Are You Allowing Fear to Rule Your Financial Decisions?

The other day, my husband asked me if he could take some money out of our savings to put into a new investment account he wanted to try. The investment is riskier than a mutual fund, but it has a known maximum loss so we could mitigate that risk.

My first response was one of fear.

“I’m not sure. How much could we potentially lose?”

His answer was one I could live with. There was no good reason not to try it.

I knew that was why we had money in that particular savings account. And I knew that just letting it sit there without investing it would mean a depletion of value over time due to inflation.

But I was scared.

It didn’t matter that I knew we could do it. It didn’t matter that I knew that was why we saved the money. 

All that mattered was I was scared. And that fear was threatening to dictate my decision.

Fear has a way of giving us amnesia. Even though we do research, we make calculated decisions, and we talk them over with our loved ones, fear can still stop us in our tracks as soon as it’s game time. Fear doesn’t care about knowledge and preparation. Fear only cares about protecting itself from an outcome we don’t want.

Picture standing on a fortress overlooking your land. Fear would have you standing in there surrounded by soldiers and ammunition, forever looking down upon your land in case a threat should come. If fear runs the game, you never, ever leave your fortress.

Growth, however, tells you to venture out. To see what else exists, to forage, to join forces with others, to do whatever you can to better the quality and life on your land. Growth also tells you to ensure certain protections before you go – so you can venture out with having to worry. Your land is protected but you still look for ways to improve it.

Which one would you want to rule your finances?

My Long History with Fear

I know the topic of fear well because I’ve dealt with it for years. Growing up in a situation that was less than financially perfect enabled fear to firmly take root in my brain for years to come. Even though there are many positives to growing up this way, fear tries to steal them away.

I’m grateful to have struggled financially in my formative years. It gave me a sense of appreciation for everything I have – and it taught me how to work hard and learn the value of a dollar. These are things that have benefitted me for my entire life and I wouldn’t take them away for anything.

But fear sneaks in and tries to take hold. It tells me not to invest my money, but to sock it away instead. It tells me to make financial decisions focused on saving money, even when spending more could improve my quality of life in very real ways. It tells me not to take a risk and start my own business, but to go for a salaried position instead (even if a salaried position forces me to hit a financial ceiling faster).

Fear basically tells me, “No, no, no” and “Stop, wait, you don’t know what could happen!!” Fear disguises itself as pragmatism when it’s really just a giant set of breaks.

Luckily, over the years, I’ve learned the difference between fear and practicality.  I learned that you can create financial protections and then take calculated risks. And I’ve seen these calculated risks pay off in my life in both my career and my finances.

But fear still lurks. I’m assuming it always will a little bit – but if I let it dictate my decisions, then it’s won. And I don’t want fear to win.

How to Understand if Fear is Holding You Back

I was lucky to unmask fear and was able to do so with a lot of help from my husband, who grew up with a growth mindset rather than a fear mindset. But let’s focus on this: I was lucky.

It’s really hard to see fear on our own. Sometimes we need someone to call it out. And sometimes we need to take a good, hard look at ourselves to see if fear has taken hold.

So how can you tell if fear is holding you back? It’s simple, actually. Just think about the logic behind your decisions.

Are you saying “no” to things because you’re worried about the potential outcome – without doing research before you decide? Then fear is ruling your decisions.

Are there financial possibilities you avoid entirely because you’ve heard they can be detrimental – without looking into the other side of the argument? Then fear is ruling your decisions.

Are there things you could be doing financially, but you don’t even consider them because you feel safer with whatever you’re doing now? Then fear is ruling your decisions.

Are you noticing a theme here? Anytime you say “no” or “never” without first doing research on both sides of the equation, you’re letting fear rule your decisions.

Even if something sounds crazy, even if you’ve heard bad things about something before, even if something is new or you don’t know much about it, don’t say “no” without doing your research. Study the pros and cons, evaluate what kind of risks you’re willing to take and what kind of precautions you need, and then move forward with an answer.

Anytime you open your mind enough to research an idea or concept before saying, “no,” you’re beating fear. And beating fear means you control your decisions, not fear.

Change Your Mindset to Growth to Banish Fear

Engaging in research is the best way to make sure you don’t let fear win at decision time. But if you want to change your mindset entirely, then focus on growth.

Growth is the opposite of fear. When fear says, “no,” or “I’m worried,” growth says, “Let’s see,” and “Try and measure the results.” Growth focuses on trying things. Fear focuses on stopping things.

When you have a growth mindset, you focus on possibilities that could improve your situation. When you have a fear mindset, you focus on how to keep things exactly as they are.

Want to learn even more about the difference? Carol Dweck is a psychologist who discusses this mindset shift in her book, Mindset: The New Psychology of Success, showing that this paradigm shift can benefit us in every aspect of our lives.

Whenever you feel fear rearing its ugly head, think about growth instead. Ask yourself, “What would the growth mindset want me to do?” And if you can keep practicing that, you can change your mindset and banish fear. Not an easy task, but worth fighting for.

Image Credit: Edgaras Maselskis

Author: Shannon

Shannon McNay is personal finance writer who loves to talk about the emotional side of personal finance. Her work has been published in Business Insider, DailyWorth, Huffington Post, Lifehacker, ReadyForZero, Yahoo! Finance, and more. You can follow her on Twitter @shannonmcnay.