Fear and Money

know fearThere’s no doubt that fear is a motivation in our financial decision making process. We fear running out of money and being unreliable for those we’re responsible for. This motivates us to prepare for the future. We fear making poor choices like investing in a stock that will tank, or putting hard earned cash into investments that we can’t withdraw from at any time. No one can predict a rainy day and no one can predict which stock will quadruple. What we do have are smart choices available to each of us, and all that’s required to harness these options is to do some homework.

With my friend Todd we’re starting a new site on personal finance called Fearless Dollar. Here we will cover how fear is the motivating factor behind most of our financial decisions. We will then take it further and talk on financial strategies to address each of those fears and how to mitigate them.

Fear and money incapacitate some, don’t be that one. Be resilient and let fear catapult you into making the right decisions.

Fear of not coming through for those who depend on us

As a man I want to be responsible and reliable for those who count on me. One of my biggest fears is not coming through when I should. It would be easy if I was made of cash and every time I chopped off an arm (maybe $1000) it just grew back. But this isn’t the reality for most of us. Money doesn’t grow on trees.

The best preparation is to be proactive. Learn what options are available to you.

  • Thinking about retirement then look at your 401k, Traditional and Roth IRA’s, and other options.
  • Want to save for your children’s college fund then look at 529 college saving plans.
  • Can’t predict a rainy day then have an emergency fund.
Fear of stocks crashing

Some are so afraid of this that they don’t have investments. Or they only invest in low risk funds like bonds and CD’s. But if you only invest in these and their extremely low interest rate (usually lower than 2%) then you won’t have enough for your golden years. To mitigate this fear have a balanced portfolio. Stocks, index funds, bonds, CD’s and mutual funds.

Fear of making the wrong choice

Life is all about choices and making decisions. Some you will make on your own when you draw from experience and knowledge. To make other decisions you’ll need to lean on others for advice or defer to their expertise. Don’t be afraid of choices, but instead use your options.

Fear of losing one’s job

I’ve seen many not take chances at work because they were afraid of making a mistake. But what the fear does is it blurs the lines of when to take a chance and when not to. To progress you have to push your limits. When you push forward so will your income potential. The best way to guarantee employment is to increase your experience, expertise and performance.

Fear of a rainy day

I wish I knew when these would happen. There’s a reason they say, “When it rains, it pours”. The most inopportune time is when it seems to strike. There is only one protection against this and it’s to be proactive and prepared. Have an emergency fund or keep your fear.

Fear of working into one’s golden years

During this past recession we saw many have to dip into their retirement fund, and some even return to work. Men and women in their 20’s and 30’s were returning home to live with their parents. It was a gloomy time full of misfortune. Now what I’m about to propose isn’t to say everyone could’ve done this or to diminish the severity of those tough times, but to learn from it and be proactive. We have options available to us that use compounding interest. We’ve written about many of them: Target Retirement Funds, Roth IRA, Traditional IRA, 401k and such. The choice is yours.

Fear the negative consequences but don’t fear doing something about it.

This is a guest post by John @ Fearless Dollar. If interested in submitting a guest post please read our guest posting policy.

Featured image by http://dribbble.com/csavala