When it comes to money and finance fear seems to be an ever-present actor on the stage we call financial security. Why is that? Let’s first examine what fear is. Webster defines fear as: an unpleasant often strong emotion caused by anticipation or awareness of danger. Let’s break this down. First, let’s consider the word danger. What is dangerous about money? Without waxing too philosophical, when I think of money I think of power. Power to do good and power to do not so good. The danger is that money gives us the power to carry out poor decisions. These decisions can range from the relatively insignificant to the permanently damaging. Anyone who has bought an item that later makes it to the “Worst products bought online” list knows what I’m talking about.
When fear rears its ugly head in your finances you have two choices: face it or run away. Fear triggers a stress response that starts a chain reaction varying from person to person. For some, feelings of panic can sweep over them. Others may simply feel butterflies in their stomach. Do these feelings sound familiar when it’s time to file taxes? Do these anxious feelings crop up when it’s time to look over your spending habits?
The good news is that you have a choice when your mind believes you are threatened in some way. You can choose to face your fear. Facing any fear takes courage and determination and in the realm of finance this can be daunting because of the influence money has in our lives. I would like to share three steps to start on the journey facing money fear.
The first and most important step is to understand where you are. If you don’t, it’s like trying to get directions on google maps without entering the place of origin. Most of the time it’s not as bad as you think. But even when it is there is something very empowering about knowing what the score of the game is. Practically speaking there are several different methods to find out where you are. You can download an app like the one offered by mint.com and enter use it to keep track of your accounts. You can also use your bank’s app or website. All the large banks and some smaller ones have very useful tools that do a good job of tracking expenses and categorizing them. Alternatively, you can fill out a spreadsheet or take a piece of paper and just write it all down. The key is to take the first step. For one month keep track of every single cent that is spent and keep track of every single cent that is earned. You will most likely be surprised.
The second step is to know where you are going. If we continue with the google maps analogy this is where you enter a destination. For example, if the goal is to free yourself from debt you would clearly and succinctly describe what that means to you. You would answer questions such as: What does freedom from debt look like? What would freedom from debt allow me to do?
The third and final step is to know how to get to where you are going. This is where you determine the process or strategy to achieve your goal. In the debt example, this could mean paying off the highest interest loans or credit cards first. Another strategy is to pay off the smallest loans or credit cards first. This step requires some basic analysis but common sense is usually the best guide. This is a very individual step and understanding the pros and cons of different strategies applied to your situation will help.
Fearing finance does not have to stifle our progress on the road to success. Stay positive and work the process. It’s important to keep in mind that when we involve money we usually have to deal with emotion. But fear not…this is one area that you have control over.