I’ve read a few posts about the impact of fear on a few other Personal Finace blogs but I wanted to tackle the subject myself. The very simple reason for this is that fear has been a great contributor to how I structure my finances and investments, at least it has in the past. Therefore even if I might not have adequate knowledge to talk on the subject I do have experience with it.
What experience do I have with fear impacting my spending and investing?
Initially when I started working I was living at home and I had few debts. Only one credit card to my name that had a low limit and the majority of my money was mine to spend. And spend that money I did. I got complacent in the knowledge that I could go do whatever I wanted because I had money. This complacency quickly turned into fear whenever the thought crossed my mind that maybe I should be spending less and saving some money. You might think it amusing but it truly was fear; I needed to be able to keep pace with my friends who were spending just as much as I was.
Before long I was 3 credit cards and a line of credit in debt for close to $30,000 but this didn’t stop me, fear was still driving me. The fear that I might not be able to keep my lifestyle kept everything just floating along for years, eventually I got to the point where I knew I had to stop spending more than I was making and I did. Everything mostly evened out and I was able to literally float all my debt and still enjoy myself most of the time.
So where was the fear at this point?
The fear of change kicked in after a little while and even though I knew that I needed to change my spending habits I didn’t. My debt load was slowly burying me so I consolidated some debt but the spending continued. I was scared of what I might have to do to actually get out of debt. Going out with my friends had become a staple of things that needed to be done as opposed to the luxiury that in reality it was. I have managed to overcome some of these fears and I now lead a much more frugal lifestyle in comparison. I still spend more than I should but now I am conscious of where my money is going and I account for it. If I know that I have bills to pay I make sure that I don’t overspend between pays and even more important I make sure that I no longer use my credit cards.
Now I have a new fear to overcome. Investing.
I have always been a consumer, I spend more than I make or I used to and I never set aside any money for pretty much anything. I am a dream customer for credit card companies, I don’t miss payments and I keep a very large balance. Investing for me is like spending money without a tangible result. It’s a fear of the unknown which is a considerable reason for why this site exists. Will I get over this fear? Yes, but I need to arm myself with knowledge to mitigate risks and to ensure I’m investing money that I can loose.