The Personal Finance of Fear – And Why I Reject It

Quite often, I get suggestions from readers to review personal finance books that are promoted with a strong theme of fear. For example, just today a reader wrote to me with some eloquent questions from a book entitled The Coming Economic Collapse How You Can Thrive When Oil Costs $200 a Barrel. While I responded to his email, I was pretty clear to him that I had no interest in reading the book and would not be reviewing it.

To me, books like this aren’t delivering personal finance advice, they’re selling fear. When I browse through the personal finance section of my local bookstore, I see a lot of books with words like apocalypse and meltdown and collapse, talking as though these events are imminent and they will be catastrophic to your life in many ways and you had better act now on whatever advice they’re selling or else you’ll be in deep, deep trouble.

Although these topics are pitched as personal finance, the ideas they deliver to you really don’t have much to do with personal finance at all. This is about one thing and one thing alone: causing you to fear the unknown events that the future holds so that you make decisions that aren’t fully rational.

From my perspective, personal finance is about hope. It’s about a sense that if you make strong choices with your life, things will get better and you can put yourself in a better place.

Yes, issues like the declining dollar and bumps in the stock market are worth talking about. But those are responses to real issues and, in the end, are still positive, showing how you can move from today to a better tomorrow. These books take a different tactic, stating that tomorrow will be far worse than today and here’s how you can minimize the damage from this specific crisis.

Another worrisome attribute of such apocalyptic visions is that they usually end up with a recommendation of one specific investment vehicle as the holy grail for keeping you safe. Often, this item is gold; other times, it’s specific foreign currencies.

All of this is nonsense, though. The best thing you can do to prepare yourself for financial strength in any situation is to work on constantly improving yourself. Learn as much as you can about everything. Focus on teaching yourself new skills. Get exercise. Learn how to live as frugally as you can so that you’re not helpless in the event of a financial crisis. Doing these things will benefit you no matter what the future holds, but are particularly useful if things hit a major rough patch.

There is no “magic bullet” solution for any future crisis. We do not know what the future holds, and to buy an investment based on the recommendation of someone that preaches fear is foolish. If you buy into theories that shout “the sky is falling,” perhaps it’s time to tuck away that tinfoil hat and look for things you can do right now to improve yourself – no matter what the future holds.