Understanding Your Risk Tolerance

Risk: How Much Can You Handle Before You Panic?

Alright, let’s get into the whole risk tolerance thing because, truth be told, it’s a huge factor in what we’re doing here. You don’t hear much about it outside of finance, but it’s there, quietly influencing your every choice—from deciding to walk up and saying hi to your neighbor to leaving a job you can’t stand.

And it’s a concept that can be wildly different from one person to the next. Take me as an example: I’ve seen the difference in risk tolerance play out more than I care to admit, and let me tell you, it’s fascinating. I really get a kick out.

When I Was Buying Rental Properties, and Everyone Else Wasn’t

Flashback to my 20s: I’d just started dipping my toes into real estate, looking to build a little empire of rental properties. My little kingdom.

I’d talk to my friends about it over beers trying to get them involved, getting them all hyped up about owning assets, cash flow, and that dream of “financial freedom.”

The Plan: I’d bring them into the mix by selling a share of my interest in a cash flowing property as an entry point so we can get started. Everyone was in. We’d chat about pooling money, splitting profits—basically all the ways we were going to be the next big thing in local real estate.

But, when it came time to actually pulling the trigger? Silence. I got Ghosted. Every time.

They’d come up with reasons that sounded legitimate enough on the surface. “It’s not the right time,” “I have to focus on my job first,” “I don’t really understand the market.” It was a long list of excuses, but let’s call it what it was—plain old risk tolerance.

The idea of investing in a property, of potentially losing money, freaked them out. And hey, no judgment. We all have our comfort zones, but it got me thinking about what makes some people lean into the discomfort and others run like hell.

Coaching Friends and Family on Taking That Investment Leap

Over the years, I’ve seen risk tolerance pop up again and again, especially as I’ve gotten more into coaching friends and family who are curious about investing. Let me tell you, there have been multiple dinners spent breaking down the benefits of investing to friends and their partners. I’d pull out all the stops, answer every question, pour some wine, grabbed some cold beers, and try to make it feel as safe and straightforward as possible.

They’d listen, nod along, start seeing the bigger picture and even set up dinner #2 with other potential “partners”. They’d say things like, “Yeah, this makes so much sense,” or “Wow, I’d never thought of it that way before.” But when it came time to actually make it happen, They couldn’t pull the trigger. That comfort zone was like the defensive line for Philly. Too damn strong.

And it wasn’t about not understanding the plan or having unanswered questions. It came down to whether they could handle the risk. It was like watching people get cold feet at the altar.

Now, here’s where it gets interesting. Some of these people were the same ones who’d take risks in other areas of life. They’d switch jobs on a whim, move to new cities, or take up intense hobbies. But when it came to money, investing, or anything that felt like a “big commitment,” that’s when their risk tolerance flared.

So, if risk tolerance isn’t just about being brave or cautious, what exactly is it?

What Actually Shapes Our Risk Tolerance?

Now, a lot of people think risk tolerance is something you’re born with, like having brown hair or bad taste in music. But I don’t fully buy that. I think it’s learned, something that evolves as we get older and have more life experiences.

Think about it. When we’re kids, we’re little daredevil assholes. We’ll pick up snakes, bugs, whatever and put them in our pockets lunch boxes etc. We’ll say anything that comes to mind (“You’re faaaat!”) to the neighbor without thinking twice.

But over time, something happens. We start getting cautious, we hold back, and we’re definitely not voicing our opinions as much (Thank God). And this shift happens regardless of whether we were scolded or hurt or whatever. It’s like the longer we’re here, the more cautious we get.

Here’s some science to back it up.

Studies actually show that risk tolerance changes as we age. According to research from the American Economic Association, people become significantly more risk-averse as they get older. And it’s not just a matter of getting wiser. Our brains literally start to process risks differently, weighing the downsides more heavily than we did when we were younger. So, whether we’ve been burned or not, we start thinking more about the worst-case scenarios, and it affects our decisions.

Here’s a question to chew on: If risk tolerance is learned, couldn’t we unlearn it? Or at least bend it back a little to make those big moves without overthinking every possible way it could go wrong?

Why Knowing Your Risk Tolerance Matters

So why should you care about all this? Because knowing your own risk tolerance can keep you from making decisions you’ll regret—or just as bad, not making decisions at all.

