Updated on 11.16.07

The Personal Finance of Fear – And Why I Reject It

Trent Hamm

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.

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  1. Tyler says:

    Amen!!! Great post Trent! And for those that actually buy into these ideas (ie. gold), shame on you!

  2. Trent Hamm Trent says:

    I’m not opposed to gold as an investment opportunity in balance with other investments, but to people who preach it as your savior in the end times that are coming, I’m unimpressed.

  3. Ron says:

    Trent, you’re “right on the money.”

    IMO, the only thing worse than selling fear is selling come crazy conspiracy theory.

  4. Joe says:

    If you haven’t reviewed these books, how do you know about their common denominators?

  5. freddiemac says:

    I read your blog every day and appreciate the good information that you write about. However, I also read theoildrum.com every day as well. I like to read from a variety of resources.

    There is good information available about the depletion of resources that, like it or not, will affect us. For instance, it is notable that the increase in the price of gasoline during the fall is not a normal occurrence, yet it is happening this year. In fact, it has happened one year after the maximum production of all liquids in July 2006.

    I don’t believe that this is right place to address these concerns. TheSimpleDollar.com has a different purpose. However, I don’t believe that the depletion of oil and other resources are just fear-based rantings.

    Just a thought…

  6. Adam says:


    I think you are right on two accounts:

    1. The books. Those “fear” books sicken me. The first irrational decision people make is to spend $20-$30 on these things, when they could save up that money…for the meltdown!

    2. Gold. I think it is a decent investment when it is in a person’s portfolio sparingly. You are totally right in how people use it: “the end is coming.” Dave Ramsey often says that, when an economy collapses, people don’t survive because they have gold; they survive because they have a skill or something to barter. Also, the best way to “play” gold (in my mind) is in stocks, and, again VERY sparingly.

    Great post!

  7. katana says:

    Thanks for the post, it’s very true. We don’t know what’s going to happen, and there’s no point preparing for imaginary horrors. And would anyone want gold if everyone is short on food and water? Maybe, while we’re planning for the worst- being attacked by zombies? ?

  8. Laura says:

    Great point:

    By selling fear, you’re immobolizing people from making choices that can help them. They’re not doing a service to their audience.

  9. Good food for thought here, Trent. We all know that prices will rise, nations will fall, and we’re all gonna’ die someday. As much as we might try to predict when those things are going to happen ultimately we have insufficient data to do that accurately. Buying into fear mongering is only going to make the mongerers richer and you poorer.

  10. Trent Hamm Trent says:

    I’ve read several of them. I just haven’t reviewed them. I write reviews of roughly 2/3rds of the PF books that I read – I tend to skip the highly obscure ones and the ones with deeply negative messages.

  11. Trent Hamm Trent says:

    “I don’t believe that the depletion of oil and other resources are just fear-based rantings.” You’re right, oil is a limited resource. However, wind, solar, tidal, hydroelectric, gravity, and nuclear energy are not (for our purposes). We just need to wait until the market makes it financially worthwhile for investors to move to those technologies, and we’re not there yet. To preach apocalypse about it is nothing more than fear mongering.

  12. Heather says:

    “The best thing you can do to prepare yourself for financial strength in any situation is to work on constantly improving yourself.”

    Hi Trent! I’ve been reading and enjoying The Simple Dollar for a month or so now and this is my first comment. I have never agreed with anything more than this quote above. It’s so important to remember that, no matter what the situation, the most important thing you can do is focus on improving yourself. The goal of concentrating on personal finance, for me, is so that I can be more prepared to handle any situation that life throws my way, and that’s true for many areas beyond finances. Learning to handle your finances is just one part of becoming a well-rounded, responsible, life-loving human, and acting out of fear of events beyond your control is completely counterproductive to that process.

    Thanks for the wise words and the great blog!

  13. dong says:

    I agree I don’t think the fear mongering about quickly draining resources is necessarily a topic for personal finance, but I think the messages are important ones to hear by the masses, and I’m not even a peak oil guy. It’s important that we know our resources are being drained so that can move onto others. To bury our heads in the sand does nothing for us when we actually do run out of oil.

  14. Heidi says:

    Well said! I have no time for scare tactics.

    I am a regular reader and you can count this post as one of your ten “truly great posts” for November.

  15. Mrs. Micah says:

    “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.”

    Exactly. Now, if oil hits $200 a barrel or $2000 a barrel, we’ll use those skills to figure out how to deal with it. And if it hits $20 a barrel, we’ll still use those skills and live responsibly. :)

  16. Minimum Wage says:

    “There is no “magic bullet” solution for any future crisis.”

    Right below that was an ad for Viagra. Isn’t that like a magic bullet solution for a future crisis?

  17. RNA says:

    You’ve pitched some sociology books into your “personal finance” classification (“Nickel and Dimed”, “Born to Buy”, “The Overspent American”, “What Color Is Your Parachute”, etc.) so it doesn’t make much sense to exclude these, especially when some of these books, like the ones by Jim Rogers, sell very well and are obviously being used as pf books by readers. I wonder if you are new enough to investing that commenting on commodity allocation isn’t in your comfort zone.

  18. Michael says:

    I think most fearmongers are kidding themselves if their nightmare scenarios come true. Nuclear war hits! Multiple cities, totally destroyed! Society in chaos! Well…sure, these guys have food and water and fuel and equipment stocked up. But will society begin again before the food, water, and fuel run out and before the equipment wears out?

    Gold will be like anything else in a total state of emergency or depression. People will pay for it only what they want to pay for it. Your $800 gold coins aren’t going to last long if all you can get is a tank of gas and a few sacks of food for it! And unlike other investments that earn interest, once you sell the gold, it is gone. You will not get it back unless you negotiate a costly exchange for it.

    Foreign currencies? Ha! Countries and individuals around the world are pumping more and more money into euros and pounds, abandoning the dollar. Where will the money go if the euro and pound are deemed overvalued?

  19. Margaret says:

    The problem with oil is not that we are running out, but that deposits are more inaccessible and there is significant cost (monetary and environmental) to getting that oil out. If society is going to go off the rails, I’d take bets that it happens because of an environmental crisis long before an oil crisis.

  20. Stephan F- says:

    Gold is actually a really good investment for really hard times but not in the form most of those gurus hawk. Gold coins and bars are fine if you like the pretty, but are completely useless in times of general economic upheaval.

    Gold rings, and necklaces are the best. They can be traded easily for many things. Everyone is familiar with how much they cost and are useful in themselves as jewelry.

    How do I know? My parents and grandparents lived in Germany during the Wars and Depressions. Gold jewelry was a common form of alternative money.

    The recent unpleasantness in Argentina also had a thriving trade in gold jewelry.

    Also go to any pawn shop and you’ll see plenty of it too.

  21. Tordr says:


    On the one hand, I agree that this blog is not the forum for reviewing such books. On the other hand I do find it wrong to dismiss such books automatically. Below all the fear and hyping of gold there might be some thoughts about how to live more self sufficiently, and that is a very fugal thing to do.

  22. rstlne says:

    I read “The Coming Economic Collapse” and I agree that it is not a book about personal finance. It is a book about an investment theme. The book’s message is rather extreme though. Here’s the way I like to think about energy and precious metals as investments: There are times when these investments are appropriate and there are times when these investments are not appropriate. It’s up to you to take the time to study them as well as prevailing economic conditions to decide when and how much to own of them.

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