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Personal finances, if handled properly and responsibly, can be one of the most boring aspects of our lives.

With invested diligence, it becomes quite uneventful and dull. How “interesting” our financial lives are is determined by one prominent factor – risk.

Which is the more intriguing introduction to a story you could possibly tell a group of friends?

- “I founded a social networking site in my dorm room. I dropped out of Harvard University to grow my company. I am in my mid 20′s and the youngest billionaire in the United States.”

- “I got my college degree with good grades. I got a job after graduation. I’m saving money in my 401K, IRA and savings accounts while paying down my student loans.”

I trust that you picked the former.

Risk Gets the Juices Flowing
To the majority of people, dropping out of college (especially Harvard) would seem to be a big risk as society has instilled that the way to succeed in life is to take the traditional path of graduating college. Mark Zuckerberg took this risk and founded a revolutionary company that has allowed him to amass substantial wealth – and a ton of press.

Any venture that escapes predictability makes it exciting. Some go on to start their own business and some take on risky investments. We subconsciously calculate risk with every move we make. Just like how it is more risky and exciting to go skydiving than to go hiking, it is more exciting to put money in penny stocks than in a savings account.

Without a doubt, we like money. And depending on each of our risk tolerances, we decide how protective we are of our money. Excitement comes from high risk while boredom comes with high security. I guess that’s why high risk individuals usually have better stories and conversations as cautious ones do nothing and therefore have nothing to say.

Three of My Money Moves
My personal experiences in the arena of vary risk levels are great examples of why great money management is quite boring.

• Moderate Risk – investing in a small cap company. It was an up and coming brand that seemed to have great potential. I was frantically watching the ticker symbol. I talked about it with many people. I couldn’t sleep or spend 10 minutes away from Yahoo! Finance. This company filed for bankruptcy eventually.
• Low Risk – investing in an index ETF. It was long-term, low-risk investment that could produce nice returns in the distant future. Sound move in the books. People ask me if and what I’m investing in. I answer, “Index funds.” They change the subject.
• No Risk – transferring money to my ING Direct savings account. Big whoop. No one cares but me…

I can tell how exciting each situation was by how fast my heart was beating at the time and how inclined I was to tell someone. If I had to brains to create Facebook, I’d tell everyone.

It’s Boring But It Works
For someone who works hard and with little financial difficulties, it becomes mundane to go on every day by following a proper budget and paying the bills on time. Simply, everything that is supposed to be done gets done.

However boring it may be though, it is the reason that many self-made millionaires accumulated their wealth. They do the right thing and make sound decisions that many neglect to do. Then, out of nowhere like a stealthy ninja, they come out accomplishing their financial goals.

But, if you can make the boring parts fun, it’ll make for a great story – something that we personal finance bloggers try to do!

(Photo credit: AliceNWondrlnd)

Although there are some things I’d worry about if I won the lottery, hitting the lottery jackpot is a fantasy that crosses our minds all the time .

But, if you don’t know already, there seems to be a curse on many winning ticket holders – most end up in a worse financial situation than before beating the slim odds of the lottery. Such is the story of those who were “lucky” enough to have received such a sizable windfall.

A windfall is a sudden, unexpected financial gain – like “money fell into your lap”.

The common perception of a windfall is that it’s free money and is therefore meant to be squandered away liberally when it is better used to solidify one’s financial position. It is often difficult to resist because it truly can be an immense upgrade in buying power. And, we don’t normally prepare for windfalls because we don’t expect it – but we do dream about it.

Little do you know, dreaming about it can be the way to prepare for a windfall.

Sweet Dreams
In the few minutes that I doze off, imagining that I selected the life-changing 6 numbers that’ll turn me from rags to riches, I also fantasize what I’d do with all that money – I can bet you’ve done the same.

As we enter a sweet daydream, we come up with ideas that fill our bodies with hope and joy. In fact, sometimes I prioritize the ways I’d use the money – and that would serve as a template of what to do in the event of a windfall.

