Deal making seems fun and exiting, right? Not always. If you’re survival always relied on making deals, how stressed would you be?
Say you had a streak of success. In fact, you had one or two months where you had deals in which you earned a lot of cash. In addition, this was your only earnings from a company in which you owned and operated. That is, you didn’t have a steady salary check. Finally, things tend to revert to the mean. You run into a slow month or two. At first, you don’t worry as you amassed some additional money from prior months.
Yes, you were stressed out a tiny bit at first. But things came together and money was flowing in. Then the dry spell came. Within the first month, you changed none of your habits and were not worried. You assumed that since you had some recent success, more deals must be around the corner.
After that, the second month goes by and things are still sluggish. You begin to get nervous and start to wonder when everything will return to normal. You still have some money left over so there’s no need to panic yet. However, things start to get stressful. Consciously, you start playing the worst possible scenario game. You ask what happens if I can’t make the mortgage loan payment or purchase food a couple months from today. You question if the last several profitable months were just an exception.
After thinking about that, you calculate your average earnings over the past year. Not too shabby. What if you had a regular income and every couple of weeks you were guaranteed to be paid? It might seem as if you made more money.
If your revenue depends on your own deals or by receiving a commission, you will not have a regular income. A steady income is simply worth more than earning the same overall amount that comes erratically. It’s also much more nerve-wracking.
This is a big reason that explains why most great investors put more emphasis on managing risk than on returns. Handling risk before worrying about returns will relieve much of the stress that comes with making deals.
Eileen Jacobs is a mortgage consultant from Las Vegas, NV | Superior Mortgage Lending
Tags: investments