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4 Fears That Cost You Money and How to Overcome Them

Everyone, from powerful world leaders to babies in their cribs, is afraid of something. Fear is a normal human response to danger – and most of the time, it’s a useful one. It can lead you to steer clear of threats, like a wild animal or the edge of a cliff. It can even protect you from financial dangers, like excessively risky investments.

However, sometimes fear works against you. When fear gets out of control, it can lead you to shy away from things that aren’t dangerous and could even be helpful. Because fear is a primal emotion, it can overpower your reason and lead you to make unwise decisions, including financial decisions, you wouldn’t make if you were thinking straight.

To avoid letting irrational fears harm your finances, you need to recognize them and be on your guard against them. Here are some examples of fears that cost you money, as well as what you can do to fight them.

1. Fear of Missing Out

Fear Of Missing Out Hashtag Sneakers

One of the most common fears in the modern world is fear of missing out, often abbreviated as FOMO. This fear is a nagging feeling that everyone you know is having a lot more fun than you are. It often strikes when you’re checking out your friends’ pages on social media, where they’ve posted stories and pictures of all the exciting things in their lives: kids, houses, new toys they’ve bought, vacations they’re taking.

A 2016 study published in Computers in Human Behavior developed a scale to measure people’s levels of FOMO. It found that the more time people spent on social media, the higher their levels of FOMO tended to be. The study also found a negative link between FOMO and happiness. People with high FOMO were less likely to feel competent, in control of their lives, and close to other people.

How It Costs You Money

FOMO can lead you to spend money in all kinds of ways you normally wouldn’t. In a 2018 survey by Credit Karma, nearly 40% of Millennials admitted to spending money they didn’t have to keep up with their friends. Most often, this meant going out on the town with their friends when they couldn’t afford it. Nearly 60% of respondents had overspent on food, 33% on alcohol, 21% on parties or nightlife, 25% on concert tickets, and 40% on travel.

FOMO can also lead to spending on stuff. For instance, suppose you’re a late adopter who’s been making do with an old flip phone for years instead of buying a smartphone. However, when you see all your friends whipping out their fancy iPhones and firing questions off at Siri, you start to feel like you’re stuck in the 20th century. Before you know it, you’re running out to the store and dropping $700 on a snazzy new smartphone – and another $100 a month on a cell phone plan to go with it – so that you, too, can check your Twitter feed every hour on the hour.

One big problem with FOMO spending is that it can feed on itself. For example, suppose all those Facebook photos of your friends’ exotic vacations make you so jealous you decide to skip your usual family camping trip and blow your vacation budget on an equally fabulous trip of your own. The cost gets tacked on to your credit card debt, while the pictures go up on your wall – where they contribute to FOMO for all your friends. Your friends respond by trying to make their next vacations even more amazing and post even more fabulous pics, in a never-ending cycle.

How to Overcome It

Since social media is a major contributor to FOMO, one way to avoid FOMO spending is to cut down on your social media use. Darlene McLaughlin, a doctor who has researched the phenomenon, says in Science Daily that people who suffer from FOMO are “looking outward instead of inward,” focusing on what they see others doing instead of living their own lives. The solution is to turn off your phone and actually look at the world around you: the changing seasons, the taste of food, the people in the room with you. Pay attention to the experiences you’re having right now, instead of worrying that someone, somewhere, might be experiencing something even better.

If your real life seems boring or disappointing after the shiny, airbrushed world of Facebook, cultivate a sense of gratitude. Instead of thinking about all the cool toys other people have that you don’t, focus on the things you’re lucky to have, such as good health, close friends, or even a roof over your head. Not only will you save money, you will probably be happier than all the people obsessed with what others are doing.

On a more practical level, if your friends keep proposing outings you can’t afford, offer cheaper alternatives. Suggest having a potluck dinner instead of going out to eat, or going for a hike in the woods instead of spending the day at an amusement park. If your friends are real friends, they’ll be willing to adjust their plans, at least some of the time, so you can be part of the group. They might even be grateful that your suggestion saves them from spending more than they can afford.

2. Fear of Falling Behind

Man Paddling Away From Sharks Ocean

Sometimes, what drives you to overspend on outings with your friends isn’t the fear that you’ll miss out on a good time; it’s the fear that everyone else will think less of you if you don’t join in. Humans have a deep-seated need to belong and be accepted as part of a group. So when you’re the only person in your group who doesn’t have a smartphone or isn’t going to a particular concert, it’s only natural to worry about whether you still fit in. You might even fear that your friends will decide you’re a wet blanket and dump you.

