Face Your Fear
Posted by Gail | Filed under Good ideas, Money Management
Money is a funny thing. It’s at once an enabler and a restrictor. It let’s us do the things we want, like take vacations, buy beautiful homes, take our kids to a concert. But it also ties us down. Would you quit a $120,000 a year job if you were unhappy, or would the money keep you working?
While I try to convince people that money is simply a means of exchange, a way of shopping without having to carry a pig over their shoulders – as in “I’ll exchange this pig-hind for two of your chickens,” – lots of people don’t believe me. They see money as the great liberator: the more money they have, the more freedom they enjoy. But that ain’t necessarily so. Just ask the guy with the $120K a year job who hates what he does!
Money, or the thought of not having enough, can actually induce a sense of panic. The idea of not being able to pay the rent, buy food or keep up the car insurance is kinda like being held under water for two minutes. You flail, not really thinking straight about what you can do to solve the problem. And that’s one reason we loooove our credit.
Credit is like the scuba tank. We figure, as long as we have some credit, we won’t drown. We can take a short sip of air, and hold our breaths a little longer. If we have to, we can take another short sip. We won’t drown because we have the means to breathe under water. Let me ask you this: when the credit runs out, what are you going to do then? Now you’re stuck under the water with a heavy ol’ tank strapped to your bank, and no air. Hmmm.
It’s time to figure out what you’re actually afraid of and do something about it.
Are you afraid that you may not have enough money to take care of your essential expenses? Lot’s of people twist their hair, wring their fingers, jiggle their legs when they start to think about how they would cope if the caca hit the fan. The fear is enough to paralyze them: they don’t start saving, they simply push the fear away (but not for long). Ya know what? It’s time to set up an emergency fund. Do a budget so you know what your Essential Emergency Expenses would be, open up a savings account and start setting aside a little each month to cover your ass.
Maybe you’d like to start investing but you’re afraid that you won’t make good decisions about managing your own investments. Get yourself an expert in investing to help you. Make sure that person understands your goals and is in tune with what you’re trying to achieve. And that person should be able to say “no” to you. When Patrick started managing my money he asked me what my expectations were. I said I wanted to earn 11% on my money. He shook his head. “No can do.”
“How much?” I asked.
“Nine percent is realistic with your risk tolerance,” said Patrick (before the melt-down). So I adjusted my expectations and let Patrick do his job.
Worried that you won’t be able to make your debt payments? Time to create a debt repayment plan so you know just how much it’ll take to be debt free in three years or less, and find the money to make it happen. Debt free isn’t going to just happen. It takes work. And a commitment to doing ANYTHING to get out from under. It takes patience. And it takes stamina. Stop worrying and start moving.
Is the idea that you won’t be able to afford your child’s post-secondary schooling keeping you up at night. Time to open up an educational savings plan and start contributing $100 a month. If they’re in Grade 11 or higher, it’s also time to start talking to them about their responsibilities in coming up with some of the money, be it through hard work or scholarships, bursaries or student loans.
While most of the time I deal with people who spend too freely, there are also people who are so afraid of not having enough that they become an extreme saver. That’s not healthy either.
Identify your fears and you’ll be well on your way to redefining the role money plays in your life. The idea is to stop flailing around like you’re running out of air. When you can acknowledge your fears you can take action to overcome them. Identify the weaknesses in your financial plan that have you gasping, and then set some goals to breathe easy.
Now it’s your turn. What have you been worrying about, and what are you going to do to face your fear and get moving?
January 30, 2009 at 8:36 am
I personally have never stayed in a job that I didn’t like or I had issues with the way things were handled, and when brought to someone’s attention was not addressed and corrected. I have gone so far is to rollback my wages for a year, but now I have a position where I earn good money, I enjoy my work, I enjoying my break between contracts and I enjoy the people I work with.
January 30, 2009 at 9:00 am
My parents and I might fall under the category of ‘extreme savers’. My issue is that I’m always concerned getting laid off. I don’t think I’m extreme but some of my friends do. Some of my friends carry large loads of debt though, so how can I trust what they say?
I’m not quite sure what my parents’ issue is – they’re retired and on pensions. Maybe because they don’t have to touch their savings… they don’t! So we’re always telling each other to have more fun. (In my defense, I don’t deny myself phone and internet like they do!)
