How to Manage Fear and Finances
The obstacle of fear is a real and overwhelming roadblock we are all face on a daily basis. While we no longer contend with saber-tooth tigers on our day to day commute, our brains still react in the same way to anything we deem as "threatening" - this includes anything from a primal fear to something complex, like a financial issue regarding what the value of money 10-20 years down the road. This is because the brain deems a threat as a threat, no matter what size or shape it comes in. And like the old saying, fear causes a "Fight" or "Flight" mentality. So despite the fact that it may be a good idea to take flight and avoid a saber-tooth tiger, financial issues are never a threat to avoid.
So, how does one find the confidence and ability stand tall against the complex issues of finances? "Rich Dad, Poor Dad" by Robert Kiyosaki explains explains how to escape this "rat race" and how to achieve financial independence. The messages in this book hold a lot of great tools on finance and it's often brought up as a reference in our office. In Chapter 8, Kiyosaki explains the importance of overcoming the obstacles of fear and how it can be possible to manage this roadblock for financial success. Enclosed below, this blog article will cite his understanding on how to manage and overcome this fear in order to develop a column of assets that could produce a large net cash flow.
...I have never met anyone who really likes losing money... The fear of losing money is real. Everyone has it. Even the rich. But it's not having fear that is the problem. It's how you handle fear. It's how you handle losing. It's how you handle failure that makes the difference in one's life. The primary difference between a rich person and a poor person is how they mange that fear.
It's okay to be fearful. It's okay to be a coward when it comes to money. You can still be rich. We're all heroes at something, and cowards at something else. My friend's wife is an emergency-room nurse. When she sees blood, she flies into action. When I mention investing, she runs away. When I see blood, I don't run. I pass out. My rich dad understood phobias about money. "Some people are terrified of snakes. Some people are terrified about losing money. Both are phobias," he would say. So his solution to the phobia of losing money was this little rhyme: "If you hate risk and worry. . .start early."
That's why banks recommend savings as a habit when you're young. If you start young, it's easy to be rich.... My neighbor works for a major computer company. He has been there 25 years. In five more years he will leave the company with $4 million in his 401k retirement plan. It is invested mostly in high-growth mutual funds, which he will convert to bonds and government securities. He'll only be 55 when he gets out, and he will have a passive cash flow of over $300,000 a year, more than he makes from his salary.
So it can be done, even if you hate losing or hate risk. But you must start early and definitely set up a retirement plan, and you should hire a financial planner you trust to guide you before investing in anything. But what if you don't have much time left or would like to retire early? How do you handle the fear of losing money? My poor dad did nothing. He simply avoided the issue, refusing to discuss the subject. My rich dad, on the other hand, recommended that I think like a Texan. "I like Texas and Texans," he used to say. "In Texas, everything is bigger. When Texans win, they win big. And when they lose, it's spectacular." "They like losing?" I asked. "That's not what I'm saying. Nobody likes losing. Show me a happy loser, and I'll show you a loser," said rich dad. "It's a Texan's attitude toward risk, reward and failure I'm talking about. It's how they handle life. They live it big... They're proud when they win, and they brag when they lose.
...In my own life, I've noticed that winning usually follows losing. Before I finally learned to ride a bike, I first fell down many times. I've never met a golfer who has never lost a golf ball. I've never met people who have fallen in love who have never had their heart broken. And I've never met someone rich who has never lost money. So for most people, the reason they don't win financially is because the pain of losing money is far greater than the joy of being rich.
Another saying in Texas is, "Everyone wants to go to Heaven, but no one wants to die... If you really want to learn the attitude of how to handle risk, losing and failure, go to San Antonio and visit the Alamo. The Alamo is a great story of brave people who chose to fight, knowing there was no hope of success against overwhelming odds. They chose to die instead of surrendering. It's an inspiring story worthy of study; nonetheless, it's still a tragic military defeat. They got their butts kicked. A failure if you will. They lost. So how do Texans handle failure? They still shout, 'Remember the Alamo!'"
