Updated on 08.14.08

How I Deal With My Financial Fears

Trent Hamm

Fear by WTL photos on Flickr!Even though I write a lot about personal finance on here and elsewhere, I still have a lot of my own hang-ups about personal finance. One of the big reasons I started The Simple Dollar was to learn how to deal with those fears, and once I dealt with that new batch, a fresh batch came along. Right now, my biggest fears revolve around taxes, the possibility of a third child, identity theft, and future career directions.

I think this is actually a pretty normal thing for most people. We all have areas where we’re less than confident and we all have areas that concern us about the future.

It’s very easy to push these fears aside and just not worry about them, especially if they’re not vital to our day to day life. We’ll tell ourselves, “I’ll think about that later,” and then when it comes up again, tell ourselves the same thing again, until it’s sat around for years, untouched.

This can really be dangerous. Take, for example, my fear of taxes. I’m making myself face this fear this year and that means I’m digging into an uncomfortable subject, saving for the taxes, and paying them when they’re due. If I had taken the “typical” route and worried about it later, I would be suffering dearly when tax time came around.

What can a person do to step up to the plate and tackle our financial fears? The obvious “just do it!” tactic is nice, but it doesn’t really work here – if it were that simple, we’d already have faced the fear and moved on with life, wouldn’t we? Here are six alternate tactics to try.

Make a list of what exactly makes you nervous
Quite often, a fear of a financial move is actually just related to some small aspect of the move. Spend a bit of time figuring out exactly what it is that makes you afraid. I find that doing this with a pen in hand and a piece of paper in front of me makes it easy for me to jot down thoughts, which I can start working through.

Sometimes what you’ll find out is that you’re actually stressed out about something else entirely or you’re only stressed out by a very small part of the equation. For example, I know one person who was avoiding dealing with his retirement situation because he intensely disliked the retirement specialist at his workplace. It wasn’t a fear of retirement, it was a fear of interaction with someone.

Do some research
One big fear is fear of the unknown. Quite often, a lack of knowledge will make someone afraid of something else – we can all think of examples of this in life, where ignorance makes people afraid.

Don’t succumb to it. If you’re afraid of something because you don’t know about it, investigate it. Hit the library or visit Wikipedia and find out more. Dig in, a piece at a time, until you understand the topic – and the fear of it is lifted.

Talk to someone about it
If something makes you uncomfortable, put forth the effort to talk to others about it. Find someone you trust deeply, preferably someone with some experience in the area in question, and just ask questions.

This might mean contacting a financial advisor. If it does, seek out a fee-only financial advisor, as they won’t be engaged in selling you products and are most interested in just providing information to you. If a fee-only advisor isn’t available to you, you can use another, but be very hesitant to invest or put money in specific places based on their advice – instead, just take their information with you and follow up yourself with your own research.

Write out the pros and cons of your decision
One alternative to having a conversation, especially if the fear is related to an important decision, is to simply write out all of the pros and cons related to that decision.

For example, I kept putting off my decision to switch to a full time writing career. One of the big steps that helped push me towards writing was simply making a giant list of the pros and a list of the cons of making the leap. This really helped put things in perspective, as it became clear I was letting the “cons” guide my way of thinking, even though the “pros” were a much more powerful list.

Spend some time each day thinking about the fear
Don’t let yourself lay the fear on the table, because once you start ignoring it, it’s easy to just let something very important slide by until it’s too late. Instead, add consideration of the fear to your daily to-do list and actually spend a bit of time thinking about the fear seriously.

This is often good to do if you’ve gathered the information but are still hesitant about what to do. Steady and informed consideration of a fear is a great way to make that fear go away. I like to think of my two year old son who fears sharks in his room. After giving him a flashlight to investigate the room and some talk about how sharks need water to swim in and there’s no water in his room, he thinks about this information, overcomes the fear a little, and goes to sleep. Over time, his fear of sharks has become less and less intense.

Take a baby step
Once you’ve made up your mind that you’re going to do this, get started with a first little baby step. Take a little action that moves you in the right direction, and feel the relief that comes with wiping away your fear.

Then, take another little step, and another. Soon, you’ll be well on your way to completely eliminating the challenge that brought you so much fear to begin with. And it will feel really good.

What are your financial fears? Feel free to share them in the comments, and good luck on trying to conquer them.

