An unusually helpful bit of pop psychology holds that we should worry only about things we can control or effect and put aside the anxieties we cannot.  That advice holds true for worrying about money and investing.  Although  some fears cannot be controlled by the individual or have little likelihood of happening, addressing a related fear that can be controlled may help alleviate some of the anxiety.

Fear: Stock Market Crash

While visions of the NASDAQ tech crash still haunt many, the reality is, your biggest worry should be getting mediocre returns from your investments.  We often abandon the buy low, sell high principle when it is most needed.  God markets make many investors feel invincible, so they don’t sell or re-balance.  When markets decrease and prices are low, investors get scared that they will lose out on potential gains; they jump ship figuring a small return is better than none, but ignoring the potential upside if the stock price rises again.  Diversification and dollar-cost averaging may help you avoid mediocre returns.  By making sure your portfolio is invested for the long haul across a variety of markets, countries, and investment vehicles, you may reduce your risk exposure and potentially open yourself up to more than mediocre returns.

Fear: Identity Theft

We, as a country, have a great deal of fear about identity theft; and for very good reason.  It can wreak havoc on your personal finances.  Mistakes on your credit report, however, are far more likely and can severely damage credit ratings.  Consumers find more than 13 million inaccuracies on their credit reports each year, according to Consumer Reports.  Those mistakes can range from minor to inaccurate, or false delinquencies that can ruin your credit.  Be cautious about giving out your social security number and check you credit report once a year for inaccuracies.

Fear: Failing Economy

High energy prices, terrorism, and natural disasters are all enough to make Chicken Little look rational.  With our penchant to view the future as a continuation of the past, it’s no surprise that many Americans fear another 1920a-style depression, or worse.  By investing in a wide variety of investment vehicles, you can help increase the chances that if one major world economy starts to fail, you’re gaining in another that is booming.  For those in retirement, where income distribution is so important, having a strategy that generates income in good times and bad is critical.

Many of us fear the worse on a consistent basis, and we all face risks everyday.  The real task is rooting out which financial fears can be controlled and then working with your financial professional to minimize your risk.

Its easy for our emotions to take over and force us, or rather convince us to make irrational decisions.  Our money is not exempt from these decisions.  But, you have to remember, from here on out, that you need to only use logic when it comes to finances.  Some people can make a go of it on their own, others employ the assistance of a financial adviser.  One of the biggest mistakes people make is coming to the conclusion that because its on sale, its a good deal.  If you are going stereo shopping and you see two marked at $400, but one is $300 off, which would you buy?  If you use your logic and reasoning, you would buy the one that got a better rating from consumer reports; but if you react like most people, you buy the one that is on sale because its a bargain.  In fact, research has found that people who wouldn’t normally spend that kind of money on a stereo before will buy the discounted stereo based on the fact that it is discounted.  The reality is, $400 is $400, and if you normally wouldn’t spend that kind of money on a stereo in the first place, you shouldn’t do it now.  Before you splurge, evaluate whether the product is worth that in enjoyment.  Also, consider how often you will use the product and if there is a cheaper product of similar quality out there.

The number of people who have money in savings accounts, earning less than 2% I might add, while carrying credit card debt, usually with interest rates above 12%, is mind boggling.  People tend to use what is called “mental accounting” and compartmentalize their funds.  Often people have the money to pay off their entire debt, but choose not to do so because they are afraid to dip into their savings.  The reality is, you are not earning enough interest on your money in savings to justify not paying off your debt.  You are losing money everyday in interest.  If you have the money to pay off your credit card debt and still pay your bills, do it. Worse case scenario, if there is an emergency, use your now zero balance credit cards to help and then pay them off as soon as you can.

Finally, people have begun hoarding money again as a result of the economic climate.  People are so afraid of running out of money, they don’t enjoy the money they have.  If you are legitimately worried about running out of money, you should sit down with a financial planner and work out the math.  Make sure you consider worst case investment scenarios, not just the averages.  That should make you more comfortable about weathering a bad patch in the future.  Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.  Money, after all, is a means to an end, not the end.  You save it to make you and the people you love calm, comfortable, and happy.  Enjoy it!