Here’s why those nagging concerns are worth heeding before you make the biggest financial decisions of your life.

Last week, I watched as my neighbor’s $10M investment went up in flames. It wasn’t just one neighbor, either. Upwards of $100M+ burned in minutes, and this had nothing to do with the crypto crash or the stock market. In contrast, these were the most tangible, seemingly conservative of investments that have generated an absurd return in recent years: Real estate. Not just any real estate, but multi-million-dollar, ocean view Southern California real estate.

Ironically, less than a year ago, I came eerily close to buying a home in the neighborhood just across the street from those flames. It was a gorgeous home, bigger than my fiancé or I needed, with a pool, a yard, sweeping coastal views, and minutes from some of the world’s most breathtaking hikes and beaches. However, I had one small hang-up, and it turns out my gut (and the buyer who put in the last offer before we had a chance) saved me from taking a major risk.

When it comes to life-changing financial decisions — be they investments or entrepreneurial endeavors — many zealous ROI-seekers hush the fears of risk away. We remind ourselves “the higher the risk, the higher the potential reward”, and perhaps sometimes that’s true. However, before you make the biggest financial decisions of your life, here are a few pieces of advice I’d heed that have earned me millions and brilliantly saved me from losing it all.

Once you have a little money, whether from salary savings, an annual bonus, an inheritance, a business success, or what have you, you arrive at a new conundrum: What do you do with it?

This is where the non-financially-conscious spend, while the financially fluent invest. Still, there’s a level of uncertainty and risk with every type of investment, so the best option isn’t always strikingly clear.

In my case, I’d had my heart set on an incredibly scarce and hard-to-acquire investment for years that seemed to appreciate at an alarming rate, keeping it out of 99.9% of the nation’s reach. That investment was premium coastal real estate. And no, my investment thesis wasn’t simply that I’d like a mid-day beach walk; it was far simpler: The coastline is finite, and no one’s making any more Southern California beach-adjacent lots.

With a finite (and nearly 100% spoken for) supply, and a growing population that continues to value coastal proximity, it seemed like a sound investment. However, even the most sound investments may be subject to risk.

While I loved the ocean and mountain view cliff above Laguna Beach — the very one that burned — I had one nagging concern: There’s quite a bit of brush here…what if it burns?

When I posed my concern to a local homeowner who’d lived there for two decades, she looked at me like I was crazy. As a California native, she didn’t perceive the risk, since it had never affected her. For me, as a California transplant and a first-time primary home buyer, I still had my reservations.

With every home perched up in those hills, I believed my investment was secured by the immaculate and breathtaking views. That is, until I zoomed out and assessed the miles of flammable brush surrounding them; suddenly, that security was fractured by the 1% off-chance the wrong hill burns.

Sure, it may only be a 1% chance that the wrong hill burns and the house goes down with it, but 1% of the time, that 1% chance becomes reality. That was a risk I wasn’t quite willing to take with my 7+ figure commitment.

Whether you agree with the Dave Ramsey method of millionairedom or not, he’s universally right about one thing: Your emergency fund should come first, before big, speculative investments — even (in my opinion) if you’re paying cash for them.

When I built my first business, I calculated my remaining runway based on my life savings divided by the monthly business costs. WRONG. So wrong. Instead, I should have subtracted 6 months to a year of personal expenses, using the remaining savings to calculate the business runway.

Speculative investments can change your life — they’ve changed mine in weeks and months faster than years of hard work combined. Nonetheless, that was never the expectation, and those speculative investments should never be your lifeline. You’d be shocked at the number of people who are counting down the days until one business exit, on alt coin, or one greenlit proposal transforms their life. If they’re counting on that as their safety net, they might consider buying a lottery ticket, too.

Point being, we all need a financial cushion to fall back on should that speculative investment take longer than we’d hoped to pan out. Plus, there’s one other reason lacking a cushion is probably costing you big money and even bigger opportunities…

I started a just-for-fun experimental secret side hustle to challenge myself in a different industry. I had high hopes and a strategic approach to the project, but it was never meant to be my bread and butter. In fact, one of the reasons it performed so well is likely because I didn’t need it to.

Likewise, when I was nearly down to my last dollar, desperately taking on every sales call, dropping my prices, and banking on webinar sales funnels to convert high-ticket customers who found me through cold ads, I got exactly what you’d expect: Next to nothing. It wasn’t because my product wasn’t good or my targeting was off. There was one repulsive stench sending prospective customers running for the hills — after taking me up on all my freebies. That stench? Desperation.

