3 Ways Fear Will Cost You Big
Many things -- from learning to ride a bike to starting a new job -- feel fraught with risk. Sometimes, fear can affect us financially. We might lose money by pulling our investments too soon, fail to find success because we're too scared to follow a dream, or waste money trying to keep up with the Joneses.
Here are three common fears seen in a different light.
1. We pull out of the market
We are currently in the midst of the 14th recession since the Great Depression. That's 14 recessions in 87 years. If we average that out, it equals one recession every 6.2 years. Yet, each time the bottom falls out of the market, some of us react as though it is the first time it's ever happened. Our thoughts become scattered, and we dive immediately into thinking, "I'm going to lose everything I've worked for!" So we call our broker to liquidate everything.
If that's how you feel right now, take a deep breath. It is often during challenging times like these that some good things happen. A recession stops inflation in its tracks, which allows people on fixed incomes to stretch their dollars. It reminds us that we need an emergency fund, and prods us to save money. And when times are tough and the stock market starts looking like the Titanic, everyday people have the opportunity to build a healthier investment portfolio by buying up investments at a low price and enjoying the gains when the economy rebounds. Continuing to invest during an economic recession is one of the smartest things we can do.
2. We don't start businesses
The current COVID-19 pandemic will pass, and the recession will end. What our lives look like then depends on decisions made today. If you've always wanted to start your own business but have been held back by dismal statistics, consider different statistics. According to the Small Business Administration (SBA), roughly 66% of businesses with employees survive at least two years, and 50% survive five years. After those bumpy early years, you may not be golden, but your odds of staying in business are the same as a business that's been open for decades. At the five-year mark, just as many enterprises survive as fail. Why can't you be one of the success stories?
In this case, fear may work in your favor. That's because you are more likely than the next person to do your homework, learn everything you need to know, figure out where you'll get the money to open your business, and create a plan that gives you the greatest odds of success.
If you're dreaming of life as an entrepreneur, use this time to build a strong foundation. There are people out there who want to help. For example, the Small Business Administration provides free counseling and low-cost training to folks who want to start a business. Another resource is Service Corps of Retired Executives (SCORE), a group of retired execs who have volunteered to mentor would-be business owners.
No one is asking you to launch your new business while a recession rumbles, but don't allow the fear of failure to prevent you from learning what it takes to succeed once it does make sense to open your doors.
3. We're afraid to miss out
In 1996, marketing strategist Dr. Dan Herman introduced the term "fear of missing out." Fear of missing out (FOMO) refers to the envy we feel when we look at other people's lives and believe they have it all. An old friend posts online photos of her "perfect" island vacation, or our next-door neighbor buys our dream car, and we wonder where we went wrong. Why can't we have the fabulous life they have?
The fear of missing out can lead us to make terrible decisions, all so we can keep up with people we barely know. We waste money trying to chase a Facebook-perfect life. We go on vacations we can't afford, buy a car that will stretch our budget thin, and end up tossing and turning at night, worried about debt.
Tips to consider when FOMO threatens to get the best of you:
- Take a break from social media. The photos and glowing posts are a facsimile of real life. Spend time in the real world, with real people who care about you.
- Make a list of your financial goals, ideal timeline, and plans to reach each goal. Ask yourself if FOMO prevents you from meeting those goals.
When doubt and anxiety cost you, calculate a plan. Gather intel that offers a clear direction. Let the work of economists, financial planners, and other experts be your roadmap. Read everything you can, and ask lots of questions. Arm yourself with the knowledge to outsmart your fears.
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