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  1. I don’t really have a lot of fears, but the baby steps is a very effective way to avoid procrastination for me. I’m sure you’ve heard the old one…”How do you eat an elephant?” and the answer is, “One bite at a time!”. Operating in a “one bite at a time” mode really helps me.

  2. D.B. says:

    One of the best pieces of advice my parents gave to me is to have a separate account to use for saving money just to pay taxes. This way, you are never surprised and you have a cushion from which to work with. My parents ran their own business, and also managed their own investments prior to the existance of major mututal funds, so they understood the tax hit that could result from dividends and capital gains, and prepared accordingly.

    So, you can apply the same hard work you put forth to create an emergency fund to create a “tax fund”. Use your higher-interest online savings accounts like INGDirect, HSBCDirect, EmigrantDirect…et. al. and plan to save an amount that will cover at least 50% of your tax burden or more (per your own needs and comfort level).

    This way you can lower the fear factor in your life just like having an emergency fund does.

    Good luck.

    Philadelphia, PA

  3. writer dad says:

    It’s true that the first step is the most difficult. Once you start walking, it’s easy to keep putting one foot forward. The first one is harder than the hundred that follow.

    Also, Trent, would you please check in with Writer Dad tomorrow? I have a short story I’m posting, and it’s about having a child and being responsible with money. I think you will appreciate it. Thank you.

  4. Shanel Yang says:

    I learned from the excellent book Feel the Fear and Do It Anyway by Susan Jeffers, Ph.D., that we will always have fear. The difference is whether we always want to have the same old fears or whether we want to conquer them and deal with the challenge of new fears so we can in turn conquer those. Knowing that helped me choose the latter. Now, I’ve enjoyed so many amazing new experiences! Since fear is a given, why not try all the different kinds in the world instead of staying stuck with the same old ones? She also has many practical on how to tackle your fears. My favorite one is to tell yourself that whatever worst case scenario you envision happening, tell yourself, “I can handle it.”

    Your self talk is what fuels undue fear and can turn a normal fear into a debilitating one. Learn how to control your negative self talk. I wrote about that in “10 Harmful Thoughts” at http://shanelyang.com/2008/06/18/10-harmful-thoughts/

  5. TParkerson says:

    Good post Trent.
    Often we become immobilized by our fears and you have laid out some very good baby steps here to start the overcoming process. I personally feel that we all have to overcome fears of some “thing” in order to grow. Our fears create the tension we need to move forward.

    Another exercise I like to do is called worst case…you know, like those disaster survival games. I let my mind go to the absolute worst case it can imagine and I make plans to get out of there. Using your tax example; okay worst case, I would need to pay taxes that I have not prepared for. The IRS will make arrangements for payments and I know you have an e fund (not intended for this but you see where this is going). Usually, I find that even if the worst is some big scary precipice that I could fall off of, when I think all the way through it, I am confident in my ability to make a plan B.

    Anyway, here’s to facing your fears!! Have a great day!

  6. Frugal Dad says:

    One of my greatest financial fears is that I have wasted too much time to reach my goals for my family. My daughter is ten years away from college, and has barely enough in her 529 plan to pay for textbooks! I’ve missed over a decade of earning for my own retirement because it took nearly that long to work through school and pay for the debt accumulated from it. So, my biggest fear is really a regret–that I didn’t start sooner and be more aggressive with my savings plans at an early age. Now I wonder if I can make up the time.

  7. Kevin says:

    I have a similar fear that you did about home buying. Currently, we live in a modest 2BR house in a older, but nice neighborhood. However, we have a 1 year old son and 2 big dogs that both need room to run. Our backyard is too small to accommodate both (not to mention we’d like to separate an area for the dogs to “do their business”). Also, our kitchen is too small to have a table with more than 2 chairs. In short, we are outgrowing this house quickly.

    We are planning on moving next spring and will most likely have a 20% down payment between savings and equity in our current home. My fears are:
    1) Will almost doubling our house payment cause financial stress or require my wife to work more hours, causing our son to be in day care an additional day or 2?

    2) Will we be able to find a home we are happy with in the neighborhood we want or will we have to settle for something less to alleviate concern #1?