January 30, 2009 at 9:09 am
My concern is that we’re not saving enough for retirement long-term, and short-term that our mortgage is too much for us; though the payments fall into the 28% ish that seems ok. It just seems like a big number but perhaps it’s not that bad considering where we live (Toronto core). Currently though we just keep paying our mortgage, avoiding any consumer debt, contributing to rrsp and resp and just doing the best that a couple in their 30s with a baby can. There’s an Inuit song I like that has the line: “I think over again my small adventures, my fears, These small ones that seemed so big” which I think of when I have to remind myself of the power that fear without action can grow into.
January 30, 2009 at 9:50 am
I love the analogy with the scuba tank!! Been there and it’s NOT a nice feeling! Never want to experience that again. I guess I still have a few fears, but I have to face one at a time or I will get overwhelmed. And I think Gail would “cut my hand off and feed it to me” if she saw some of the things I used to do, which I am working on changing. I guess my biggest fear would be that if something happened to my husband, regarding his job. I just started saving for an emergency and there is very little in there right now to say the least. My mom had told me that it wasn’t a good idea to save when you have debt – so I listened! Now I have another “mom” to get advice from – and boy did she open my eyes…
To Geoff, how true!!!
January 30, 2009 at 10:35 am
I’m definitely in the “Extreme Savers” side of the house, I worked for the big tech company that just declared chapter 11 and after years of uncertainty it has put “Fear” into me that is hard to control. If I don’t see a steady rise to the emergency fund I panic, sometimes it’s just hard to spend a penny.
January 30, 2009 at 12:34 pm
I am afraid for my old age… no matter how many times I visit the retirement savings calculator, we don’t have enough set aside every month to retire — even at 75!
I started early (age 23) putting bits away every month and got husband on board with about 7-10% of the take home income. Unfortunately that income has ebbed and dipped occassionally. And now that our investments are worth even LESS that we have put in…. a feeling of utter helplessness has set in. All this time that money could have gone to our mortgage and we would have been farther ahead. The power of compunding with time was blown out of the water and the returns are in the negative! Oh when I think about it I get a terrible heavy feeling in my chest and get despondent.
I really start to panic when I look at our family histories. The women in my family live to ripe old ages, but the men on my husband’s side tend to leave the world relatively early… my husband COULD theoretically have similar issues and drain any resources from major health problems! Then where would my long life expectancy leave me?! AAAAAAH panic sets in. ALONE and poor, not just broke, but POOR.
(Of course, I can’t count on such a negative picture, but it would be shear ignorance to ignore it.)
So I fret quietly making sure all the bills are paid and the kids are cared for and wishing there was a better guarantee than the RRSPs we have, a better rate of return to get into…. and more cash to set aside.
January 30, 2009 at 12:40 pm
I also worry about retirement. I wanted to retire at 55, but looking at my pension investments and savings that I have, I more realistically better find a job that I love because quitting work early probably won’t be in the cards. And I have the same issues as Pol – I am much younger than my husband, so when he goes (as his health dictates will be likely) I will be alone and poor as well. Hopefully still working at something I love to do though – so I better get on with finding out what that is and making it happen.
January 30, 2009 at 12:48 pm
I have a LOT of money fears.
When I moved out of my parents home and in with my husband I was terrified we wouldn’t be able to make it. He couldn’t find a job and I covered everything and everything left us with about $30 at the end of the month.
I worry that we won’t be able to stand on our own to feet when we get out on our own (we live with his parents right now to save for a house). I don’t want a free ride. I don’t want to ask for money. I don’t want to be in debt. I’m scared like a moose in a hunting camp that as much as I plan and try to save something will happen to bankrupt me. So very very scared.
January 30, 2009 at 1:13 pm
You say plan to be debt free in 3 years. Does that include mortgage? I never know what to classify my mortgage as. I have no debt other then my mortgage on my home and on my rental condo. I have a $9000 emergency fund and $10000 RRSP acount I am 31 years old and am stressed about not having enough money. Should I stress?
January 30, 2009 at 1:34 pm
Leah:
It’s always consumer-debt-free in 3 years (student loan in 5). No one would buy a home otherwise!
January 30, 2009 at 1:58 pm
Growing up I saw what a lack of money can go, and I am afraid to be in that place myself. So I like to keep a high bank balance. It doesn’t make sense when I could do things like pay down my mortgage or invest.
This year, I am working on keeping a bank balance that will get me through the month with a comfortable buffer, but no more. Any extra goes into my investment savings account to use for retirement, paying down my mortgage, or planned spending. Because when I keep a high balance in my bank account I feel good, but I also give myself permission to buy little things that I don’t really need, since I can ‘afford it.’
