Don’t Be Afraid
When dealing with your finances, you have to remove fear. Fear of missing out, fear of better options, fear of losing money, all of it. Every time I have let fear creep into my investing decisions, I’ve either lost money or if I was able to turn the investment around, made very little profit. When you are afraid, you handicap yourself by not thinking clearly. You need to realize that fear isn’t real, that it’s just something in your mind.
Karate and Finance
When I was younger, I took karate classes. Eventually, I reached the point where I had to break a piece of wood by punching it. At first, this seemed impossible and fear danced around in my head.
Wood is difficult to break, how I am going to do it?
This is crazy, that board is pretty thick.
I’ll look stupid if it doesn’t break.
What if I fail and break my hand?
The first few times I tried I couldn’t break the wood. Fear had created a self-fulfilling prophecy. I thought maybe it was my technique or that I wasn’t punching hard enough. While technique and force do play a role, it ultimately was my fear of failure that held me back.
Breaking Down Barriers
See the key to breaking a piece of wood is the belief you can do it. It’s a little bit of the chicken and egg problem. You don’t know you can succeed until you do, but by eliminating fear you give yourself confidence. Most people start with fear, like I did, so they hold back and stop their punch short (this is a great way to hurt yourself). But once you believe and you aim past the wood, you are able to punch through and break it, like I ultimately did.
Conquering Fear in Our Everyday Lives
It didn’t hit me back then, but looking back at that moment I realized how fear and doubt are just thoughts and how powerful they can be. Now when fear creeps up, I really stop to analyze what I am actually afraid of. Most of the time the fear is unfounded, so I am able to push through and make a clear decision.
With your personal finances, there are so many different things to think about.
What’s the economy doing?
Is my job secure?
Am I saving enough for my children’s college?
It’s easy to be afraid. However, you need to look past those thoughts. Don’t let fear impact your decisions.
Fear and Investing
Often, I’ve found a when I wanted to buy a stock, the price increased before I can buy. I would get worried that I missed out and the price will never come back down, so I needed to buy immediately. Then a few days or weeks after I made the purchase, the price drops at or below where I was originally looking to buy.
Rationally, I know stock prices don’t go up forever, but in those moments, I’m not thinking rationally. That’s what fear does, it causes you to make irrational decisions. Now I tell myself, if the stock doesn’t come down to the price I want, that’s okay because there will always be another investment option down the road.
Next time you are making a decision about your finances, take a few minutes to really think about it and make sure your decision isn’t being driven by fear.
What Are You Afraid Of?
What’s your biggest financial fear? Let me know in the comments.
Great analogy!