Have you ever bought something large and skipped negotiating the price?
Or followed advice from the TV to later realize that what you got was only half of the advice you needed?
Or not negotiated a salary?
Was it because of fear? Me too.
In fact, many of us walk around letting fear affect our finances, sometimes without even knowing it.
Despite being someone who gets paid to help people plan their money lives, I've done it too.
Looking back over my adulthood, there are three primary ways that I've let fear affect my financials, and ultimately my financial (and mental) well being.
- Not asking, or speaking up. Yes, there has been a plentitude of times that I have not spoken up. Whether it be because I was afraid of a no, or just afraid of a one on one confrontation, I've let silence cost me money by not asking for a higher starting salary, a higher raise, an explanation of an unexpected charge on a bill OR even asking for discounts. (My husband routinely asks for discounts on things, and is surprisingly successful at getting them!)
- Following T.V. advice, and/or not seeking help from someone more knowledgeable. I've lost more money that I want to admit on this one. (Ask me sometime how I picked the investments in my first 401(k), it's embarrassing). I started working in financial services almost 20 years ago. Before I really understood the basic tenants of investing, I had money to set aside for investing and was excited to do it. More than once, I got caught in that trap of listening to all the excitable buy recommendations on CNBC, and before I realized that I'd never get an alarm to sell, I lost money. And not just a little bit. I was paralyzed as the stock prices fell (yes, I did this more than once). I wanted so badly for it to just get back up to where I bought it, so I could sell it (sound familiar?!). After much frustration, embarrassment and loss of sleep, I spoke up and was ultimately able to pull someone in that could help me re-coup some of those losses. One of many lessons I walked away with was that the exciting stuff was fun on the upside, but could cause great pain when that upside turned down.
- Emotional Decisions. I've fallen into this trap in a few different ways, from stress shopping to saying yes to friends/social pressures when I didn't have the money to support that yes. The first car I bought on my own (yes, a purchase that I did NOT negotiate), was admittedly a car that I should have avoided. I was just out of college with a fully functioning free (used) car that my Dad was lending me, a full time salary (albeit a small one), significant credit card and student loan debt, living on my own and I felt that I deserved and needed a BRAND NEW car. (#DontTellBankerDad). Needless to say, after I signed on the dotted like, my buyers guilt lasted over a decade and the resulting bill included a significant amount of interest that I could have avoided had I done things differently.
So how can you avoid some of these pitfalls? I have these recommendations to protect yourself from yourself.
- Awareness is key. Be aware of your money tendencies. Before you notice a trigger that has in the past lead you to poor financial decisions based on fear, check out step 3.
- Educate yourself. Knowledge is power. What are the downsides of this decision? What are the upsides? What are the alternatives?
- Put a plan in place. Whether that plan is to call someone (step 4) or to pull out some images of your financial goals (like that trip to Australia that you're saving for!), have a plan that will get you past unexpected hiccups like emotional/impulse spending.
- Find a partner or someone you can talk to. Someone that is knowledgeable. Someone that can help you see other angles, someone that can help you make decisions objectively. An accountability and decision making partner can go great lengths to helping you make objective non-emotional financial decisions. I recommend having 2-3 of these. They could be a financial professional, a family member and/or a friend.