January 30, 2009 at 2:25 pm
This is probably going to be your best post of the year…”figure out what you’re afraid of, and do something about it” is indispensable advice.
January 30, 2009 at 2:43 pm
WOW,
It is actually comforting to know that many people have the same fears.
The recurring theme I see here though is the fears but not what you are doing or going to do about it.
To all the people worried about being left alone and poor because of a spouse that dies, you need to look into life insurance. Do it now? My husband had a heart attack at 36. Yes he is ok but it makes you stop putting off things like insurance and wills and power of attorney.
Gail has posted lots of information on what size an emergency fund should be, what should be in savings and so on.
I too was in the same boat as a lot of you and still am to a certain degree. The difference is I have taken steps to make things right in the end. Being organized and knowing what is done and what still needs to be accomplished takes a huge wait off your shoulders and lets you sleep at night.
If I can do it, any one can. Now just go do it now.
January 30, 2009 at 3:18 pm
I struggle finding a balance between saving and spending. Sometimes I feel like i’m not having as much fun as I deserve and I think I should start loosening up a bit. But then other times I worry about having enough money in my future. For me I think it’s the lack of planning and organization that makes me fret so much. I still haven’t made a proper budget this year, after moving to one income.
January 30, 2009 at 3:19 pm
Prior to encountering Gail and TDDUP I was always living in scary spending land. I paid all my bills on time but I never knew how much to save or how much I could spend on gifts, clothes, entertainment – all the variables. I thought I should be putting every penny to my fixed expenses, debt and savings and I felt guilty spending money on anything else. Now I have a budget for everything – even gifts and xmas. I know exactly how much I can afford to spend on everything and it is so freeing! I never realized you only had to set up a budget once and then follow it and you never need to think about money again IF the budget is detailed enough. That was my problem in the past – no jars. The jars have lifted the weight off my shoulders and let me sleep at night.
January 30, 2009 at 4:10 pm
To Angela: Fab advice about life insurance, for those who can get it. My DH is diabetic (has been since he was a kid) and is now having heart trouble. Nobody would ever insure him, except for those “guaranteed” plans, which cost a ton and insure you for very little. I am taking the amount I would spend on premiums and figuring out how long it would take me to save up the same amount he would be eligible for.
January 30, 2009 at 4:21 pm
@ Pol – there is a silver lining to your investments being worth less now than before – your dividend reinvestments are buying more stock for the same amount of money (assuming dividends haven’t been cut). But if you were/are planning on using your rrsp for a house purchase, you should be in fixed income products anyway in your rrsp.
@ Leah – I think you’re doing pretty darn well at 31 personally owning a home and a rental property and no consumer or education debt (spectactuarly well, actually). Now that said as long as your bringing in more money than you spend and can cover emergencies I think you should be quite proud.
And for those of us worried about retirement, I think it’s wise to consider the fact that in our 30s and 40s the financial demands on us are quite high. In retirement, many of our costs should be gone — no mortgage, no tuition to save for, no kids to take to Disneyworld, and we get 10% off at shoppers drug mart too.
January 30, 2009 at 7:35 pm
My fears are about finding balance…
I want to be able to buy a home, save for emergencies and retirement, and be able to go on big trips and enjoy the time with the people around me.
I don’t want my money planning to paralyze me from doing the things that make life so sweet, but I don’t want a lack of planning to do the same.
I am new to living with someone and having a shared major expense (a car) and planning for the future when we are both used to being financially independent.
And I don’t want it to keep me from working in a job I love or going back to school if I find a new passion.
Financial planning to me means freedom – freedom to take the opportunities when they arise, like housing options in a town with limited affordable housing… or buying a plane ticket to Hawaii when friends call about a 1 day seat sale.
January 30, 2009 at 8:09 pm
As a boomer, I’ve watched my ancestors retire and live out their lives living on their pensions, and it was enough. In these economic times as the price of everything escalates, I worry that we have enough in our retirement – which is right around the corner…hubby in June and me probably by the end of this year…..things aren’t the same as the ‘olden’ days. I think it has a lot to do with my parents/grandparents going through the depression. They were frugal because they had no choice. I’m afraid I came through the ‘bountiful’ years and spent way, way too much. Wasn’t that a party???? Hindsight is a wonderful thing.
So as our RRSP’s tank, I’ve done a 180 and have been trying to sock as much as possible into our new TFSA’s. My goal is to hit the limit of $5,000. for each of us this year. I’m also chipping away at our LOC (our only debt) but it won’t be paid off by December. If we move and sell our home it will be cleared, but, hate losing that chunk of $$$ for our new place of residence.
