Personal finance can be intimidating. Money problems can be overwhelming. Concerns about the future can be debilitating. A lost job could put the family in jeopardy.
There are valid reasons we deal with fear about our finances.
And our goal in this article is not to eliminate any fears or say they are unjustified, because it's not true. However, we would like to review some of the dangers of managing your finances from the perspective of fear.
Fear can be as bad as greed.
Have you ever regretted making a financial decision based on greed? We all want to make a good return on our investments, see our nest egg grow, and have a reward for the hard work we do. That is not greed. It's perfectly normal. It's how the system works.
But fear can paralyze.
You can miss opportunities due to fear. Yes, there is risk in the market, and we live with risk every day. So there is no guarantee that you won't lose money, and in fact there is no guarantee that the stock market will always bounce back after a drop. There is no guarantee that a buy-and-hold strategy will work. The market could drop and stay down for the rest of your life. However, we have to live with risk in order to get some reward.
Have you ever sold a stock or investment in a panic? Maybe the market had a big drop, and there is bad news everywhere. So you sold. Then in a few months the market was back, or it was higher than before, and you wish you had held on. Most of the time it's better to hold on, depending on your situation. But selling in fear is not the right approach. However, it's very common.
Stuffing cash in the mattress is something people did a long time ago, but the practice is still happening as people stockpile money in a low-interest account at a bank. Yes, they could invest and lose it all. But inflation will eat away at the purchasing power of those stockpiled dollars.
So what do you do?
First, get informed about what kinds of risks there are and how to mitigate them. You can't remove risk, but you can manage it.
Second, work with an advisor, mentor, or coach on what strategies are right for you, in your current situation.
Third, once you have decided on a plan, try your best to stick to it. This doesn't mean you never sell and buy something else, but it does mean that you buy and sell according to a plan and a strategy, not fear.
It's not easy, and we can't offer a quick solution. But think about where you are and your current financial situation and evaluate if you are managing your investments based on fear or a plan.
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Disclaimer: The views expressed on this website reflect the personal opinions and experiences of the writer. Nothing in this article constitutes financial advice in any way. Information on this website should not be relied upon for investment or business advice. Please consult with a qualified financial professional before making any financial decisions.