What would I do with the money:

1. Pay off all my debt.
2. Save enough to live off interest income.
3. Purchase a few houses for rental income.
4. Buy a nice house and car for myself.
5. Start a business.
6. Build a large investment portfolio.
7. Participate in philanthropy.
8. Splurge!

If a large sum of cash fell out of the sky, think of what you would do first with that money. As you can see, I’d pay down all my debt from student loans and credit cards. It seems to be the instinctual move for me. Next, I’d use that money to make me more money. And finally, I’d donate some (don’t let wealth make you lazy and uninspired) and then splurge a little.

Others who may not have great money management skills could go on a stray path and immediately think of treating friends and family with new toys. That is the textbook method of have a windfall hurt you rather than help you. Here, a few lessons in financial literacy and setting financial goals are more important.

Does the Amount Matter?
Whether it is $1,000, $100,000, or $1,000,000, a windfall merely accelerates the completion of your financial goals. No matter what amount the windfall happens to be, my very first move is to clear my debts. More money only opens more opportunities.

Setting concrete figures (percentages help for varying amounts) for your goals makes it easier to manage. Most lottery winners head off towards an aimless direction and end up losing it all without knowing where it went. It wouldn’t have mattered if it was $1 million or $1 billion because they had no idea what to do with it.

So, close your eyes and imagine winning a $10 million lottery. What are your initial steps with this money? How will you make this money work for you? At what point can you have fun and help others?

(Photo credit: IrisDragon)

The rat race. The apparent eternal pursuit of what seems to be unachievable. It is often used to describe the 9-to-5 career of an overworked, underpaid employees who just can’t get ahead in life despite their exhausting efforts. And, it is anyone’s goal to not participate in or to escape the rat race.

It is easier said than done. I’ve been a witness to prime participants of the rat race – my parents. They’ve worked in the same fields and held the same general occupations ever since they came to the U.S. over 23 years ago.

As I enter the workforce, their looming shadows remind me what I should be striving for. So, I’m here wondering what would be my definition of an escape from the rat race.

A New Jobs Era
The employment environment has changed drastically since the recession began – and it seems that the idea of a “job” has been forever revolutionized. Job hirings are becoming scarce and layoffs are occurring left and right.

The situation has opened a moment of reevaluation for everyone. Many are taking matters into their own hands while others are finding a better life in another field. Some would agree that the idealistic image of climbing the ladder in corporate America has been tarnished. More and more people are opting out of the rat race. Most do it by starting their own business or by simply retiring.

There Is No Finish Line
For the majority of us, we would have been a participant in the rat race at one point or another. One essential realization is that there is no finish line in this race – either keep going or get out. As long as the job arena breeds a competitive nature, there will always be a relentless scramble to the higher ranks.

Escaping the rat race is the goal – not to finish it. I believe that point is marked only by retirement. Running a business may be a move that many consider to be a withdrawal from the rat race but it still entails a working life.

To me, the ability to retire comes with the notion that I do little to no work but still have sufficient income to maintain a certain lifestyle. With that in mind, my primary objective is to build income-generating assets, not to establish a substantial cash reserve (though it is still very important to do so).

The optimal cash-generating assets that I’d like are:

• Real estate. Many of my neighbors are owners of several pieces of real estate. I typically see them in front of their houses tending their plants and lingering about like full-time neighborhood watchers. They’ve told me that they are able to live comfortably by owning a few houses and collecting rent. In New York City, rental income can account for a major part of retirement income.
• Business ownership. The entrepreneurial spirit in me hopes that I can someday start my own business and make it the source of a comfortable life. If management of a business can be transferred to reliable hands, I’d consider stepping down and collecting residual business profits.

When these assets are able to sustain my preferred lifestyle, that marks the great escape from the rat race.

(Photo credit: @ LaRsNoW @)