    What am I doing about it
    a)Research – numerous projections including “worst case” and “best case” scenarios for selling our old home and purchase prices of the new home
    b)Talk to someone – the wife and I talk about it almost weekly
    c)Pro/Con list – at this point it is certain we’ll move, so there’s really no point to this unless we’re talking pros/cons of a particular home
    d)Spend time thinking about it – probably spend too much time thinking about it already to the point it is causing more stress than it should
    e)Baby step – we’re trying to live off just my income for now to see if, when our mortgage goes up, we’ll have enough from my wife’s income to pay for the difference. It’s working well, but will still be pretty close. Another step I’m taking is pushing for a bigger raise at work by taking on more responsibility.

    Honestly at this point, I’m ready to just do it. I think we’ll be ok since in the past I’ve had similar concerns and things have always worked out. Any advice anyone else can share?

  8. Mary Beth says:

    I cannot recommend your strategy of living on one income enough. And buy your new home based on that. My DH and I bought our current home 9 years ago. We bought a nice home that we could comfortably afford on one income. All of the “experts” said we could afford more but I was just not at all comfortable with that. (And honestly, with 5 bedrooms, a finished basement and 2900 sq feet not including the basement, who really needs more) Fast forward to now, DH’s industry (the building industry) is experiencing a huge slowdown and he is making about 1/2 of what he made 2 years ago. I am also working part time as all our 4 kids are in school -but we CAN STILL AFFORD our home. We are able to make the mortgage every month, and afford to pay our other bills. Had we gone for a larger mini-mansion, we would not be able to pay our bills.

  9. Amanda says:

    Fantastic post, Trent. One of my all-time favorite books is called “The Dance of Fear” by Harriet Lerner. It’s a fantastic read. One of the biggest things I’ve picked up from the book is that to face our fears, as hard as it is, we have to keep doing them, on a regular basis. For example, if you’re afraid of flying, you just need to keep doing it. Keep getting on that plane, and keep taking off. She teaches a lot of good techniques about how to face your fear.

    Financially, my biggest fear right now is the debt we are taking on for my husband’s dental school education. Even though it is a good debt, and will certainly help us in the long run, it still scares me. This is partially because I’ve never had debt before, and debt scares me. But everyday, I’m facing it head on, trying to journal about, and keeping frequently conversing with my husband on the subject. I guess the best we can do is just “keep on keepin’ on.” Good luck!

  10. Aryn says:

    Think of it this way, Trent – if you weren’t earning as much money, you wouldn’t have to pay as much taxes. So, really, having to pay taxes is a sign of your financial success.

  11. wendy says:

    A variation of the pro/con list is to make two lists – the first one headed “if I do….” and the other “if I don’t do…..’. As you write down the pro’s and cons within the lists, ALSO record the extra bit of ‘justification’ you say immediately following the pro/con. These add-on bits often lead you to the right decision/action for you.

  12. Megan says:

    I fear keeping our spending under control. My husband has a chronic illness that is very expensive to treat. We don’t have very good insurance and are responsible for several thousand dollars out of pocket each year.

    That is a stress in itself, but on top of that, my husband has not gotten on the frugal bandwagon with me and therefore spends a lot of money each month–especially on eating out for lunches. I’ve shown him what the totals are (at least $500/month), but he is indifferent and hasn’t made any modifications. I fear that he believes it’s his money to spend since he’s the one who works full-time, but I actually take home more than he does.

    His eating out combined with his health costs are taking a big chunk of OUR money that could otherwise go toward savings and debt reduction. (Our only debt besides our mortgage is HIS student loan.) And I’d like to have enough saved to put a big payment down on a modestly bigger home for our growing family.

    So I guess my biggest fear is that my husband and I are not on the same page (do not have the same financial goals), and that as I become more frugal I might resent my husband’s spending even more. The other outcome is that I get discouraged and feel like all my self-denial is being erased by him, so then I “treat myself.” *sigh*

  13. Chris says:

    Great post Trent, as usual. My biggest financial fear is losing my job. My wife and I have about 12 months of living expenses in liquid savings and we live below our means, with no debt except our mortgage. But I still fear it. My company is having a so-so year, and while I think I’ll be okay, you never know.

  14. Adrienne says:

    Great post, and applicable to a lot more than financial matters!
    My biggest fear right now is that I won’t be able to find a balance between paying off debt and saving, and not making myself feel deprived. I haven’t figured it out yet but at least I’m going in the right direction, i.e. decreasing debt.

