Become Fearless By Jean-Luc Tahou, MBA, CFP Business & Finance Editor
Over the years, I have realized that most people know that they need to get a better handle on their finances but most don’t make the necessary changes. Why is that, you ask? Mainly because of fear: fear of the unknown, of the unfamiliar, and fear of making mistakes. In some cases these fears are justified but the reality is that they usually aren’t. The truth is that we are creatures of habit and we eschew getting outside our comfort zone at all cost, but it is when we force ourselves to challenge our boundaries that we make significant progress. A lot of the financial products we need and should have in place intimidate people. What is an IRA again? What do you mean by 401k pre-tax contribution? Margin calls, what is that? Instead of appearing financially illiterate, we err on the side of caution and stick to what we know. It does not help that the news keeps covering stories about misconducts at financial institutions nationwide. It all seems so foreign and uncertain which in returns leaves us fraught with mistrust for Wall Street related products. We are basically afraid to make costly mistakes in such a troubled market. Other products are simply too uncomfortable to discuss because they force us to face our own mortality or the frailty of life. Drafting a will, evaluating a life-insurance policy, or choosing a retirement plan beneficiary all bring to the table conversations that we’d rather skip. However, those hard conversations have beneficial effects that should not be ignored. As the saying goes, better be safe than sorry. In general, we should all aspire to become more educated when it comes to solidifying our financial future. The effort that is required to master the basic concepts seems insurmountable. We give up before even starting the race. It is a daunting task to cover all the basis between saving adequately for retirement, worrying about sending kids to college, reducing debt, and investing properly. Unfortunately, throwing in the towel is not an option as no action is worse than taking an initially misguided one. We use the guise of ignorance as an excuse not to take the plunge, but what we fail to realize is that we are in essence leaving money on the table by not participating. When we switch our mindset and consider that temporary discomfort potentially leads to long-term peace of mind, we are able to get over our fears and do the right thing. For example, even with its ups and down, the stock market is the surest bet for wealth accumulation over a long period of time. Our apprehensions often result in later starts and precious time of compounded growth is wasted. With this realization in mind, we should free ourselves from our fear of the unknown. I am not suggesting that one should go in blind in setting up a financial plan but wasting time is a worse alternative. As with everything, it is possible to learn as we go and become more confident in our transactions over time. We should let go of antiquated ideas about what our parents and grandparents did in their days as times are different. We no longer have the cushion of union jobs, pension plans, or even social security. It starts with watching more financial news programs, reading financial publications occasionally, and asking questions to our bankers or our HR department. Actions such as these will solidify the foundations we need to surpass ourselves and do better. At the risk of sounding cliché, this brings to mind a quote by Marianne Williamson: “Our greatest fear is not that we are inadequate but that we are powerful beyond measure”. Wouldn’t it be fun to discover how empowered you can become once you know the basic rules of the game? So go ahead and take a leap. At the onset of this New Year, I would like to exhort each of you to let go of your apprehensions and challenge yourself to know and do more about your finances. Have those much-needed conversations. Put in places those necessary documents and learn about what works for you and your family. Taking the reins of your financial plan means that you are not leaving anything to chance, therefore you are in control.