Use fear to build your wealth. Yes, really!

*This content is brought to you by Brenthurst Wealth

By Maria Smit *

When it comes to managing your finances, we’re often encouraged to stay calm, avoid risk and remove emotion from your decisions. I’m here to tell you something different: don’t be dispassionate about your money, because I believe that understanding your fears can help you develop good financial habits.

From my experience in advising a wide range of clients, there are three types of fear that you need to understand and accept in order to be a better investor. 

Facing your financial fears is one of the most powerful decisions you can make because it empowers you to take control of your finances.

It’s about facing the truth of your personal financial situation. If, for example, you calculate that you don’t have enough saved for the retirement you want, it’s perfectly normal to be worried that you’re going to miss your target. What’s most important is how you respond to this because it’s never too late to start saving with a greater purpose.

The key is to use that fear to motivate positive action. You might now invest more diligently for your retirement or dedicate to meeting your emergency savings goal. When you take action, you start to strip fear of its influence.

Here are three of the biggest fears that I see clients making. I hope that the insights and my suggestions help you to face up to your fears and conquer them.

The fear of spending

Our grandparents, who lived through much tougher economic hardships because of the Great Depression and World War Two, taught us a valuable lesson: you have to save for a rainy day. 

As a result of growing up with very little, they often ended up driving old cars and seldom indulged in luxuries, even when they could afford them. This wasn’t just them living modestly, it was a deep appreciation that economic tides could turn at any moment.

This was a lesson that many clients had to learn again through COVID when livelihoods were shattered overnight. If they didn’t have a fear of spending before the pandemic, it’s fair to say many of them still do.

And for good reason: because money spent on luxuries is money that could save you in future if another COVID-like catastrophe happened. 

The fear of investing

Many people worry about losing money when they invest, which can stop their wealth from growing. 

I like showing clients the worst performance a portfolio has done in the past so that they see how market movements higher and lower are perfectly normal. Once you understand that your fear of losing capital is holding you back, take time to understand your risk tolerance and build a portfolio that matches your natural instincts.

As advisors, our job is to talk you through the tough times. But your fear of losing funds in market downturns might hold you back, which fuels financial advisors’ fear that the ‘safer’ returns you’re getting are being eaten away by inflation.

The fear of missing out (FOMO) and investment timing

Worrying about missing out on big wins in the market drives some of us to buy when prices are highest, which is often a decision we regret. 

Warren Buffett once said, “Be scared when others are greedy, and be greedy when others are scared.” This advice highlights the need for a smart approach to investing, focusing on long-term aims instead of what the market’s doing right now.

Being scared about money doesn’t have to hold us back. If we understand our fears and use them wisely, they can push us to spend, invest, and save more carefully. Turning fear from something that worries us into something that motivates us helps us make choices that not only keep our finances safe but also help us grow our wealth.

Take a moment to reflect on your financial fears. Are they holding you back, or can they be the motivation you need to take control of your financial destiny? Consider discussing your financial strategy with a financial advisor who can help tailor an investment plan that addresses your fears while aligning with your financial goals. Together, you can turn fear into your financial ally.

* Maria Smit CFP® professional is an advisor at Brenthurst Pretoria [email protected] 

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