One question I get asked a lot is “Should I follow my dream?” It is shocking to me how much I get asked this question. There are a lot of people out there wondering if they should go outside their comfort zone and pursue their passion in life. My answer to this is always “yes” with out hesitation. Of course you should. Go out into the world and follow your dreams. But I say that for a very specific financial reason which I am going to explain to you in this video. WATCH NOW
What is a dream? Let us start there. A dream is your mind telling you that some aspect of your life can be improved. There is something in your life that is making you unhappy, and you can envision a better future for yourself. That is a dream. It is rooted in your desire to improve your situation.
That all sounds good, but dreams have a downside. If dreams do not work out, they can hurt you. It can be embarrassing. It can cost you money. It is uncertain, and uncertainty is stressful and scary.
Let us use an example. Most people ask the question “Should I follow my dream?” in relation to their career. They might be in a job they do not like. The question is whether they should focus on the secure career they already have, or take action to pursue a dream. The dream will cost time and money, and it may not work out. Is it even worth it to try?
Let us look at a financial analysis. Imagine you are evaluating the financial impact of two different career choices over the next five years. In your current job, you make 60,000 per year. You may get small raises, but there is basically not much room for growth. You have an idea that you could start a dream career. It will probably be slow to start off. You will make nothing for your efforts in the first year. But every year, you expect to grow. By the end of the fifth year, you have made the same amount of money as if you would have in your current job. In both of these situations you have made 300,000 over five years. Of course if you extend this out into the future, your dream has the potential to make you so much more money than your current job.
But when we look at these numbers, we have to factor in risk. Dreams are very uncertain, and very risky. On the other hand, steady jobs are much more certain, even though there is no room for growth. You might be miserable, but at least you know what is likely to happen. Let us assume that in your current job there is 10% risk of it not working out as expected either from getting laid off or another unexpected event. For your dream there is 90% risk of it not working out as expected. It is very uncertain. We can use these risk factors to create weighted values by multiplying the total value times one minus the risk rate. We see in this analysis that your current job appears so much more valuable than your dreams. Whether you are aware of this or not, your brain is performing this analysis. This is why you are scared to follow your dreams. Your brain is telling you “is this even worth it?” Your dreams are so risky, that the weighted value of the money you could make is so much less than the current money you are making.
But there is a problem with this analysis. It is based on fear. Your brain likes to focus on fear, but then you completely miss the opportunity. If you reshape this analysis to focus on the risk of missing an opportunity instead of the downside risk, you get a different result. A different way of looking at the same situation is to ask the question, “What is the opportunity to increase my current income?” This is the difference of looking at life with expansion versus looking at life with contraction. In fact, when you talk with successful entrepreneurs they have this ability to focus on the expansive opportunities of life.
Let me show you how to do this. You want to look at the risk of missed opportunity. What is the chances that your life will not improve from its current state. Well if you stay in your current life and not do anything to improve your situation, the risk that you will stay miserable is 100%. There is 100% certainty that your life will not change and you will miss the opportunities that are right in front of you. If you look at the income levels of your current job, they stay flat, whereas your dreams have the potential to increase dramatically. But following your dream is also highly risky. However, even with the risk, our example shows there is at least a 10% chance that your situation will improve. So we can change our risk factors to 100% risk for your current situation. And we keep a 90% risk that following your dream will work out. So the new weighted value is zero for staying in your current situation. This stands for the fact that there is no opportunity to make money above what you are currently making if you do nothing. However, when you follow your dream, even at incredibly high risk levels, you have the opportunity to make more money.
So this is what I recommend. Spend some time thinking about your situation from both of these perspectives. The first perspective uses contraction, fear, and the risk of losing money. The second perspective uses expansion, and the opportunities to make more money. When you spend the time to think about the differences, you will come to the realization that of course you should follow your dream. You should always follow your dream. Yes it is scary. Yes it is risky. But if you do not try to better your situation and better your life, you are never going to get anywhere.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.