Advertisers know about this kind of fear, and they don’t hesitate to exploit it. One of the most common advertising strategies is the “bandwagon” ad, which sends the message that all the cool people are wearing this shoe, drinking this soda, or using this new technical gadget. If you don’t want to be left behind, these ads imply, you’d better run out and get one too.

How It Costs You Money

Fear of falling behind can lead to lifestyle inflation, otherwise known as “keeping up with the Joneses.” This term supposedly refers to a family of wealthy bankers in 19th-century New York. One of them built a magnificent 24-room mansion in Rhinebeck known as Wyndclyffe Castle, inspiring other property owners in the area to build even bigger mansions in an attempt to compete.

Though you probably haven’t built a mansion to keep up with your neighbors or friends, their habits could be influencing you to overspend in other ways. For instance, you might decide to build a deck on your house, even if you don’t expect to use it, just to avoid being the only house on the block without one. You could buy designer clothes for your kids because all your friends do, or throw them fancy birthday parties because you don’t want your celebration to seem shabby compared to theirs.

Like FOMO, fear of social isolation drives you to overspend to go along with the crowd. However, the motivation behind this spending is different. Instead of worrying about how much fun you’re having compared to everyone else, you’re focused on what other people think of the way you live. So, for example, instead of buying a new smartphone because everyone else seems to be having such a great time with theirs, you buy one because you’re afraid your friends will look down on you for being the only person still using a clamshell.

Keeping up with the Joneses can be a very costly pastime. A 2016 working paper published by the Federal Reserve Bank of Philadelphia found that when someone in an area wins the lottery, their neighbors are more likely to spend more money on “visible assets” – things that are easy to see, like houses and cars – so they won’t look poor by comparison. Unfortunately, this increased spending often leads to bankruptcy. For every $1,000 increase in the lottery jackpot, bankruptcies in the neighborhood increase by 2.4%.

How to Overcome It

If you’re tempted to spend money because you’re worried what others will think of you if you don’t, try asking yourself these questions: Would you ever look down on someone for not spending in this way? Would you think less of a friend who drives an old car instead of a new Mercedes, or sends their kids to public school instead of a pricey private school? If the answer to these questions is no, then what makes you think your friends would look down on you for doing the same?

However, if you happen to know that your friends do look down on you for the way you live, maybe you need new friends. Spend less time with financial frenemies and more with people whose lifestyles and budgets are similar to yours.

3. Fear of Failure

Fingers Pointing Shame Fear Of Failing

Failure is a normal part of life, and especially of business life. It’s hard to name anyone who’s gone through life without ever failing at anything. Of course, no one likes to fail, but most people just pick themselves up and move on. Sometimes the failure even motivates them to try harder and helps them succeed next time.

However, some people hate the idea of failure so much that they’d rather not try something at all than try and fail. Maybe they had overly strict parents who criticized them every time they did a less-than-perfect job, or maybe they suffered a humiliating failure in the past that they can’t bear to repeat. Whatever the reason, their fear of failure holds them back from trying new things.

How It Costs You Money

Suppose you’re thinking of starting a small business. However, you’ve seen data from the Bureau of Labor Statistics showing that roughly half of all new businesses fail within their first six years. Faced with that fact, it just seems too risky to trade in a steady job, even a job you hate, for a business venture you can’t be sure of.

What you overlook in this situation is that you’re certain to fail if you never try. Sure, there’s no guarantee your new business will succeed, but as long as you have enough emergency savings, your family will be able to get by even if it fails. And if you don’t try, you have no way of knowing whether your new business could have been the next Facebook.

Fear of failure could also keep you from changing careers because you’re afraid no one will hire you in a field where you have no experience. Or it could keep you slogging away in graduate school because you’re convinced you won’t be able to get a job without that advanced degree. Mihaela Jekic of Money for Meaning estimates that her decision to keep working toward her Ph.D. for fear that employers would reject her if she “settled for a Master’s” cost her over $300,000 in lost wages and investment returns.

