Five fears about money


Over the past 20 years, the US share market has risen 5-fold, the Australian share market 5.4-fold, and Australian property 4.2-fold.

Making MoneyThat means if you invested half a million dollars 20 years ago, in either shares or property, it should be worth between $2 and $2.5 million today.

You’d have even more money if you added some gearing.

This observation raises an interesting question.

That is, why aren’t more people independently wealthy?

I suspect the answer lies in their actions, or more correctly their inaction.

We make emotional decisions not logical ones

It is a widely accepted fact that we make decisions based on our emotions (how we feel) and then rationalise these decisions with logic.

Often, we do this unconsciously.

We’d like to believe that we are logical and rational animals.

But the truth is that we are not.

Our decisions, particularly about money, are shaped by our beliefs, upbringing, our peer group, past experiences, and culture.

We tell ourselves stories about money.


And then we use confirmation bias to validate those stories.

Self-awareness and reflection are probably the greatest gifts as they help you recognise how you think (money fears), so you can stop allowing emotions to influence your financial decisions.

Building wealth requires a logical, pragmatic and rational approach.

Emotions are not only unhelpful but can be dangerous.

Money fear # 1: Paying attention will be painful

Sometimes it feels easier to stick our head in the sand and ignore a (potential) problem.

People Who Bury Their Heads In The SandFor example, most people know that it’s not financially prudent to spend all income on lifestyle expenses.

They probably realise that they should be investing/saving some of their income.

But to do that, they will have to admit to themselves (and maybe others) that they have been doing the wrong thing in the past.

It feels less painful to ignore the issue and “get to it one day”.

The problem with ignoring financial misbehaviours is that they magically don’t disappear.

They compound. Just like good financial decisions compound, so do bad ones.

The longer you ignore it, the worse the consequences will be.

And those consequences will be forced upon you at some point in life.

For example, you will have to stop working at some point in your life and it’s that point that you will rely on your savings/investments or lack thereof.

Often, people in this situation will not do anything until the perceived pain (consequences) from not changing becomes greater than the pain of changing.

RetireThis often occurs when they are 5-10 years from retirement.

They start to think that they’d better start investing before it becomes too late.

The solution is to educate yourself about the cost of procrastination.

Spending all your income for a couple of years is not a big deal.

But doing it for 20-30 years may cost you dearly.

Money fear # 2: Investing is too risky, I could lose my money

We work hard to accumulate savings.

Invest RiskWe make sacrifices.

And having savings in the bank helps us feel financially secure.

Of course, we don’t want to lose that money.

When you invest, you do so with the intention of generating future returns.

Of course, investment returns are not certain. Investment returns can vary from initial expectations.

This is called investment risk – i.e. the risk that you don’t achieve your targeted investment returns.

This perceived risk can paralyse some investors into doing nothing.

The reality is that risk is black or white.

protect-umbrella-portfolio-saving-money-coin-insurance-rainy-dayIn fact, it is very easy to increase or decrease investment risk within a portfolio through asset allocation.

Therefore, the consideration should be how much risk can you tolerate?

Most importantly, I think the best way to reduce risk is by adopting evidence-based strategies.

That is, employ rules-based approaches that are supported by an overwhelming amount of empirical evidence that demonstrates they work.

Money fear # 3: If I try, I may fail

No one likes to feel foolish (although, maybe Carlton supporters are the only exception to this rule).

Sometimes it feels less risky to not try something and let failure or success remain uncertain.

Invest Fail LossThis fear is like # 2, but it’s less about losing capital and more about successfully achieving goals.

Or maybe it’s more about ego?

My response to this fear is to highlight that doing nothing is perhaps the riskiest thing of all. It is highly likely that you will fail to achieve your goals if you do not invest.

Of course, it is risky to invest if you don’t know what you are doing.

But if that’s the case, ask for help.

Leveraging the knowledge and experience of people that have achieved what you are looking to achieve gives you the highest probability of being successful.

In this situation, it’s a who question, not a what question (which is discussed here).

Money Fear # 4: People like me never get ahead

Facing A FailureAs I mentioned at the start of this blog, often our thoughts about money are shaped by our childhood, experiences, and the people we spend time with.

People tell us stories about money and these stories echo in our own minds.

These can give rise to limiting beliefs.

You must first acknowledge these limiting beliefs exists to be able to break this cycle.

Then you must identify, reframe and move forward.

Money fear # 5: Life’s too short

No one knows how long we have left on the planet.

Time Money2So, we should always make the most of today.

For some people, this extends to how they manage money i.e. spend for today and save nothing for tomorrow.

Building wealth is a journey, often a long one.

So, we must enjoy the journey in case we aren’t lucky enough to live a long and healthy life.

In practical terms, this means spending some money today whilst at the same time, saving (investing) some for the future.

Investing doesn’t necessarily require you to curtail all enjoyable activities.

In fact, the sooner you begin the investment journey, the fewer compromises you will have to make (my recent blog is evidence of that).

Combating these money fears?

You can’t address something if you don’t know it exists.

CalmTherefore, the first step is to consciously reflect on your decision-making and the stories you tell yourself about money.

Once you do that, you may become more open to considering evidence that refutes some of your money fears.

The good thing about investing is that it is rooted in simple logic and math, unlike emotions, so it’s easy to verify.

Of course, engaging an independent financial advisor allows you to outsource decision-making to someone that not only has substantially more experience than you but also has no emotional baggage about your money.


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Stuart was a Chartered Accountant before establishing mortgage broking firm ProSolution Private Clients. He has authored two books and shares his experience with readers of Property Update. Visit

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