  15. Schwamie says:

    Reading your posts I wouldn’t have guessed that you were even considering a third child. I guess I dealt with that fear taking the most drastic step one can. I made an appointment and got a vasectomy. Now, I no longer have a fear of having any more children! (Of course my wife and I both decided that her stepdaughter and our son was enough.) As for other “fears”, the best approach is to tackle them head on. Determine what is holding you back from settling what it is and then come up with an organized outline approach showing each step and then actually doing each one until that fear is taken care of.

  16. Laura In Atlanta says:

    My financial fears are concerning being able to pay for my parents should something happen to them. I know they have insurance, and money in the bank, but Nursing Homes scare me BIG TIME, so for me, I want to make sure that should something happen to them, that I have $ set aside to have a Home Health Care Nurse to come stay wtih them. Not all insurance covers that and it can be crazy expensive. So, the way I battle this is find, read and keep as much information on home health care that I can find! Also, to build up a nest egg of some sort so that if I had to take time off from work, or go Part Time, so that I could take care of them myself. They are both in their early 70s and doing just fine, but I want to be prepared for the worst. There is no way I can stomach the idea of them living out their final months in a nursing home.

  17. Hannah says:

    Probably my biggest financial fear this year is the AMT because I just don’t understand it very well (and seems like something that is hard to research since Congress does some kind of patch on it every year). I’m going to have a considerable jump in income for 2008 from getting a bonus for the first time. As a single person with no kids who has a house…what kind of income is likely to trigger AMT? And how much will that cost? (My employer did seem to tax the hell out of the bonus, so my withholding on the year is pretty high…but the fear is, will that be enough?)

  18. Sarah says:

    Nice post, Trent. Financial fears dovetail a little too neatly with other fears about ourselves.

    @ Megan, I feel for you, as I’ve been in that situation.

  19. I think we all have financial fears, and it seems more money doesn’t always solve the thoughts and worry from going away. In fact, after the initial euphoria feeling, the thought of what to do with the money and concerns can start to creep in our minds. We all want to be good stewards of our resources and take care of our family. I like that you have a plan of action, budget, and a great attitude towards your family finances. This will allow you to succeed when faced with another challenge.

    My wife and I are contemplating the 3rd child as well and going through our many family checklists.

  20. Kevin says:

    Hannah – the big, most common triggers for the AMT are:

    1) high tax deductions (which you may have with the bonus withholding and real estate taxes on home),

    2) multiple exemptions (which you don’t have since you’re single, no kids),

    3) exercise of incentive stock options if not sold within the same calendar year

    4) home equity loan interest NOT used to purchase or improve the home (ie – used to pay off credit cards, buy a car, take a trip, etc)

    As a CPA, those are the ones I see the most.

  21. The future of the American economy scares the heck out of me. I fear that I am going to get laid off and not have a big enough nest egg. Ugh…

  22. Ericka says:

    This theory works for fears that are not financially related too. I’m going thru some of that right now, and your suggestions make a lot of sense in my context as well.


  23. Erich says:

    Only vaguely on topic but…

    One bit of advice my grandmother gave me, that always stuck out:

    Never have an odd number of children, one will always be left out.

    She grew up in an era of big families, and saw enough of the above that I believe it. Just thought I would mention it since you mentioned a third child.

  24. Moolah says:

    Our financial fears are usually in line with our personal fears that we deal with. For example, if one of your fears are about taking chances in life. 9 out of 10 that will spill over to your financial live also. I know so many people who always ask me, when it is the right time to invest, and I could give them a blueprint from Warren Buffet, and they still do nothing and wait for the perfect moment. All I can say is Action, Action, Action, and the rest will take care of itself

  25. Todd A says:

    Two things I think are worth mentioning here:
    1) My dad’s advice to me; “Most things that CAN go wrong in the world, DON’T.”
    2) A shameless plug for my multiple-goal/responsibility calculator, LifeCALC (link on my name). I developed this over the last 3 years, because of my fears/concerns for my responsibilities as head-of-household for my young family.

  26. Jamie says:

    Hi Trent,

    Nice post. I personally think it is a bit off in one regard: No matter how hard you plan, there will always be something that hits you out of nowhere and derails those plans. I really think it is not credible to believe that you can plan away your fear. Defeating fear requires one thing: Faith.


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