Fear. Even reading the word conjures up feelings of anxiousness. The good fight-or-flight fear protects us from danger, but the bad deer-in-headlights fear paralyzes us.
Fear also plays a significant role in how we feel about money and deal with our finances. Bad, paralyzing fear can get in the way of important decision making and result in women being less financially prepared for their future. In our article, Breaking Down the Barriers Between Women and Financial Success, we identified fear as one of the common barriers women experience when dealing with money.
After years of managing money, I’ve seen fear come in many different forms. According to Christopher Hansard, author of The Tibetan Art of Serenity, there are 12 main types of fear. Not surprisingly, three of these relate to money - Fear of Success and Failure; Fear of Poverty and Wealth and Fear of the Future and What It Will Bring. To this list of fears, I would add a money fear we observe almost universally—Fear of Making a Poor Decision.
It is this fear that paralyzes many of our clients, not just women, and it preys on both the wealthy and middle class. For example, we see many people who fear they won’t have enough money to retire or that they will outlive their money. They believe they can’t afford to lose any money, and their fear of making a poor decision prevents them from making any decision at all.
Even our wealthiest clients fear not having enough. They want to preserve what they have so they fear making a bad decision that could potentially deplete their wealth. The old adage, “Here today, gone tomorrow” holds a tight grip on the mindset of some wealthy clients. To be more specific, recently an affluent female client said to me, “You know, I was more content when I didn’t have money. Before all this wealth, I was more at peace because I didn’t fear making a mistake.” Having more wealth isn’t your ticket to eliminating fears about money.
How can you get unstuck from your fears about money? The first step is to become aware of the source or ‘trigger’ of your money fears, then you can take action to reduce or eliminate them. Triggers differ from person to person, and often men and women have different triggers. These are the most common triggers we see in our female clients:
1. Unexpected Life Events: As we navigate challenges in our daily life, we inevitably experience unexpected life events. Whether the event affects us personally, impacts our family, or affects the financial stability of the broader population, events can create fear about our future. Sometimes we make our fears worse by imagining the worst outcomes. As you’d expect, this is a common trigger for women undergoing a change in family circumstance such as divorce or death of a spouse or when someone faces a serious illness.
One of the best ways to combat this fear is by being aware of your financial situation. The very mission of Her Wealth is to encourage women to get engaged with their finances so that they are prepared should an unexpected event occur. Fear is replaced with confidence when you know your net worth, or that your income is protected by insurance, or that you know where all of your assets are and how they are invested. Money is too important to abdicate the responsibility of your finances to someone else.
2. Lack of Communication: It’s a fact that many couples fail to openly discuss money issues. Instead, they fight over how money is spent or one partner may dominate the other when making money decisions. Even worse, some partners resort to making threats around money. Too often, anger and aggression are used to avoid engaging in important financial conversations.
Honestly, there is no easy remedy for this emotional trigger. As a financial advisor, I often mediate money discussions and act as a neutral, objective sounding board when couples disagree. Engaging a financial advisor or a money therapist is a good idea if you’re having trouble discussing family finances. You and your partner will find that open communication is one of the best ways to understand each other’s fears around money and find some common ground.
3. Experiences of Loved Ones: Many of us are naturally compassionate, especially when someone we care about is having a tough time. And when their life stresses involve money, it can trigger fears about our own finances. For women, this often shows up in the form of questions: Can I afford to financially assist this person? Am I prepared if this happens to me?
I often help women answer these questions in the context of their personal financial plan. Some are fortunate to have sufficient funds to help a friend or family member in need. Others decide they cannot afford to assist financially. When they know what their financial circumstances will and won’t support, they’re empowered to say no without the guilt. Then they can begin to consider other ways to provide help without sacrificing their own financial security.
4. Media: Fear messages are literally everywhere in the media. From real world events that create fear of the future to more subtle fear messages in advertising or articles related to wealth—it’s impossible to get away from this fear-mongering.
One tip here—much of the information you hear in the media is written for the masses. We know from working with clients directly that no two people have the same life or financial circumstances. It’s likely that financial advice doled out for the masses may not apply to you, especially if you’re not ‘average’! Be aware of the way financial advice is being delivered and whether fear is being used as a tactic to sell a particular product or service.
5. Messages from Childhood: Most people do not grow up having educational or philosophic conversations about money. However, we all can rattle off money messages we heard our parents and other caregivers use during our younger years. From “money doesn’t grow on trees” to “you only live once,” we are told things that shape our attitudes towards money from an early age.
When we are consciously aware of these messages, we can counteract their power and dispel their influence. For example, instead of holding attitudes that restrict our enjoyment of money, we could begin to embrace a more positive and fearless money perspective. Equally important, we can monitor our own money habits to make sure we’re not acting in fear based on actions of our family members (i.e. mom was a spender, so now you’re overly miserly in spite of your wealth). Also, we should be wary of societal messages that cause women to doubt our ability to create financial independence on our own. These are dangerous messages that keep women holding to the belief that they need to rely on a partner to create their financial security.
One last note: this is a great time to start to talk to your children about money. Money has for too long been a taboo topic. Open up the dialogue and help them create healthy attitudes about money. This will go a long way to set them up for financial independence throughout their lives.
Becoming aware of your triggers, and then taking positive steps will help to free you from fear and lead you to a more peaceful and confident relationship with your money, your family and your future.
Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?
Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs.
And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are.
Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?
Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.
Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.
Consider this your training manual to get and stay financially fit for life!