An opportunity or a gamble?

It’s been a crazy week, watching GameStop and other stocks go through the roof, as social media turns the stock market into a casino – although many have long thought of it that way! Who’s right?

I think it depends on what you’re trying to accomplish, how well you understand the market, what resources you have and how well you understand your financial situation.

One person’s opportunity is another person’s gamble. And the one thing they have in common is risk. The question is – can you afford the risk?

I’ve been hearing stories of teenagers who turned a few thousand dollars into a million overnight! They got lucky! I’ve also been hearing stories of people who used their rent money to buy the stock, but bought at the wrong moment, and lost it all. I feel sick just thinking about it.

For the teenagers, it may have been an opportunity they couldn’t pass up! They’re still living at home where mom & dad pay all the bills. If they have access to a few thousand dollars and it doesn’t matter if they win or lose, why not? Sure, losing a few thousand dollars is never fun, but they won’t be devastated by it – and who knows? They just might get lucky!

But for those who need that money to pay the rent and have no other available resources, this is a big risk that shouldn’t be taken. Of course it’s tempting, especially if money is always tight and you live with a belief that it will never get better. But taking this kind of risk could make things substantially worse.

If you’re somewhere in the middle, how do you decide whether to take the risk? Go on the assumption that you’re going to lose the money, and gauge how you would feel about it. Would you be glad you tried? Would you be kicking yourself for losing the money? Would you be able to shrug it off, or would it have a long-lasting negative impact on your life? How much could you gamble without it going from risk to downright stupid?

My budget helps me answer these questions in a heartbeat – and it’s all because of the categories. I have categories for all my bills; I’m not about to use that money for anything but paying the bills. I have categories for groceries, gasoline, medical expenses, car repairs; it’s all off limits! But then, there are categories like dining out, vacation and other discretionary items that I’m much more flexible on. I add to some of these each month, but I don’t necessarily spend it all each month, so it builds up. Heck, after this week, maybe I should consider adding an “opportunity” category!

Categorizing my money has really helped keep me clear on what I can spend and what I can’t, for any given situation. It’s much easier than when I just had a lump of money in my bank account, trying to keep it all straight in my head! It was so stressful, and I never had money for an unforeseen opportunity, because I used it all in the moment, without any thought about tomorrow.

The best part is that I can add new categories anytime I want, delete the ones I don’t want anymore and move the money around, if my goals change! It’s very flexible, but keeps me well organized and financially stress free!

Budgeting is a great way to prepare for opportunity and even provide a bit of gambling money – if that’s what you want.

Want help getting started? Schedule a free budget consultation with me!