pandemic, climate change and heated global politics means it’s not hard to get the sense that the End of Days are on the way. This week was the anniversary of GameStop – the memestock phenomenon that saw average small investors drive up the price of GameStop shares by 1,700% through enouragement on reddit. If you are interested in hearing more about that, and about understanding the ethics of engaging with the stock market and how to impact it, I really recommend Paula Pant’s podcast on the topic.

After a few years of investing – and freaking out, and sometimes doing stupid things – here’s what I learnt:

Your portfolio should have different options depending on your risk tolerance based on what you want that money for and the consequences of losing it. There is room for both the tortoise and the hare here: room indeed even for the Pink Fairy Armadillo. The question is choosing the right vehicle for your money at any particular point. If you are socking money away for retirement you already know:

• What your time horizon is, and probably that you have a long period to invest meaning that you can choose vehicles which take a longer time to generate a return, as well as needing to factor in inflation. The long horizon also makes it wise to look at tax implications since you will, hopefully, be making a bunch of money over a long period.

• That you need to be sure there will be money by the time you retire, so your risk tolerance will likely change as you get closer to the date and you will have a chance to rebalance so it makes sense to find a mechanism which allows that.

• The consequences of not investing wisely would have a massive impact on the later seasons of your life. If you lose your retirement fund, it increases the likelihood that you will have to work way, way past when you want to and are more at the mercy of health issues, not able to help out adult children and so on. Basically, it’s not where we want to end up, and for my generation who worked 15-20 years before pension auto-enrollment but will probably get to retirement after the State Pension has gone up in smoke, it is a very real destination.

Balancing the options therein should get the balance between comfort and discomfort.

• Get the very basics right first. If you have a clear saving and investing strategy for the money you have coming in based on hierarchy you will create a foundational level of comfort which frees you to be courageous elsewhere. Allocate the money that needs to be there to pay your bills, keep your kids fed and a roof over your heads, and it removes a whole load of late-night anxiety. This money is not something you need to invest anywhere, at any time. Keep it accessible, and spend it – it’s what you made it for. Check out my post on working out your fixed outgoings, and go from there.

• Prepare for emergencies. I am a total catastrophiser. I think working in the humanitarian sector for so long, coupled with a few unexpected life disasters and an overactive imagination means that the only answer I ever have to the question ‘what could possibly go wrong’ is ‘EVERY DAMN THING’! Whether you think they are coming or not, having rainy day money, or an emergency fund, means that you won’t be thrown off course by a broken down car, month without work, or whatever else. Keep it accessible but don’t spend it unless you have to – it’s there to protect you later on. As I say to my kids, boredom is not an emergency.

After that, base decisions on what you are prepared to lose.

• Optimism bias means that we are programmed to think about what we have to gain. Negative Nelly over here says – but what about what you might lose? There is a reason though why this is the right question to ask when thinking about investing. With the examples above of retirement, monthly costs and emergency funds, the answers are quite different. The risk balance for retirement is also cushioned by the longer time horizon, and by the fact that (hopefully) you can delay using that money by a few months or years if you need to ride out an occurance in the market.

• Conversely working this out gives you a whole load of freedom for other pots of money. I have a few super high risk investments which have all been done with what I call beach money. This is money where if I lose it all it means I can’t take my kids to the beach for a holiday – not that we can’t pay our rent. It means I can be brave (or ill informed, let’s be fair) and it really doesn’t matter. I have about $10,000 of beach money investments across angel investments and crypto, and I only really think about it when I am getting antsy that I might be missing out on something.

Working out your priorities means you will create a framework in which you can have certainty and risk where you need to. Let me know how you balance this out, I love hearing from you!