What do you fear most? Is it that you’ll never get the job of your dreams? Or that you will never get the woman/man that you have a crush on? There are many types of fears and one of the types of fear we will conquer today is financial fear.
Financial fear is pretty much the fear of taking risks in your life that can have a positive impact on your financial life. This holds true for employees as well as merchantry owners. Your financial fear can be holding you when from making increasingly money.
Let’s dig deeper into what financial fear is and how you can overcome it.
Fear Is A Motivator
Anyway, fear is an emotion that can often motivate us to action, sometimes positive and sometimes negative. It can moreover leave us paralyzed in the moment, which is rarely overly good. Fear is a motivator. But we shouldn’t let it be a negative motivator, expressly when it comes to our finances.
For me, financial fear rears its ugly throne in several ways. For example, as I work toward financial independence, fear of things like significant periods of inflation and economic stagnation and the resulting potential losses to my investments is concerning.
Fear can moreover pension you from participating in investment opportunities or rationalization you to wilt irrationally invested.
Fear Can Pension You On The Sidelines
One of my biggest regrets is that I didn’t invest my money for a few years thinking a stock market crash was coming, maybe you can relate. I lived through two recessions, 2000 and 2008, which caused the stock market to plunge which put a thought in my throne that flipside one is coming soon.
Instead of investing my money, I let fear irrationally pension me from investing in some of the weightier deals in a generation. If I had practiced what I preach now, doubled-down and invested heavily in that market, and dollar forfeit averaged my way in on the way up, I could probably once be pretty tropical to achieving financial independence.
Don’t let fear pension you on the sidelines.
Fear Can Tempt You to Deviate From Your Plans
Fear can moreover rationalization you to invest untied from your investment plan. When the market is way down, you might be inclined to sell, rather than to buy. Depending on your time horizon for retirement, this might make sense.
But if you’re decades yonder from retirement and dollar forfeit averaging your way to financial freedom, a falling stock market can be a unconfined ownership opportunity. Alternatively, fear of missing out (FOMO) can rationalization you to over-invest in appreciating market.
Long periods of run-ups in investment prices (stocks, bonds, bilateral funds, real estate, you name it) can result in a type of irrational optimism tabbed “market euphoria” where people uncork to think that the market can only go up.
This results in a lack of perception of the potential risk(s) of an investment and an over-investment in the windfall relative to a person’s financial goals. Don’t let fear of missing out rationalization you to invest untied from your investment plan.
Fear & Entrepreneurship
Another financial zone I’ve seen fear play out in my own life is in the zone of merchantry ownership. It can be pretty discouraging when thinking well-nigh starting your own merchantry to realize that virtually 19 out of 20 businesses goof in 10 years.
I think we need to temper the type of fear that might trailblaze that nonflexible reality with both mettlesome and cautious optimism. Of course, we are to consider risks and count the forfeit surpassing investing money and time in a business.
But, if you have an idea that could significantly modernize the lives of others and maybe plane your life, maybe it’s worth pursuing or at least scoping out.
Combat Fear by Mitigating Risk
Almost any whoopee we can take has risks. When you get in your car every day, for example, there’s a risk you won’t return home. But that doesn’t pension most of us from driving. Why do you think that is?
When we take towardly steps to mitigate risks, fear often becomes less of a factor. For example, if I’m driving the speed limit in a mechanically sound vehicle with airbags and safety restraints in use, I finger relatively confident out there on the road.
Mitigate Investment Risks Through Diversification & Dollar Forfeit Averaging
So, what steps can you take to mitigate investment risks? In the investment world, there are a number of ways to mitigate the types of risks that might rationalization us fear. Portfolio diversification is an spanking-new way to reduce risk and the associated fear. Dollar-cost averaging is flipside unconfined way to mitigate risks.
If a person receives a windfall of money, approximately two times out of three historically, it has been largest to go superiority and invest the lump sum of the money as soon as possible. By picking some time horizon to enter the market, you’ll be ownership increasingly of the resources when prices ripen and less when prices rise.
But you won’t be putting all of your money in at the highest highs (or the lowest lows).
Mitigating Merchantry Risks With Sound Planning & Scaling
If your financial fears are related to business, like some of mine are, there are ways to mitigate those risks, too. One easy way to mitigate merchantry risk is to develop a sound merchantry plan.
If you can provide proof of concept that your merchantry should be profitable, you will have both some peace of mind and a road map to potential success. Experienced merchantry owners and organizations that support merchantry and entrepreneurship will often help you develop and refine these plans to help you succeed.
Another practical way to mitigate merchantry risk is to start small and scale the merchantry up over time. That’s not feasible for every business, but it’s often possible.
The smaller your initial investment and the less of the rest of your life you requite up out of the gate, the lower the stakes. The lower the stakes, the lower the risk and the resulting fear. You’d moreover do well to take that tideway with a grain of salt, though. Low stakes often midpoint quitting when the going gets tough.
Fear As A Positive Motivator
Remember, fear can moreover be a positive motivator. For example, if you didn’t fear a large wild animal, you might not know to pension your distance. How you respond to the emotion of fear often has a whole lot increasingly to do with the outcome than the stimulus that caused the fear itself.
For me, “keeping the wolves away” motivates me to pension working to pay the bills. Instead of fearing next month’s expenses, I use the reality that they will come as a positive motivator to pension working toward financial freedom.
Don’t let fear pension you from pursuing and achieving your financial goals. Recognize financial fear, understand it, and take practical steps to mitigate risks and overcome irrational fears.
What are some of your financial fears? What do you do to mitigate the underlying risks that trailblaze those fears?