If any of you are Seinfeld fans and remember the Elaine episode about being ’sponge worthy’….I’m really, really trying here to be ‘Gail worthy’!
Thanks to everyone for their comments and being so honest – it’s nice to know that I’m not the only one in the boat.
January 30, 2009 at 8:17 pm
My fears were about ending up unemployed living in a cardboard box on some back alley. I use this line with my kids when they occasionally leave both the gas fireplace on and the 3rd floor windows open all night (not to mention the key in the front door). I remind them that to ‘heat the universe’ will end up taking funds away from their university funds.
Six years ago we took a risk – and moved up to a larger house in a nicer neighbourhood. Every anniversary of the moving date I say to myself, ‘Self, we are still in this house – and not living in a cardboard box on the street’. We’re handy and are renovating it ourselves so the move made sense. The first things we did was renovate and rent out the basement apartment – which helps keep us from living in that cardboard box on the street.
I am so thankful that we started saving for the kids’ post-secondary school costs when they were in the womb. Now we are shelling out those savings, but know it’s not enough to put both kids through school – but it gives them a good start.
January 30, 2009 at 9:33 pm
Been there, done that with the $120K per year and I can tell you first-hand, now that I am unemployed and a stay-at-home Mom that there is no better feeling than spending time with family and friends (time that you could not spare working a job that pays you $120K, let me tell you!) and living on cash from your jars!! HONEST!! I was also one to leave university with $20K on my credit cards, a car that was financed and then I got my wits about me – financial stability and independence is a wonderful feeling but TRUST ME – more money doesn’t make the world a better place. Deciding what you need (put it on paper – year by year and guesstimate what you may need and what potential expenses may arise to the best of your ability) and how to best manage it does make it livable and then quit worrying about it and get on with living!
January 31, 2009 at 2:48 am
Of course, like many, I do fear what my financial future will look like. When I was a bit younger, I did have unrealistic views as to what stage in life I was going to be in the upcoming years. Right now, I feel behind and have the habit of looking at my age and how my financial portfolio isn’t where it should be.
Respectfully,
Josef
January 31, 2009 at 10:07 am
This month we have put our first $300 away for emergency and savings. We would have put more but a couple unexpected events happened this month. Yes I know thats what we should have an emergency fund for.
I have also started a seperate savings for my kitchen counter i want. already have about $55 in it. Just from what coins i had saved up around the house and little extra change here and there.
So many things we could use but its deciding on weather we need it or not.
It feels nice to be able to put some money away and still have some to pay the bills and pay extra on our debt.
my boys are 18monts and 2monts3weeks old and they each already have some savings. Birthday and gift money mostly. I think they have more than i ever did at their age and until i was old enough to really make anything or know to save it. My parents were not financially able to save anything for us.
Its morethan being financially able too, its being responsible.
February 1, 2009 at 5:13 am
I loved your analogy! And it’s true! We need to take ownership and get it done!
A friend of mine told me something that made me shake my head today…
“I don’t care how much debt I have, as long as I have fun and make memories.”
When she starts to drown, I bet her tune will change, and fast!
February 1, 2009 at 5:47 pm
My fear would be that the giddiness of our first month on the jars will wane, and it can’t. Hubby was laid of last week, which was somewhat expected, and the jars and excel sheet really helped us know that we’ll be okay. A family member died on Friday, and I just wanted to go and spend money to make myself feel better after such a crap week. Thankfully, my family understood that my travelling such a far distance for the funeral didn’t make sense, with what all is going on in my life right now.
I am proud that I didn’t use retail therapy to make myself feel better and I hope hubby and I have the strength to make the right choices and get rid of our debt sooner rather than later without too much struggle.
February 1, 2009 at 9:25 pm
I’ve always been very frugal and tracked every penny I made and spent. I still do it for hubby and I because I fear the unknown. We paid off our house 2 years ago and the car loans (only other debt) last year. He was off work for months last year, after leaving a high-paying job to search for something he enjoyed. He still hasn’t found it but we’ve learned to live off my paycheque in the meantime.
Many of our friends think we’re nuts to worry in this situation at 30 & 35, but it’s not like we’ve saved up much for retirement, which is our next goal.
