How many opportunities have you missed because of fear? I know fear has had a massive impact on my life. As a result, I’ve become a bit obsessed with the concept. I’ve adapted one of my favorite fear quotes as the title and theme: Fear is the money killer. In this post, I explore the impact of fear on our finances.
I’ll share how fear has affected me, common ways it limits financial growth, and how we can use fear productively. As a bonus (ha!) I’ll also sprinkle some of my favorite quotes about fear throughout the post.
What This Isn’t
Courage is not the absence of fear, but acting in spite of it.
Commonly attributed to Mark Twain
This post won’t be one of those posts that lists those things we’re all afraid of like “medical crisis” and “stock market meltdowns.” Yes, we’re all rightly afraid of catastrophic things. Good financial planning helps prepare for those. Instead, I want to look at how fear impacts our financial behaviors.
This also isn’t a “just conquer your fears” post. Or a diatribe about how you should stop being afraid and just deal with it. Fear is real, and it is both productive and unproductive. People can’t just stop being afraid. But, we can acknowledge it and work to move through it.
Which brings us to our first fear quote (right)!
Finally – it’s important to acknowledge that some have phobias or clinical levels of anxiety. Those are not things that you can simply overcome, and no blog post or motivational BS should try to deny that. If you are fortunate enough not to suffer these, don’t be a jerk and pretend others don’t.
My Personal Experiences With Fear
Fear is the mind-killer. Fear is the little death that brings total obliteration.
Frank Herbert, Dune
I share these not for personal therapy or because I think I’m all that special or interesting. Rather, an important part of mastering fear is acknowledging it. I’ve wrestled with how my fears have impacted my personal and professional life, and perhaps you’ll identify with one of my experiences.
I had to open this section with my favorite quote on fear (left). It’s from the Litany Against Fear from the science fiction series Dune by Frank Herbert. The entire litany is powerful, but I use these two sentences to help me push back against fear when I feel it. They perfectly capture how fear paralyzes you and how dangerous it is to give in to fear.
Most of fears impact on me has been mental. Even as a kid, I had little fear of physical pain. Any I did have was squeezed out of me by the Marine Corps. (This isn’t necessarily a good thing!)
However, mental and social fears have always been an important part of my life.
Shy Child
I was a cripplingly shy child. It was difficult to approach new people. I didn’t even like being looked at by adults. One positive result is that those who I was able to connect with usually became close friends. This habit of strong bonds has carried over to my adulthood and is related to my introversion.
However, it also limited my ability to find new friends and to have experiences. I tried staying over at friends’ houses, but always ended up needing to come home. Consequently, I stopped being invited to things. I wasn’t able to overcome this shyness (mostly) until my teen years when sports helped me bond in non-personal ways.
I know I missed important connections and experiences because of my childhood shyness.
Fear of Failure
Fear of failure is common. For me, though, it’s probably the defining feature of my life. It has been both a positive and negative. I’ve always had the need to succeed at everything I chose to try.
The positives of this: I work my ass off to make sure I can do something. I also built a reputation as someone who is highly skilled because I would only do something in front of others if I was damn sure I was good at it.
There are clear downsides to this approach. First, learning is slower if you only do it individually. I rarely got helpful feedback because I would simply refuse to do something new in front of others. Instead, I’d work obsessively by myself until I was proficient at it. Only then would I allow myself to act in public. This is sub-optimal.
The biggest limiter, of course, is the many things I simply refused to try at all because I wasn’t (yet) good. I missed out on learning many things because I didn’t even try.
Fear of Being Second-Best
This is a subset of the fear of failure. For a variety of reasons, I’ve always been expected to be exceptional at everything. I internalized this early. It was never enough to simply enjoy something.
As a result of being less-than-the-best, I rarely did anything frivolous. I worked constantly at getting better. Again, this can be a positive. But, it also kept me from enjoying many things that were supposed to be “fun.” As one example, I burnt out on most sports because of this.
Social Anxiety
This the fear I struggle with most to this day. Strangely, I have no fear of public speaking, which is fortunate in my current role. I can, and do, speak impromptu in front of thousands of people with only a normal level of nervousness.
Walk into a room of strangers to make small talk? An entirely different thing. If I can opt out, I will. If I have to attend, I will be anxious and irritable for days.
This is obviously not good for networking. An amazing amount of the world depends on the ability to make quick superficial conversation and impressions. As a result, it can take me years to build connections that others may build in a single day.
Fear of Letting Others Down / Public Ridicule
This is related directly to my fear of failure. Somehow, I’ve ended up in a role that is very public. As you may have noticed, I also take my professional responsibilities very seriously.
