Living is a risky business. We make all sorts of decisions on a daily basis and in the process take a risk—we either choose something that works for us, or something that doesn’t.

Over time some of the repeated decisions turn into habits and we stop thinking about them. They almost make themselves. And the more we automate, the safer we feel.

But as we all know, this is false safety. Repetition gives us confidence and we become more comfortable with the decision and the experience.

Things like what to eat, what to wear, when to leave for work, and how to do our job all become familiar over time. We tend to forget that each decision we automate today was once a new and unfamiliar one.

So when we’re faced with what we perceive as new major decisions, we feel the sting of risk. Think of decisions relating to these questions, for example.

• Do I quit my job and start my own business?
• Should we buy this house?
• Should we have kids now?
• Should I invest my retirement funds in this company?

All of the above (and more) are major decisions that can be scary. And if my experience with fear is any indication of how we react to fear, one of two things happens.

1- Rushing into a decision and regretting it later, or

2- Procrastinating and avoiding making the decision—only to suffer later from the constant nagging of “I should” or “I must” do this and the cost of an opportunity lost.

I’ve been experimenting with a different approach that seems to help a bit in managing risk. I hope it can be useful to you.

The process will not eliminate mistakes. I don’t think that’s humanly possible. But it will ensure that you make decisions you’re comfortable with—including moving past a mistake or loss.

I still make more bad decisions than good ones. But I learn in the process and my overall rate is a net success—a few big successes can be more than enough to outweigh lots of smaller failures.

Below are two “what if” questions that you need to answer calmly and honestly to deal with risk.

1. What if I’m wrong?

What would happen if you took the decision and it was the wrong one?

• Can you live with that?
• Can you sleep at night?
• Can you afford the loss?

For example, if you’re investing money in a business or buying a stock, what is the maximum loss that you can afford without undue anxiety and the possibility of losing your shirt?

Let’s assume you have $100,000 in your retirement fund. And you really want to buy shares of the stock of a company you like. How much should you invest? Do you invest everything or a portion?

The amount you invest should be the maximum amount you’re willing to lose without ruining your life. There is no right or wrong answer. We all have different risk tolerance levels, and as such the amount will vary.

For me, I wouldn’t want to risk more than 4% to 5%. So my maximum investment would be $4,000 to $5,000. To be on the safe side, I’d limit myself to $4,000. This means if I lost the entire $4,000 I’d still be okay.

If the situation was about buying into a business to run, I’d be okay with investing up to $50,000, after doing my due diligence. I can take a higher risk because the detailed work I do would help me determine future returns. If things go south, I wouldn’t lose my home. I’d still be okay.

If you’re buying a home, what is the maximum mortgage payment you can afford that won’t destroy your ability to have a decent life and meet your obligations?

Some things cannot be quantified in monetary terms. But the same concept applies. Instead of money, think of the consequences of being wrong.

If you want to pursue a relationship, are you willing to take the heartbreak if things don’t work out?

If you want to end a relationship, what would happen if the separation got too complicated?

This question helps you determine the worst-case scenario. From there you can determine a reasonable level of discomfort and fear, but not something that can ruin you financially or emotionally.

If you determine that you can live with the possibility of being wrong, then go for it and hope for the best.

2. What if this were my last chance?

This question alone can make one rush into action. That’s why it’s important to answer it honestly and to consider question number one when making a decision.

For other situations where you’re not rushing but feel hesitant, think about this decision as your last chance and determine the cost of missed opportunity.

Whether we’re talking about a business decision or the prospect of a new relationship or dissolving a relationship, answer some of these questions.

• What would happen if you didn’t take any action at all?
• Are you okay with letting it go?
• How would your life be if this opportunity were gone—forever?
• Do you think you would regret not doing something later?

Remember the whole point is to make a decision and move forward. This is not about putting things to the side to think about them later. If you decide this opportunity won’t matter if it’s gone, then you should be able to close the chapter and not let it linger.

Below are a few guidelines to consider when answering the questions and making a decision.

Guidelines when making risky decisions

The above questions are not meant to automate decision-making. Use them to gain more insight into your thought process when facing uncertainty and risk.

Be as realistic and honest as possible. We have an amazing ability to justify decisions or to exaggerate our fears. When thinking about a risky situation, think of what an unbiased observer would say when they listen to your answers. Assume the observer knows your strengths and what you’ve been through in the past.

Don’t rush or procrastinate. Take your time answering the questions and wait for a bit before acting. Give the decision some time to percolate in your mind and heart. But don’t let it sit too long. Give yourself a deadline and stick to it.

Listen to your gut feeling. When you give yourself a bit of time for emotions to subside, you create the space for your intuition to communicate with you. You may not be 100% certain but you will lean towards a yes or no. Always take that into consideration.

Capitalize on previous experiences. Consider the results of somewhat similar experiences from the past, especially the ones that can’t be quantified. These remind you of your strengths when fear is at its peak.

Take risks on a gradual basis, instead of jumping in with both feet. Make one decision at a time and deal with it. Sometimes in our effort to take full advantage of the opportunities presented to us, we commit to so many things and then freeze without meaningful action.

Accept that mistakes are inevitable. Nothing we ever do is 100% foolproof. We can’t completely eliminate uncertainty. Failure is part of the journey and the next success.

Consider your motivation. Why we want to do something is the most important factor in making a decision. If you’re taking a risk and the reward is not that meaningful to you, you will be wasting your time and energy.

Commit to action. Once you made a decision to do something commit to it and do it. And if you made a decision to let go of something, completely let it go. A decision limbo is not a good place to be.

The suggestions in this article will help you but can’t be a substitute for your judgment, or unique experiences and traits.

Decision-making and risk taking are part of the artistry of life. They cannot be taught without hands-on practice. Take risks, make decisions, and move forward knowing that whatever you do it is part of your journey.

Everything we do will help us learn and grow.