Thursday, November 10, 2011

Risk, Reward and Big Life Changes

One of the best pieces of advice I've ever received was from my Finance professor at Miami University, Dr. Terry Nixon. He said to understand finance you needed to first realize the risk vs. reward scale. If risk goes up then expected reward should also go up. Subsequently if risk goes down then your expected reward should go down. This made logical sense, but until that moment I guess I had never really thought about the direct relationship between risk and reward. It is a useful guide though when faced with both financial and personal decisions.

The reason I bring up the risk/reward is that M and I are going to be taking on a big risk. We are moving from Minneapolis to Columbus, Ohio. This is a *huge life change and something that will in the short term bring in a lot of complex situation. There is risk that we won't like living in Columbus or that our jobs won't be as fulfilling as they have been in Minneapolis. There is also risk leaving behind a great friend group here because their is no guarantee that we will be able to have as nice of a social scene there. I can list out other risks, but by moving away from the status quo we are taking on additional risk.

*A few months ago my brother-in-law wrote a small post on the big life changes that seem to happen every summer for him. He referenced the Holmes and Rahe stress scale, which lists out "43 stressful life events that can contribute to illness." Well it looks like M and I are heading down a pretty stressful fall/winter.

However, the other side of the scale means that with this extra risk we should expect additional rewards because otherwise we wouldn't make the decision to move. And the reason we are moving is because the rewards of moving back to Columbus justify the potential risks. We get to be closer to both families, which should be invaluable if/when we decide to have children. The cost of living and salary information means that we will be making more money. The fact that we have decided to make Columbus our long-term home means that we can take on the *risk of buying a home.

*Rewards: 1) Home prices might go up. 2) We can build equity. 3) We can join a society that seems to look more kindly on home owners compared to renters. 4) We will have a bigger, nicer place.

We have the reward of being more centrally located. Columbus is within 4 hours of Cincinnati, Cleveland, Detroit, Pittsburgh, Indianapolis and Louisville. Also, we are only a day's drive away from New York City, Philadelphia, DC, Atlanta, St. Louis, Nashville and Chicago. Minneapolis is unfortunately only really near *cabins that are "up north." You are a day's drive away from Kansas City, Chicago, Milwaukee and St. Louis, but there aren't nearly as many options around **Minneapolis.

*I have been in Minneapolis for over 6 years and still never been to a friend's cabin up here. This is something I will always find very strange and unfortunate.

**However, in the city itself there is more stuff to do in Minneapolis than Columbus. I will miss seeing the Twins and Timberwolves. Also, I love the selection of restaurants here. I know there will be places to eat in Columbus, but I doubt there will be as nice of a variety as there is here.

We are taking on additional risk, but I'm excited for the move. I will look back fondly on my time in Minneapolis working for two great companies. This is the city where I experienced a lot of personal and professional growth, met great friends and had a wonderful time. I am looking forward to living in Columbus, but I am not looking forward in leaving Minneapolis.


Bethany said...

Congrats again on the move! I am very excited for you both. It is nice to live closer to family. The rewards will greatly outweigh the risks involved!

Jenny said...

I don't have a cabin, but if you visit in the summer we could spend some time at my parent's newly acquired trailer up north. Might be crowded, though, with the 6 of us in a moderately sized 5th wheel.