How and why to think about bad things

In my triathlon travels a name I frequently encounter (although I have never had the pleasure of meeting him) is Gordon “Gordo” Byrn.

Gordo comes from a finance background and made himself into a top professional triathlete about a decade ago.  Having left finance to pursue triathlon coaching and writing full time (see his books here) he still frequently comments about the financial choices he’s made, and how they support the life that he wants for himself and his family.

This post here concerns bad stuff: things that could go wrong in his business and his personal life, and what steps he’s taken either to help minimize the chances of them happening, or how to mitigate their financial impact on his life if they do.

The post is not that interesting if you focus on the “what” he is reviewing, it is more interesting in the “how” and the “why” he is doing it.   Gordo has a bit of an unusual lifestyle compared to most people, and his methods for dealing with risk in his own life would be impractical for most.    Instead of that, focus on the how and why behind the process: he has given great thought to what he is trying to accomplish, considered the most likely risks that may undermine what he seeks, and then apportioned resources (which are always scarce) accordingly.

Some key points that are worth repeating:

1.  The time to think about bad things is when things are generally good.  When we wait for the bad things to show up, at that point we usually have neither the resources available or the opportunity to do anything meaningful about them.

2.  Insurance is really expensive until you need it.  To that end, I personally tend to under-insure nuisance items (my homeowner’s and auto policies have high deductibles) and perhaps over-insure things that would really, really suck (death, disability).

3.  There is no financial substitute for reasonable diligence (my paraphrase): wear your seatbelt, don’t get behind the wheel drunk, etc.