I couldn’t hide it because I was desperate. I absolutely HAD to make that business work or else…

That’s the kiss of death in sales, business, and financial decision-making. I’ve seen people jump on the real estate bandwagon in the last year, psyching themselves into buying a house they didn’t like, that was out of their price range, and that required nearly $100k in repairs. Why? Because they felt desperate. They believed this was a once in a lifetime opportunity, and if they didn’t buy now, with record-low interest rates and quickly appreciating home prices, they may never buy.

That’s simply the wrong attitude. It’s fine to set a goal, but you never want intrinsic panic due to external circumstances to muddy your rationale.

Had I let the real estate frenzy push me to desperately rush a purchase on the first home we saw, or to overlook the minor concerns lurking in the back of my mind, I could have easily purchased in a fire zone. Or a flood zone. Or waived a vital inspection and entered into an unforeseen money pit post-close. If you’re feeling desperate, you probably shouldn’t be making 6- or 7+ figure decisions under time pressure and duress. Common sense, right?

I’m not talking about real gambling here; I’m talking about accepting a larger risk appetite than you’re truly will to choke down. It’s one thing to acknowledge a risk, but it’s another to envision the real-life impact it could have on your life, financial situation, and future.

When buying our home, we lucked out with a very unique realtor. He wasn’t initially a realtor at all; he was a $700M founder who’d just sold a company for a billion bucks. He was also an aggressive real estate developer and investor, who’d been buying multi-million-dollar properties since he was 25, as he was raised in a real estate family and trained from the age of 12. Plus, let’s not gloss over the fact that he came from money, so his concept of risk was far different than your average Joe.

With over three decades of property owning experience under his belt, he was very straight-forward about the pros and cons of each area. His response to the fire risk concern? “Yeah, I lost a $3M home to a brushfire. Our insurance turned out to be a scam, too, so we lost it all. But that’s life; you just have to move on and rebuild.”

That may be life for him, and a $3M loss may be immaterial to his bank account, but for many and many other highly successful people who’ve spent years working hard to amass their wealth, their attitude might not be so cavalier. Given my risk threshold and the fact that I was buying a primary residence and my largest personal investment to date, I simply wasn’t prepared to take that type of a gamble.

If someone else — even a successful industry expert or highly qualified advisor — offers up their experience or their values, take a step back and objectively assess the discrepancy between your and their situation. An immaterial gamble to one person could be a financially devastating blow to another; know the difference and be honest about where you stand.

In life, I think most of us experience at least a short period of tipping too far to one end of the financial values system or the other, sometimes both. For example, when I worked on Wall Street, I was brilliant about saving every penny for my future startup endeavors. Unfortunately, once I jumped into those endeavors, my classification of business expenses as “investments” sent me down a very aggressive path. Aggressive enough to quit my job and lose my 6-figure life savings on a failed startup with no side cash flow or backup plan. Way too aggressive.

Over the years, I’ve developed a system that offers a better balance of conservative and aggressive financial management, while allowing me to take risks and start new projects without worrying about next month’s rent.
Here’s how:

Personal:

I’m just plain cheap when it comes to my personal spending. Why? Because if it doesn’t have an ROI or make me insanely happy for an extended period, I’ll probably be happier saving the money for other things. Despite being cheap, I’ve managed to prioritize the factors that most enhance my quality of life (like living by the beach, owning pets, etc.), and those are investments in my daily lived experience I won’t regret.

Business or career:

I bifurcate my business into risky endeavors and safer ones, ensuring that I’m never too reliant on a high-risk or precarious income stream and always have some more reliable cash flow to fall back on. The same goes for business expenses; every few months I make a significant and somewhat risky business investment that may or may not generate a great return. Alongside those intermittent purchases, I invest in a steady stream of lower-ROI, but more sustainable, predictable, and low-risk investments.

Other assets and investments:

Again, balance and diversification is key. I chose an asset class I believe heavily in and that’s proven itself safe and high-appreciating as my primary financial investment. Plus, I like tangible things a real person can use, while they either produce cash flow, gain value, or do both. On the flip side, dipping my toe into a little speculative crypto or a startup syndicate doesn’t freak me out — so long as I remember this is the fun, risky, gambling side of my portfolio. If it goes to zero, I’m glad I’m sitting in a tangible beachside investment to offset those losses.