As a result, my biggest fear comes from the thought of failing in a public way that causes others to perceive me as letting kids down. While this ensures I do my job with total and obsessive diligence, it can also limit risk-taking. Risk-taking is important to innovation.
And of course, this isn’t exactly personally healthy. This fear keeps me from truly enjoying my job.
How Acknowledging Fear Has Impacted My Mindset
…Fear is such a weak emotion that’s why I despise it. We scared of almost everything, afraid to even tell the truth…
–Lupe Fiasco, Words I Never Said..
The Lupe Fiasco lyric is important to me because it conveys why I hate feeling fear. It is not weak to feel fear, but fear makes me feel weak. It took me a long time to recognize the limits fear imposed on me. Even longer to push through and build strategies to deal with it.
I’m fortunate to have a wonderful life. I’ve worked hard, leveraged my strengths, and had good fortune along the way. Yet, it would have happened earlier and definitely been more enjoyable if I’d recognized and dealt with my fears earlier.
Fear holds us all back from so many things. It can create a serious drag on your financial health…
Ways Fear Can Impact Your Finances
I’m not the only one impacted by fear. In fact, I contend that fear is one of the biggest challenges on the path to financial independence. Some people have a fear of spending money. That’s not one of mine, as evidenced by my lifestyle inflation phase!
Fear can keep you from seeking important opportunities, taking productive risks, or even taking action. Let’s look at some common fears that appear in personal finance.
Fear of the Wrong Choice
Once someone decides to take charge of their financial life, they’re going to do some research. There is so much personal finance information/advice out there! It can be confusing, contradictory, and incredibly context-dependent.
Love is but a song to sing. Fear’s the way we die…
Youngbloods – Get Together
Here are just a few:
Should I rent or buy?
Debt avalanche or debt snowball?
Pay off mortgage or invest?
Invest in the stock market or real estate?
Traditional or Roth IRA?
(I could go on…)
It’s no wonder people get frozen. Analysis paralysis sounds dramatic, but the fear of making the wrong choice does paralyze us from making any choice at all.
The lack of action caused by this fear may be the most significant impact of fear on finances.
If you face two good choices, don’t let fear keep you from acting. Act now, improve as you go. A good choice now is better than the perfect choice two years from now.
Fear of Change
Gone are the days of finding a good solid job, doing it for forty years and retiring comfortably. Now, to maximize your income you must seek out opportunity, build new skills, and be willing to move to a difference company. Unfortunately, in many industries your salary will only keep up with market rates if you’re willing to change employers.
For those who fear change, this is a major barrier. People will remain at a lower salary, or in an unhealthy work environment, simply to avoid change. Either case hurts you in the long run. You will be earning less money or may spend more to compensate for an unhappy work environment.
Fear of change also limits your ability to seek out geoarbitrage opportunities. Changing location can increase your earning opportunities and decrease your cost of living.
We shouldn’t change just to change, but in some cases it provides a clear benefit. This fear may keep you from even considering it.
Fear of Missing Out (FOMO)
There’s, like, this fight between courage and fear. And sometimes we choose fear because we want to protect ourselves. But we don’t realize that by choosing fear, we put ourselves in a situation that has a really bad impact on us.
Malala Yousafzai
Fear of missing out can impact your finances in a number of ways.
Social FOMO
Social fear of missing out can lead you to choose social opportunities over personal or career development opportunities. (All things in balance – don’t be a workaholic!) In college, for example, I certainly studied less than I should have because I spent far too much time on social time.
Frequent social activities can also be more costly. You may not want to spend money on going out for drinks – but if you fear missing out you might find yourself regularly having $10 cocktails.
Or maybe you really want to be part of that group? Suddenly, you’ve got a $5000 road bike, country club membership, or the latest PC gaming setup. (as just a few examples I’ve seen with friends)
Again, the point isn’t deprivation. It’s to understand if you’re doing something because you truly enjoy it, or are simply afraid of missing out.
Investing FOMO
A friend tells you that he’s made a killing on a certain investment. It’s going up like crazy! It’s $400/share now, but it’s going to $1000 for sure! How can you resist? Investing FOMO leads people to invest in things they don’t understand, buy at the peak, or get sucked into outright scams.
Just because others have made money, doesn’t mean you will. But the fear of missing out on huge gains can draw you in anyway.
Invest only in things you understand, and have a clear personal investment policy statement to resist this FOMO.
Fear of Loss
The fear that limits many people from building wealth.
It’s safer to hold your money in a bank savings account than invest right? Many fear the stock market, or other investments and therefore are content to simply save. Unfortunately, the purchasing power of money actually shrinks over time due to inflation.
