Consider personal risk as risk to your well-being. Well-being can be the basics (food, shelter) to comfort (better food, better shelter, good experiences) to dreams (best food, best shelter, best experiences). Personal risk is the risk not being able to get the basics, comfort or the dreams.
If you need to achieve the basics (food and shelter), you can find ways to achieve that. The risks of not having basic food and shelter may be death. We hope you are not in that situation and have reduced the risk of not having basic food and shelter. You have probably helped reduce this risk by generating income that allows you to purchase food and pay for shelter. It may not be great food or great housing, but you reduced your personal risk of not achieving these basic needs by working for income.
What if you want to reduce the personal risk of having to just rely and afford the basics? What if you want more? How do you reduce that risk? Maybe you work more hours to generate higher income to afford better food and shelter. Maybe you get more schooling/education to broaden your knowledge and increase your competitive skills and get a higher paying job. Maybe you pay for health and disability insurance to protect your income if you get sick or injured and cannot work. Maybe you save up to have a large enough emergency fund to cover any unexpected expenses.
What if you have dreams of a comfortable retirement when you are older? What if you have dreams to cover the college expenses for your kids? What if you have dreams of opening your own business? The personal risk of not achieving your financial dreams may require more planning, discipline, higher risk and higher expenses. What if you reach retirement and you don’t have much in retirement savings? What if you are planning on a pension from your existing company and they go out of business and reduce your pension payout. How do you reduce that risk? Maybe you save more than you may potentially need. Maybe you become more focused and disciplined on longer-term financial planning and budgeting. Maybe you increase your insurance coverage to include health, disability, property, liability coverage so that you are not wiped out. Maybe you have a diversified investment plan that can whether significant market volatility.
Whatever your strategy may be, you want to focus on reducing your personal risk so that not being able to cover and achieve the basics, the comforts and the dreams. Unexpected events can happen at any time, so you need to be prepared and reduce the personal risks that could wipe you out.