fear of money


If I was going to search deep within my (financial) soul I’d admit that most of my money decisions are based on fear. Fear’s a negative word, and I don’t think that in this case my decision making is always a negative process.  I am often quite happy with the result.  A great example has been my investing philosophy.  A little more than a year ago I got nervous about the direction the market was headed.  I took about a third of my retirement accounts’ total out of the market and put it into cash.  Good fear, right?  That chunk of my retirement savings would have been wiped out.

But after a year, I’ve only redeployed about a quarter of that third. You could make the argument – and I do, to myself – that holding onto cash is a defensive position.  Nothing about the current propped-up-through-stimulus-and-bailout money situation of the US economy should encourage a reasonable investor to get back in…should it?  Yet again and again we’ve seen these market drops come back.  So some of my reluctance is fear-based.

I’ve written about the reasons why I don’t talk about real estate investing. I said I don’t like “investing” in a primary residence, I don’t much about real estate or the business of real estate, and that the New York market – where I lived until recently – was too competitive.  I should have added that it usually seems like BIG chunks of money are needed for real estate investing.  Fear of investing in big chunks keeps me diversified in the stock market (index funds, right?) and keeps me afraid of real estate.

Fear of wasting money is good, certainly – but at least as far as investing goes, some fear and uncertainty are necessary to have any sort of reward. I’ve always dreaded a doomsday that seems unlikely to come – a final day with money and then a penniless dawn.  It could happen, of course – but with the ability to make more money (which I have) and good health (which I hope to continue to have) and a supportive family, it seems that I won’t face that doomsday.  So the fear is something more than trivial but also less than a doomsday event.

Does Warren Buffet fear loss? Probably not at this point – he’s old enough and seemingly content enough to be free of financial fear.  Does Bernie Madoff?  I guess now he will face his own doomsday now, and learn whether that fear should have been stronger.  How do you control fear of money?  Here are the things I try to do:

  1. Remember that money is infinite. YOU may not have infinite amounts of money, but there is a lot of it out there, if you can just figure out how to get it.
  2. You cannot anticipate every disaster, but you only need to anticipate one success. If you invest in a property, a billion things can go wrong – title problems, a fire, a sewage plant groundbreaking the day after you close, etc. etc.  You can’t prepare for everything.  Try to aim for success, not dodge failure.
  3. Fear comes from you. Fear is not an externally-caused reaction.  Sure, we all get a jolt of adrenaline when we’re jumped by a cave bear, but you can control fear.  It’s not like being poked with a stick, where you have a reaction determined by nerves and muscle reflexes.  Fear is neurons firing off in your brain, and you can control your thoughts – they are the only thing in the world you CAN control.
  4. Doomsday may come, true… but let fear of that day go. I do sometimes worry about all of my index funds and various other investments going to zero… but as I’ve often told my friends and family, if my retirement portfolio, invested in index funds that span the US market, goes to nil we’ve got bigger problems that worrying about retirement.  We’ll be reverting to a currency based on canned foods and shotgun shells.  Worry about your 401(k)’s fees, or your consumer debt with 21% interest rates – things you can do something about.  Don’t worry about the end of the world.  If the aliens come, you’re not prepared anyway.

Fear of money – worrying about its scarcity, or its disappearance – can cripple you from making more and even more importantly from enjoying life.

Photo by DownTown Pictures

9 Replies to “fear of money”

  1. My worries about my stock investments are based on Japan's example. I think the Nikkei is still around 1/3 of where it was in 1990. That's an investment disaster for anyone who invested in 1989. Hopefully there is something about the US stock market which will let us avoid something comparable happening here.

  2. “Don’t worry about the end of the world. If the aliens come, you’re not prepared anyway.”

    LOL exactly, our time is better spent worrying about things that we have control over. Excellent blog!


  3. That is why you diversify your investments. Most of us have way too much of our money invested in the stock market. You might want to look at bonds, private loans (I have a large portion of my retirement in a self directed IRA loaned to a local company at 9% in a business I understand and with owners I trust), your business, close ended funds invested in muni bonds (tax free income), and other alternative investments.

    Don't limit your thinking to just the stock market. Most people would be better served putting their money to work in areas they understand rather than the stock market, especially at the valuations we are currently sitting at.

  4. Hey Steve,
    Excellent post. I actually got really lucky and pulled my money out of the stock market about three days before it's largest drop. I actually did it to make a down payment on a house but the timing was lucky nontheless. I haven't put my money back in the market since. I have been much too scared. My money is all sitting in a savings account earning a 2% interest rate. Although, who knows how safe savings accounts are nowadays either.

    Anyway, great post. I'm glad to see that you're still here and you're still managing to kick out quality posts. Talk to you soon.


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  6. If there is, I sure as hell don't have it……if you are afraid of any of yours I will be glad to relieve you of it!

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