After he had done all his due diligence and now it was put up or shut up, he told us this story. Every time he was afraid of making a mistake, or losing money, he told us this story. It gave him strength, for it reminded him that he could always turn a financial loss into a financial win. Rich dad I knew that failure would only make him stronger and smarter. It's not that! he wanted to lose; he just knew who he was and how he would take a loss. He would take a loss and make it a win. That's what made him a winner and others losers. It gave him the courage to cross the line when others backed out. "That's why I like Texans so much. They took a great failure and turned it into a tourist destination that makes them millions." But probably his words that mean the most to me today are these: "Texans don't bury their failures. They get inspired by them. They take i their failures and turn them into rallying cries. Failure inspires Texans to ' become winners. But that formula is not just the formula for Texans. It j is the formula for all winners." Just as I also said that falling off my bike was part of learning to ride. I remember falling off only made me more determined to learn to ride. Not less. I also said that I have never met a golfer who has never lost a ball. To be a top professional golfer, losing a ball or a tournament only inspires golfers to be better, to practice harder, to study more. That's what makes them better. For winners, losing inspires them. For losers, losing defeats them.
People like Fran Tarkenton are not afraid of losing because they know who they are. They hate losing, so they know that losing will only inspire them to become better. There is a big difference between hating losing and being afraid to lose. Most people are so afraid of losing money that they lose. They go broke over a duplex. Financially they play life too safe and too small. They buy big houses and big cars, but not big investments. The main reason that over 90 percent of the American public struggles financially is because they play not to lose. They don't play to win. They go to their financial planners or accountants or stockbrokers and buy a balanced portfolio. Most have lots of cash in CDs, low-yield bonds, mutual funds that can be traded within a mutual-fund family, and a few individual stocks. It is a safe and sensible portfolio. But it is not a winning portfolio. It is a portfolio of someone playing not to lose. Don't get me wrong. It's probably a better portfolio than more than 70 percent of the population, and that's frightening. Because a safe portfolio is a lot better than no portfolio. It's a great portfolio for someone who loves safely. But playing it safe and going "balanced" on your investment portfolio is not the way successful investors play the game. If you have little money and you want to be rich, you must first be "focused," not "balanced." If you look at anyone successful, at the start they were not balanced. Balanced people go nowhere. They stay in one spot. To make progress, you must first go unbalanced. Just look at how you make progress walking.
Thomas Edison was not balanced. He was focused. Bill Gates was not balanced. He was focused. Donald Trump is focused. George Soros is focused. George Patton did not take his tanks wide. He focused them and blew through the weak spots in the German line. The French went wide with the Maginot Line, and you know what happened to them. If you have any desire of being rich, you must focus. Put a lot of your eggs in a few baskets. Do not do what poor and middle class people do: put their few eggs in many baskets. If you hate losing, play it safe. If losing makes you weak, play it safe. Go with balanced investments. If you're over 25 years old and are terrified of taking risks, don't change. Play it safe, but start early. Start accumulating your nest egg early because it will take time. But if you have dreams of freedom-of getting out of the rat race- the first question to ask yourself is, "How do I respond to failure?" If failure inspires you to win, maybe you should go for it-but only maybe. If failure makes you weak or causes you to throw temper tantrums-like spoiled brats who call an attorney to file a lawsuit every time something does not go their way-then play it safe. Keep your daytime job. Or buy bonds or mutual funds. But remember, there is risk in those financial instruments also, even though they are safer. I say all this, mentioning Texas and Texans, because stacking the asset column is easy. It's really a low-aptitude game. It doesn't take much education. Fifth-grade math will do. But staking the asset column 'J is a high attitude game. It takes guts, patience and a great attitude toward failure. Losers avoid failing. And failure turns losers into winners.'' Just remember the Alamo.
Kiyosaki, Robert. Rich Dad, Poor Dad. Scottsdale: Plata Publishing, 1997. Print.