For many Australians the major hurdle to building real wealth is not the performance of investment markets… it’s what’s happening in their head.
In other words, how they control their financial fears. All of us are governed by basic human emotions… vanity, lust, greed, fear, joy, sadness. When it comes to matters of money, fear is often the overwhelming emotion which can destroy our ability to manage our finances properly.
Understanding those fears, and knowing how to overcome them, can be both a liberating experience and a critical turning point in building serious wealth.
Here are 6 biggest financial fears that we see are holding people back and how to conquer.
1. Money is too complicated
The fear of not understanding and being made to feel a fool is so common when it comes to dealing with financial matters. It is basically an automatic surrender to have anything to do with any money decision.
They want someone else to do it and, as a result, they take no responsibility for what eventually happens. They don’t read the fine print of investments, they aren’t willing to educate themselves or even learn from their experiences or from others.
It is such a dangerous trap to fall in to. Change your thinking. Believe us, money isn’t complicated. It’s common sense.
Challenge yourself to learn about the different parts of your financial life. Do it slowly and methodically and focus on the fact that you can understand.
2. What if I make a mistake?
We all make mistakes, particularly when it comes to money. That’s life. The best we can do is limit the damage and rectify it as quick as we can.
But for many people, this fear of making a mistake paralyses them from making any decisions at all… and that is a whole lot worse.
Keeping your money in a bank savings account earning incredibly low interest, or under the mattress, means you will go backwards financially as your cash is ravaged by inflation.
There are tools and strategies to minimise risk while maximising returns. It’s a matter of finding a balance between the degree of risk you’re comfortable with and getting a decent (not necessarily the best) return on your money. Good advice and a diverse portfolio of investments will help overcome this fear.
Kochie explains how the Money Makeover works
3. I’ll get fired and never have enough
During periods of high unemployment or under-employment this is a very common fear. A regular wage becomes a financial lifeline on which we all depend and fear of ever losing it. It can mean we are stuck in jobs we hate or too scared to ask for a pay rise. It causes stress which can often feed on itself the older you get as you suspect employment opportunities recede.
To overcome this fear, it’s important to have a back-up plan. Assess the future prospects of your employer. If the outlook isn’t so bright, start looking at what else you could do. Have a plan of targeting potential new employers, let friends and relatives know you’re on the market, start developing new skills to transition to a new career.
Just having a well thought out back-up plan will control your fears.
4. I’m going to end up poor
This is one of the most insidious and complex of our financial fears. It’s rooted in vanity, in independence, in uncertainty.
In our society wealth is a status symbol, a measure of success. If you don’t have it, what will friends and relatives think, who will you have to depend on for assistance, how can I control my future.
Poverty can be demeaning and sole destroying. At its root this is a fear about losing financial independence. And that fear can be so absorbing that it can distract you from solving the problem.
The solution boils down to knowing how much you’re making versus how much you’re spending. So if you don’t already have a budget in place, you may need to do the numbers ASAP to figure out if you’re living within your means — and in a sustainable way.
Many people tend to turn a blind eye to the real things that can financially derail them. They might, for instance, fixate on a low superannuation balance as the source of their money stress, while ignoring the fact that they spend $500 on eating out each month.
5. I’m being crushed by debt and will never get out of it
A combination of outstanding credit card balances, which never seem to dwindle, with a whopping 30 year mortgage can be just too much for some people. It’s a mountain of debt which can seem insurmountable.
To get started, consider calling your bank to see if you can negotiate a lower interest rate on the home loan. Even a small discount can cut years off your home loan and save thousands in interest.
Once you’ve lowered your rates, figure out the amount you’d need to pay — and what works with your budget — to eliminate that debt in five years or less.
Another important step is to make sure you aren’t racking up more debt. Aim to leave your worst-offender credit cards at home (the ones with the highest interest rates), so you’ll be more inclined to stick to using cash or your debit card.
6. What will my friends and family think of me
Too many people gain a sense of personal value from the money that they earn (or don’t earn). People have a lot of fears about how others will see them because of money.
They may fear that people will think less of them if they don’t have enough money or even will think they’re snobby if they have too much money. What do you fear people see when they see your money? Are those fears holding you back?
Learn to separate your self worth from the money that you have. Define what you consider to be a sign of success other than a big investment balance. Determine what you think is important to have in your life regardless of how much it costs.