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Knowing your financial risk tolerance is not only for people who are investing. As long as you want to make the right decisions about your finances, this is something that you need to identify. How else can you be brave in making financial decisions? You need to know if you can afford to take high financial risksbefore you proceed with them. Your inability to understand the level of risk that you can take will affect you in two ways. The first is it can lead you to make irresponsible decisions. You may think that you can afford to borrow a certain amount of money when in truth, your finances are already spread out thinly. Since you are unaware of your financial risk tolerance, you might have a false sense of courage when making financial decisions. It might lead you to sign into financial agreements that you cannot commit to. Another way that you can be affected is through financial opportunities. If you have no idea how strong your finances are, you might miss out on opportunities that could have pushed your income or profits to greater heights. These are only two simple explanations of why you need to understand the level of risk that your finances can afford to take. According to an article published on Bankrate, the financial security index of the country is going down - but Americans appear to feel confident about their finances. The report revealed that Americans feel like their financial security is better and that makes them more confident when they are making financial decisions. In fact, it is the Millennials who have reported that they are the most comfortable when it comes to their financial position. This is where you need to be very careful. Young adults are ridden with debt - specifically student loans. While it is admirable that they feel confident despite the amount of debt that they owe, it can also be dangerous. They might have a false sense of their financial risk tolerance. It could lead them to make financial decisions that they are not ready to commit to.