When you understand how much risk you’re willing (and able) to handle, it changes the way you approach everything—careers, relationships, investments, all of it.

Better Decision-Making
If you know you’re naturally cautious, you won’t throw your life savings into a high-stakes investment just because someone else says it’s a good idea.

On the other hand, if you’re like me and tend to lean very high on the risk-tolerance scale, you might need some checks and balances. Take gambling, for example. I’m a terrible gambler because, in the moment, I genuinely don’t care about the money I’m throwing down, knowing I can “get it back” later. (allegedly)

It’s called optimism bias, a tendency to overestimate positive outcomes, which makes high-risk situations even more tempting. So I stay away from the casino tables and instead I’ll see you at the bar.

Long-Term Success
Making big moves that are in line with your risk tolerance leads to more sustainable success. It’s the difference between trying to live someone else’s life and sticking to a path that feels right for you.

Trying to keep up with someone else’s level of risk tolerance—whether it’s higher or lower than yours—can be exhausting and unsustainable.

Financial and Emotional Stability
Decisions based on your personal risk tolerance help you sleep better at night, literally. If you’re someone who freaks out at market volatility, maybe a more conservative approach to investing is your sweet spot. May plop money on ETF Symbol: SPY or QQQ and let it marinate.

Or, if you’re comfortable with uncertainty like me, high-stakes decisions might feel natural but still need a little tempering to avoid overdoing it. So I don’t short Symbol: AAPL. (the strongest company on the planet)

So while a high-risk tolerance has its perks, knowing when to step back is crucial.

How to Discover Your Own Risk Tolerance

Now, figuring out your risk tolerance isn’t always straightforward. If you’re trying to make sense of it, here are a few ways to start:

• Look at Past Decisions
  Think back on the last few big choices you made. How did they go? How did you feel during each phase? Did you go into panic mode, or were you pumped by the challenge? These memories are little clues into where you fall on the risk spectrum.
• Identify Personal “Red Flags”
  Everyone has their own “nope” signals—the things that tell us we’re pushing our comfort zone too far. For some, it’s sleepless nights or constant second-guessing. For others, it’s straight-up avoidance and taking it out on a box of Twix bars. Recognize the signs.
• Try Small, Low-Stakes Risks
  You don’t have to go all in to learn about your tolerance. Dip your toes into small risks—an investment, a new side hustle, saying “yes” to something outside your norm. Treat it like a test drive to see how much risk you’re comfortable handling before you start sweating bullets.

Risk Tolerance: Born with It or Built Over Time?

Here’s the real kicker: I don’t believe risk tolerance is something we’re stuck with from birth. I think it’s a skill, one that can be developed, shaped, and even increased over time. Just like we pick up caution as we grow older, we can also relearn a little fearlessness if we put in the effort.

Take sales reps, for example. I’ve seen countless reps who are genuinely terrified of picking up the phone to call leads. But if they’d spent years knocking on doors, facing rejections and wins face-to-face, their tolerance would be sky-high, and they’d own that call. The difference? Experience.

Risk tolerance is like a muscle—the more you work it, the stronger it gets. Those with high face-to-face experience in high-stakes situations build confidence that spills over into any new challenge, even cold calling.

Building tolerance doesn’t mean you have to jump in with big, life-changing risks right off the bat. Start small. Push a bit outside your comfort zone with each new step, and before you know it, you’re not as fazed by what used to freak you out. Each time you flex that risk muscle, you’re strengthening it.

So, take a minute to think about it: What’s something you’ve been holding back on because you didn’t feel “ready” or couldn’t get comfortable with the risk? And here’s the big question—how much of that hesitation is based on real concerns, and how much is just old habits of caution?

Wrapping It Up: Your Risk Tolerance Is Yours to Own

At the end of the day, your risk tolerance is personal. There’s no right amount—only the amount that works for you. Knowing where you stand and staying in tune with that tolerance gives you the freedom to make choices that suit you, not someone else’s idea of success.

The trick isn’t to become a wild risk-taker overnight. It’s about being aware, being intentional, and pushing your boundaries just enough to keep growing. If you’re feeling a little nudge to try something that scares you, maybe now’s the time to give it a go.

After all, the biggest rewards usually come when we’re willing to take a chance, one we’re just a bit uncomfortable with.

So, welcome to the world of risk tolerance. It’s not about having all the answers; it’s about knowing how much uncertainty you can handle and owning it.