How to Overcome It

There are several ways to get past the fear of failure. These include:

  • Seeing the Upside of Failure. Often, what looks like a failure paves the path to future success. For instance, when Thomas Edison developed his light bulb, he tested thousands of filaments before hitting on one that worked well enough to be marketable. When asked about these numerous “failures,” Edison famously responded that he had not failed; he had succeeded in discovering thousands of ways that didn’t work. Similarly, Steve Jobs failed spectacularly with the Apple Lisa, his first attempt to develop a computer that used a graphical user interface, but many of the features of that computer later became part of Apple’s hugely successful Macintosh.
  • Putting Failure in Perspective. Sometimes, the idea of failing is so distressing that you never really think about what would happen if you failed. For instance, suppose you try to change careers, and sure enough, no one wants to hire you in your new chosen field. At that point, most likely, you’d either go back to your old job or find a new job in your old career. In the end, you’d be no worse off than you are now.
  • Using the 10-10-10 Rule. Business writer Suzy Welch has developed a trick called the 10-10-10 rule for facing a decision that scares you. Ask yourself, if you take this risk, how you’ll feel about the decision in 10 minutes, in 10 months, and in 10 years. If all the answers are positive, the decision is clear: go for it. If some of them are negative, step back and look at the problem from the other angle: How will you feel about your decision if you don’t take the risk? If you imagine yourself feeling worse in this situation than you did after taking the plunge, that’s a sign it’s a risk worth taking.

4. Fear of Losing Money

Losing Money Fear Anxiety Graph

It seems bizarre to say that the fear of losing money could cost you money. After all, if you’re afraid of losing your money, surely that will lead you to be cautious with it. And in most cases, this is a good thing. It keeps you from foolishly staking all your savings on risky ventures like commodities trading or multi-level marketing schemes. However, there is such a thing as being too cautious with your money.

How It Costs You Money

If you’re so scared of losing money that you refuse to invest in anything but the lowest-risk investments, such as CDs and Treasury bonds, you’ll be stuck earning much lower returns than you would if you put a portion of your money into stocks.

According to Investopedia, the annual return for the S&P 500 – an index of the stocks of the 500 biggest companies in the United States – has averaged 10% from 1928, when the index started, through 2017. That means if you invest $200 each month in an S&P index fund, in 10 years, you can expect to have close to $41,000. Of course, there’s a chance the market will take a downward turn and you’ll end up with less than this, but on the other hand, there could be a few boom years that would make your return even bigger.

By contrast, the best yearly interest rate you can earn on a savings account right now is around 2%, according to Bankrate. If you put $200 each month into a savings account at that rate, you’ll end up with only around $26,500 in 10 years. On the plus side, you can be sure you won’t end up with any less than this, but you can also be sure you won’t end up with any more.

Worse still, this figure doesn’t account for the way inflation eats into your overall returns. If inflation over the next 10 years averages 2.5% – a pretty typical level – then a bank account paying 2% won’t even earn enough to keep pace with it. That means the real purchasing power of your money will actually decline.

How to Overcome It

Conservative investing isn’t always a bad thing. If you’re likely to need your money within a few years – for instance, if you’re stashing money in an emergency fund or saving for a down payment on a house – it’s a good idea to keep it in fairly safe investments. But when you’re investing for the long term, such as saving for retirement more than 10 years down the road, it’s more important to grow your money as much as possible.

The key to wise investing is to figure out what level of risk tolerance is reasonable for you. Online risk tolerance questionnaires such as Vanguard’s and Wells Fargo’s can help you with this. Answer a few questions about your situation and your attitudes, and they’ll give you a general idea of how to divvy up your dollars among different types of investments. You can feel more confident about taking a bit of a risk with your money knowing it’s what financial experts recommend.

Final Word

In many cases, overcoming fear is simply a matter of looking it in the face. Think about whatever it is that scares you and ask yourself, “What’s the worst that could really happen?”

Of course, in some cases, the worst-case scenario truly is bad. For instance, if you’re trying to decide whether to quit your job and start a business without any emergency savings to rely on, the worst-case outcome is that you’ll end up broke and lose your home. That’s a perfectly reasonable thing to worry about – and a good sign that you aren’t ready to take this step.

But in other cases, the worst that could happen isn’t that big of a deal. For instance, if your frugal vacation isn’t quite as cool as your friend’s, who cares? As long as you have fun, that’s all that matters. Likewise, if a few people look down on you because your clothes, your car, or your house aren’t up to their standards, that just proves they’re shallow snobs, so their friendship is no loss.

In short, if you take a good, hard look at your fears and they still look reasonable, then you know it’s worth paying attention to them. But if they look silly on close inspection, you’ll find it much easier to put them aside and get on with your life. You’ll be happier for it, and so will your bank account.

What are your biggest fears about money? Do you think they’re realistic?

Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including,, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.