Fear and money are not good friends. Feeling scared of failure can lead even the most astute person to make the wrong money decisions.
I always remember the acronym of fear: False Evidence, Appearing Real.
Fear can grip any and every part of our life, but it bites especially hard when it comes to making money decisions. Here are some key questions to ask yourself to get on top of why you’re feeling scared to make a money decision – and what you can do to overcome your fear.
1. Does the decision form part of an overall strategy?
For example, you’re under 30 years old and your superannuation is invested in growth assets. If there is a market correction or a financial crisis – you shouldn’t be thinking of moving your money out of the investment option and into cash. Your superannuation strategy is a long-term investment, so you need to stick with it over the long term. Not up and change it because short-term market movements have got you scared.
2. Have you sought out an objective opinion?
Before you act – can you ask a trusted third party who will workshop the decision with you? This can help you get out of your head and put some distance between your money and fear. It might be a friend, relative or a financial adviser.
Think of it like this: remember that friend who is dating someone who is not right for them? You can see it as you’re looking at the situation from another angle, but they can’t because other factors cloud their judgement.
In the same way, someone in your life who has your best interest at heart can help you take the fear-factor out of decision making. For added wisdom, try and find someone who also is further down the line in terms of their wealth journey.
3. What are your alternative strategies?
Your first strategy idea might be the right one, but to ensure you’re not acting out of fear, it’s a good idea to see if there are any other outcomes.
Grab a pen and paper and think of at least two. Start writing. Do a brain dump of possible alternate action points than the one you are thinking of. If you do this, than that. If you try X what happens?
One strategy may be to wait another month and revisit the situation.
4. What’s your plan B?
Have a plan B figured out before you even start.
Next time you’re planning something in your life, have a “plan B” ready to go. That way you have a backup strategy in place if you have to change plans, or something doesn’t work out. This can really bring you peace of mind because you know, no matter what, you’ll be okay.
For example, if you’re thinking of doing some study or improving your work skills via a course, what would happen if you couldn’t get your ideal job or promotion at the end of it? What is another possible career move you can make with the same study investment? It’s always a good thing not to be painted into a corner!
5. Is this your fear, or someone else’s?
It goes without saying: do not act out someone else’s fear.
This can be a huge trap for all of us. For instance, if you’re younger and your parents are pressuring you to save up and buy a home to live in because that’s what they did, this could be dangerous. They may be fearful that you won’t get ahead in life if you don’t do as they did, but that’s not necessarily the right decision for you.
Just because it’s a different strategy to the one someone else used, doesn’t mean it’s the ‘wrong’ strategy. This can sometimes happen in relationships too. One partner is more risk adverse than the other, so in the end nothing is done.
Don’t let someone else’s fear of doing something different become your reality.