Paying off the house wasn’t easy but we wanted to do it, so it was simple. Our friends tell us all the stuff they would do in our situation: travel, stop working, etc. But we’ve realized that money doesn’t bring happiness. We’re not any more or less happy than when we had the mortgage. It hasn’t changed us at all. We’re proud of what we’ve achieved but we’re still working on our other goals. The fears of not having enough for our future are still there.
Just had to throw in another perspective.
February 1, 2009 at 11:26 pm
“…there are also people who are so afraid of not having enough that they become an extreme saver. That’s not healthy either.”
—————————–
That is unfortunately me in a nutshell. As you said starting the post off, I’m one of those few who lets money become a restrictor to greater happiness.
I’ve been out of school for 4 years already with my student loan paid off a couple years ago, a 5-years-old used car (was 2 years old when purchased) is also paid off, and I’m debt-free (yes ladies, I’m single…haha). I also have two separate saving accounts – one set for RRSPs, and the other non-RRSPs – both with healthy amounts in them (until the past few months where I saw a good chunk of my paper money get wiped out – but still sticking to my investment strategy – a la Wealthy Barber). In fact, I could get laid off/fired, and realistically not be concerned about paying the bills for a while, yet I still have a tough time of “letting go” when it comes to spending. And, for people who think I should be happy because I have no debt-clouds hanging over my head, you would be wrong.
I’d like to say I have a financial strategy/goal – like saving for a mortgage (and in some ways I am) – but really, I have no goals…no purpose as to why I am saving. It likely stems from my background while growing up – single parent household, money being tight – where I had to learn to talk down any “want” I had – not because I was forced to, but because of the self-imposed guilt that came from it. So even today, any “want” that comes up gets scrutinized and pondered over.
Even with my used car, I spent 4 months looking for the “perfect” car, and when I found one that caught my eye, it still took me 2-3 weeks to confirm a yes decision – even at the risk of losing it to another buyer (and let me tell you, the price was incredible for the car I got). Even just recently, during Boxing Day, there was a Dyson vacuum on clearance sale (one left) – I needed a vacuum, and the desire for a Dyson was certainly there. Yet, while it was $200 off regular price (a fantastic price), it took my friend (who knows me well) having to put more pressure on me than a salesperson in order for me to get it. I don’t know if I would have gotten it in the end. It took me 2-3 hours after the purchase to finally be okay spending the money, and now, I’m so happy with it (love with a capital L). I have to thank my friend for it, because I normally do not drop “x” amount of dollars without contemplating it first, but then, if I followed my usual “routine”, it likely wouldn’t be around anymore.
In many ways, I have to thank an ex-girlfriend of mine, who pushed me and challenged me to change my approach. She was never afraid to spend money on things if it was what she wanted, while at the same time, saving money and not going into debt. She showed me that it’s ok to enjoy life while still being sensible, that at the end of the day, it’s spending time with people you care about, and if it requires spending some money to show people you appreciate them, so be it.
For me, this will be a slow and steady battle that I have to fight to overcome this mentality, but I think I’m making small steps to some kind of victory. I believe that if I can learn to let go of my anxieties, believe that I am worth spending money on (the real key issue), then I can live a more satisfying life. I look forward to that day.
February 2, 2009 at 11:17 am
I am a bit concerned about how Patrick, who you trust, is getting paid. Many financial planners are little more than mutual fund salespeople. They put you in mutual funds that charge one to two percent of your money each year and keep about 40% of that fee. On 125k, you could be paying him as much as $1,000 each year, regardless of the actual results.
The reality is that only a small fraction of mutual funds in Canada outperform the index. It makes much more sense to invest in an index fund with a low MER. For example, the TD e-series Canadian index fund is as low as one third of one percent.
I doubt Patrick would suggest that though. He might even try to convince (sell) you that his funds might give better returns, otherwise known as chasing returns. This a definite conflict of interest.
High MER is a problem in Canada and I’d love to see a post on it.
February 2, 2009 at 11:51 am
Being a financial planner myself, it took me a while to sit down and track my budget. That was the first step without setting any goals.
I was amazed at how much money I spent, and even after living with my parents for one year, I didn’t save a single penny. Three years ago, I knew I needed to set goals for myself. I stuck to my budget and managed to pay off my car and student loans. I also set a savings goal of 20% of gross income (it IS possible), and still be able to take a couple of big trips/year.
So after being fiscally irresponsible shortly after University, (I’ve been out of school for four years now), I am now debt free, and in a position to buy by own place with a 20% downpayment. I didn’t think it was possible, but it starts with tracking expenses and setting a savings goal.
I can plan vacations hassle free and buy anything I want without worrying.