Or, after getting the courage to invest, the market drops. You suddenly have less! What if it keeps going? This fear of greater losses causes many people to sell low and then miss out on the recovery before buying back in. If you invest – don’t try to time the market.
Imposter Syndrome
The fear of not belonging in an education institution, social class, or job role can limit your personal and professional growth. You might miss out on vital development opportunities and connections.
You may not try for a job that you don’t feel you are qualified for. Yet, someone less qualified than you suddenly jumps in and gets the job.
It can also lead to overconsumption. “Keeping up with the Joneses” can often be triggered by impostor syndrome. Suddenly, you are buying a luxury car or expensive clothes to prove you belong.
Fear of Failure
Fear of failure can have a massive impact on your financial success. Progress typically comes from willingness to try new things, learning from failure, and doing better the next time. Small failures early can prevent larger ones later. This fear keeps you out of that iteration cycle.
If you are a w2 employee, you may not be as innovative as you could be because of fear of failure. Your boss might perceive you as complacent or unoriginal. You may not be offered other opportunities or promotions. Therefore you earn less.
Fear of failure may keep you from starting your own business or trying a side hustle. (Fear of loss can come in here.) If you do take the leap, this fear may prevent innovation of expansion when it’s needed. You may be willing to settle for less than reach for more.
Fear Isn’t All Bad
I said no not because I lacked courage; it’s because I was self-protective. Fear can be useful.
Patti Smith
I’ve been clear about my feelings on fear. I *hate* it. Yet, sometimes we just dismiss fear outright as inherent failure or unproductive. Fear has a definite purpose.
For example, when fear tells you not to jump from the 1000 ft cliff? Yeah, that’s not a fear that should be ignored. Similarly, fear of fire, poisonous animals, and fast moving objects are all important safeguards.
Part of childhood is learning which fears are valid and which aren’t. Part of parenthood is trying to make that happen without catastrophe!
Fear is a method of protecting ourselves. The trick is to recognize unproductive fears to resist, and to use productive fear to your advantage. Easier said than done.
Unproductive Fear
Unproductive fear keeps you from doing things even when you should. Most of the money fears I listed above fall into this category, at least partially. These are the fears that keep you from pushing yourself forward or tell you that you’re less than you can be.
Always do what you are afraid to do.
Popularized by Ralph Waldo Emerson
Dealing with these will be an individual, and ongoing struggle. The first step is recognizing and acknowledging the fear. Then, to analyze why you’re feeling it and if you can deal with it.
For me, I’ve learned to carefully analyze my fear and whenever possible face it. The Marine Corps certainly helped with this. As did life experience. It took me too long to realize that people aren’t watching and judging your failures. They’re too wrapped up in their own.
Consequently, I’ve tried to live by the Emerson quote. Now, if I feel a fear that I judge to be unproductive it’s more likely to make me do that thing than to stop me. (Again – I’m not talking about actual phobias here!) This has served me well in the second-half of my professional life.
How Fear Can Be Productive
I already discussed how fear can protect you from catastrophic physical damage. It can also be useful in money situations. Don’t reject fear outright!
When Used as a Warning Sign
Fear is a valuable warning sign. It’s your mind telling you to stop and pay attention.
Analyze – what is the source of your fear? Is it based in reality, or is it from the environment? A great example of this is the financial press. Fear sells. Every market drop is an impending cataclysm.
Are you afraid because you don’t understand your investment? This is a good sign that you need to either do more work to understand or make a different investment choice.
Be fearful when others are greedy and greedy when others are fearful.
Warren Buffett
If you understand the investment, and you realize that your fear isn’t based in reality, you can follow the famous Warren Buffett advice about fear. Acknowledging and assessing fear has worked out okay for him.
This is also true with the fear of change. If you see an opportunity and are considering moving, fear of change causes an important pause. Again, use that pause to assess why you are feeling fear. It may give you important insight and the time you need to realize that what seems obviously better, may not actually be. Perhaps your new salary will be eaten up by cost-of-living increase, or your work/life balance will suffer.
Accept fear and let it be a warning sign, but not the final decision-maker.
Knowing Your Risk Tolerance
If you are losing sleep because of fear of loss, it is a good sign that you may be outside your risk tolerance. An important part of your financial plan is to decide how much risk you are comfortable with. Currently, most investors feel very comfortable with risk because we are on a long market run. The next drop will be a good test of how comfortable you truly are.
When it happens, and it will, take the opportunity to analyze that fear of loss you feel. It’s natural to be afraid when you see your net worth dropping. Is that fear tolerable or toxic?
Use your fear to determine how much risk you are truly comfortable taking. But, don’t panic and sell at the bottom! Instead, adjust your asset allocation accordingly.
As one example, I’m comfortable being fairly aggressive with our paper asset allocation. My preference is for a 90/10 stock bond allocation since we have decades of investing ahead of us. TFI is not. As a result, we have compromised and are moving to a still relatively aggressive 80/20.
Some aren’t comfortable with stocks at all, but instead rely on real estate. Use fear of loss to test your own risk tolerance.
Planning for Failure Points
I’ve been honest about my extreme fear of failure. I’ve made that productive by using it as motivation to do front-end success planning.
If I’m afraid of failing – where are the failure points? I identify those, and then plan to eliminate or mitigate them. You’ll never eliminate failure points entirely, but after assessing and planning you can better understand the true likelihood and outcomes of failure.
If failure is likely or too costly, then it’s an unwise choice. Most of the time, it will be worth the attempt. If you’ve planned on the front end, you are more likely to be successful. If you planned, and still failed, you know you made the best attempt. You can adjust and go back again.
This type of planning both increases the chances of success and helps overcome the fear of failure.
Some examples from our financial independence plan and possible retire early plan:
- Simply accepting the 4% rule as gospel wasn’t enough. So, I’ve relied heavily on Big Ern’s Safe Withdrawal series.
- We plan to downsize our primary residence before retiring
- We don’t count on our pension, but instead use it as a bonus and hedge against sequence of return risk. We’ll be FIRE, but could potentially be FatFIRE
- We’ve started to prioritize 457 and brokerage assets over 403b due to easier access should we decide to retire early
Don’t Let Fear Be Your Money Killer
“Fear defeats more people than any other one thing in the world.”
Ralph Waldo Emerson
Don’t let this Emerson quote be true for your financial independence journey.
Use fear as a warning sign, rather than a stop sign. Take the pause to assess your risk tolerance and comfort-levels, both in investments and in life-changes.
Plan for the failure points to increase your odds of success and accurately assess the cost of failure.
Doing these things can lessen fear’s control on you and improve your path to financial independence!
Tell me – how has fear limited your personal growth? What strategies have you used to overcome productive fear?
This was a really deep post with so many great quotes. I too was a shy child, really reserved. As I aged, I realized that “failing” was not really failing, just experimentation. So I took more risks, learned more skills and basically invited failure (or learning) to occur. I think being courageous with your life and financial choices is a practiced act but so beneficial. Without it I wouldn’t have found real estate investing, blogging, or any side hustle. Be bold, go for the goal.
I think fear’s done both good and bad for me. I’ve always feared I might lose my job one day and always have a 6-12 month emergency fund. Guess what? I fell into unemployment out of the blue between October 2018 and March 2019 and had I not saved up for it, it’d be a total disaster. At the same time, I think there were points when I hoarded too much cash and missed out on the compounded returns.
Another great example, and why I don’t think the prescribe # of months for emergency fund is a good approach. Each person needs to balance their own fear with what they save. It sounds like you’ve hit the right level for you.
This post really hit home for me. This is something I am currently dealing with and going down the rabbit hole of learning and trying to overcome my fears. They don’t have to do much with financial independence but we taking more risk in my personal and professional life. Now I have another perspective to look at it.
I’m glad I could share another perspective. Good luck with those risks. Given time, I know you’ll find the right balance.
I relate a lot to your struggles. But my fear extends to public speaking. My social fears get amplified in front of a crowd. This is a fantastic article. A lot of great, deep thoughts here.
As you have pointed out in your case, fear has also been a part of my success. Part of my job is trying something, failing, and then repeating until I find a solution to the programming problem. I don’t experience fear with this process, but I do struggle with imposter syndrome and feeling like I’m not good enough. In previous jobs, this has cost me sleep and massive amounts of stress. I’m trying to get a good sense for the different levels of fear, and figuring out how to approach each one more intentionally. Thanks for sharing!
Thanks, Chris. I can totally relate to that lost sleep and the toxic levels of stress. I’d love to hear any strategies you find on your own journey.
Great post Principal FI. I can relate to many of these, especially social anxiety and imposter syndrome.
Growing up, it meant I would hide in my room when my parents had guests over.
As an adult, it means I hold myself back from going for roles or promotion until I am absolutely sure I am ready, even if others think I am.
Pushing through some of these fears continue to be a challenge for me and helps me to grow. I’ve learnt to live with some of these fears and I suspect it is in my very nature and they will remain with me.
Great examples. And yes, I think most fears remain with us – I can just handle them now. Definition of courage, right?
Super article. Is is powerful for sure and can work for and against us:
Loved your article which covers virtually all angles.
Thank you – glad you enjoyed it!
THIS: “The biggest limiter, of course, is the many things I simply refused to try at all because I wasn’t (yet) good.”
This is really big for me and something I’ve battled with in different contexts. It prevented me from blogging for three years before I decided to push past that fear and allow myself to feel the discomfort of imperfection, knowing that the only way to improve writing is to practice.
I am trying to get over this by continually putting myself in situations where I feel that ‘squirm’ of knowing I’m not good at something – eg. recently taking salsa lessons and (finally) learning how to drive a car. I still hate that feeling, but am overcoming that fear of failure slowly but surely.
Yes, pushing into that “squirm” moment is huge for personal growth for me now too. I wish I’d had more self-awareness or willingness to do it earlier. I’m glad you’re feeling the progress – congrats on the salsa dancing and driving!
Another great post. I love Lupe Fiasco 🙂
Yes! I can sometimes find myself on an endless loop of a few Lupe Fiasco songs.
Thanks for writing this. One thing I’ve learned through dealing with clinical anxiety is that anxiety is actually the physical response to fear, when you in fact don’t need to be afraid. So it’s important to assess a feeling of fear. For me it’s been asking: does this feeling or it’s intensity actually fit the facts of the situation? If it does, then I know it’s telling me something important. If it doesn’t, that’s when I can work through a variety of strategies to be able to reduce the duration/intensity of the emotion and move forward. It’s important to listen to ourselves when we feel fear for a valid reason – if our or another person’s physical or emotional well being could be harmed. Anyways, thanks for the post!
Thanks for mentioning that physical reaction aspect of fear and sharing a great method of assessing your fear.
This hits home so much for me, especially FOMO.
It impacts my finances heavily since I want to go on adventures, buy experiences without regard to their quality, and keep up with the Joneses socially (which usually involves more $$$). Social media amplifies a lot of it as well because it lets me see all the things I’m missing out on!
I need to become more comfortable with the fact that prioritizing what’s important to me will naturally mean I’m not doing ALL THE THINGS.
Oh, great point that social media can amplify FOMO!
I have a fear of losing my job one day, and I have health problems that mean I probably won’t find another one that I can do reliably. So I’d have to freelance write or go back on disability, neither of which would lead to a stable financial situation.
My fear isn’t very rational. Yes, competition in our industry has heated up, but at worst I’d probably be asked to take a pay cut. Things would have to get very dire for me to lost my job completely. Alas, that fear has led to me wanting to focus more on paying down my mortgage than on retirement, which is no good especially because I’m behind in saving for retirement. So I recently had to sit down and make myself understand that the guest house rent covers about 75% of my mortgage because the latter is so low. So even if I did lose my job, I’d probably be okay (until repairs were needed anyway). Meanwhile I’m losing time for compound interest. So I need to stop putting as much money against the house as I have been and put more into retirement.
A great example of fear and impact on your finances! It sounds like you’ve worked through it and made a choice that works for you. I think the mortgage paydown debate is a perfect example of two good choices. That guest house situation sounds like a great safety net.
Thank you for sharing — so much of this runs parallel to my own experiences! I totally agree with the public speaking aspect — I have no problem speaking in front of colleagues in a work situation. But when it comes to socializing and making small talk, it’s a no-go. Because that’s more personal. My entire world implodes if I think someone doesn’t like me. So I keep a fair distance from everyone, and don’t even give them the chance.
Fear is pretty much the root cause of every single regret in my life, both professional and personal. And I’ve made enough mistakes to realize I can’t just wave a magic wand and use positive thoughts to will the fear away. It’s going take work, which won’t happen overnight. But I plan to keep pushing.
Wow, thanks for the honest comment. It makes me realize that I’m fortunate not to be overly concerned if someone doesn’t like me. That’s come with some of the roles I’ve had to hold. Small talk though – it’s so awkward and uncomfortable and I *know* I’m awful at it.
I’m with you on the regret – it’s one reason I’ve tried to push back so hard on fear. Yep – it takes time, we’ll just keep at it!
I played softball through college, but once past the little league all stars level, I was never the best. I’d make the team, but that was about it. Everywhere else in my life, being second best felt like a major failure, so I credit my sports experience in getting me to get past this fear of failure / fear of absolute perfection.
Sports helped me in a lot of ways. But, I never got past the drive to be the best with sports. I rarely was, but I kept working to try to be so didn’t enjoy it as much as I could have. Still an overall positive – but I’d definitely do it differently now. I’m glad it worked better for you!