How to Face Your Financial Fears

0:28Many people assume that money is tactical. focus, your energy, your attention. So which do you prioritize the most and what trade-offs are you willing to make in accordance? Answering those two questions is the focus of this podcast. We cover five pillars, financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I FIRE. And today's episode is all about that first pillar, financial psychology, the F in FIRE, in the way that acronym is defined here. I am your host, Paula Pant. I trained in economic reporting at Columbia. I'm here to help you prioritize because that's the key to growing wealth.

1:07So let's kick off with the misconception about what it means to be quote-unquote good with money. A lot of people mistakenly think that being good at money simply means you have a high savings rate. Oh, it's easy to be good at money, just don't spend it, right? But that notion is reductive and it can lead to enormously dysfunctional behavior. Most of us or many of us know people who are, quote unquote, too cheap for their own good. They cannot part with money. They can't let it go. They have a great savings rate, but they're often pretty risk averse in their investments and they don't use their savings for anything.

1:45Savings is deferred spending. It's money that we're putting aside to spend later. If that later never comes, then what's it all for? And so the myth, the misconception that being quote unquote good at money means that you have a competitive savings rate, that's great, but what is it costing you and are you considering the context of how that money could be a tool in your life? Think about it. If we took this idea to its extreme, the notion of being good with money simply means not spending it. If we took that to its extreme, we would end up like Ebenezer Scrooge. He lived in self-imposed poverty.

2:24Of course, he was a fictional character from Christmas Carol, but he lived in self-imposed poverty despite the fact that he had enormous wealth. And nobody wants to be Scrooge. And nobody would argue that Scrooge was good with money. He was good at accumulating it, but he failed to use it as a tool to improve his life or to express his values. Scrooge was the absolute epitome of miserliness, and he had a famous catchphrase, bah, humbug, which reflected a disdain for anything that might cost him money, including basic creature comforts. We're not talking luxury, just basic comforts. And including expenses that would facilitate social connection.

3:09Scrooge, as a character, seemed to have a deep-seated fear of poverty, and that led him to behave transactionally, to value hoarding money over human relationships. I mean, he refused to even properly heat his office. And let's be honest, how many of us know people like that? The ones who keep their thermostat at really uncomfortable levels because we get to eke out just a little bit of extra savings? That is extreme frugality. And it comes about when we mistake the tool for the end game. Money is a tool to help us live our best lives and express our values in the world. Money is not a substitute for life itself.

3:56It is not the end game. It is a tool that facilitates the end game. So if you're a person who's good with money, that means you're using money as a physical manifestation of your values. That's what it means to be good with money. It doesn't mean you save as much as possible. It means you use money as a representation of your values. When those are aligned, when those are in integrity, that's when you're being good with money. Now, what causes a deviation in that alignment? What causes us to have a dysfunctional relationship with money? Well, I believe this can be boiled down to three categories.

4:36You're either anxious, you're obsessed, or you're avoidant. So let's unpack each one of those three. And before I start, I'll say these ideas heavily draw from the research that was done by Dr. Brad Klontz, who is a financial psychologist, who we will be interviewing in a three-part series on this podcast that's going to air in late October. So I want to give attribution to where attribution is due. In his research, he has actually found four categories, but I have condensed them. In my own take on his research, I have condensed them down to three. And those three are anxious, obsessed, avoidant.

5:13And I want to start with the last one on the list, avoidance, because this often relates to deeply internalized negative scripts about money. So if you believe that rich people are greedy or money corrupts, or I'd rather be happy than rich, as though the two were mutually exclusive, which is a false dichotomy. If you believe any of those ideas, that can even subconsciously lead to self-sabotage because, well, rich people are greedy. You don't want to be greedy. If money corrupts, well, you don't want to be corrupted. If you're rich, then does that necessarily mean that you're unhappy? If you'd rather be happy than rich?

5:56And so when we hear these negative messages, there's a part of us that gets in our own way, a protective mechanism to stay inside what's familiar and what's comfortable. And where do we learn these unhealthy messages? Well, let's go back to the Ebenezer Scrooge example, because in popular media over and over, we see that the rich people are the villains. So let's take The Simpsons, the character of Montgomery Burns. And I mentioned this character in our recent podcast episode, one of the two recent podcast episodes that we did with Katie Gaudi-Tassan, the host of Money with Katie. In The Simpsons, Montgomery Burns, think about his catchphrase.

6:41Ebenezer Scrooge had the catchphrase, bah humbug, which was dismissive of spending money. What's Montgomery Burns' catchphrase? His catchphrase is, excellent. And when does he say it? He says it when he's profiting at the expense of others. There's an episode where he literally blocks out the sun in order to increase energy usage that comes from the nuclear power plant that he owns. There's another episode where he's illegally dumping nuclear waste in the river, creating three-eyed fishies to save on disposal costs, right? And that's when he goes, excellent. He's this evil villainous character, cartoonishly so.

7:27He's also lonely, isolated, paranoid, constantly dissatisfied. We don't want to be an extreme cheapskate like Scrooge, but we also certainly don't want to be Montgomery Burns. And I did some digging as I was thinking about this as I was planning today's episode, I was thinking about other characters. Because if this were limited to a Simpsons reference, it would not be as pernicious as it is today. But let's look at Game of Thrones. Tywin Lannister. What's one of his catchphrases? It's a Lannister always pays his debts. And on the surface, that sounds great. Oh, great. He repays his debts. Good.

8:08Good job. But he isn't repaying his debts because it's the right thing to do. He's repaying his debts because that's how he maintains power and status and reputation. It's how he maintains political influence. And he crushes anyone who gets in his way. He's obsessed with his legacy. He's so obsessed with his legacy that it destroys his family. It's the ultimate irony. And I'm not giving away any spoilers here, but he is so obsessed that it harms his relationships with the very people who share the Lannister name. The Lannisters are the wealthiest or one of the wealthiest families in Westeros. And they're also one of the worst.

8:56And so again, it's that internalized script of you don't want to be like that guy. You don't want to be Tywin Lannister. You look at Harry Potter. Look at the character of Draco Malfoy and the Malfoy family. Like, they're snobs. They're just total snobs. And they look down on Ron Weasley and the Weasley family because the Weasley family is middle class or lower middle class. You know, they're sweet and they're loving, but they're kind of poor. And the Malfoys are established in their blue bloods. but it's another classic example of associating villainy with wealth. And I mean, without giving away any spoilers, obviously Malfoy is not the real villain in the story.

9:44The villain there is Voldemort. I think I can safely say that without spoiling it. But Draco is still just not the kid you want to sit next to at the cafeteria. You'd rather hang out with Ron Weasley or Hermione Granger. And even Harry himself lived underneath a stairwell. The good guys in the story always have really humble beginnings. And so all of this leads back to why people can sometimes internalize those ideas and then kind of become avoidant and stop really taking care of their finances and stop trying to improve the amount of money that they can earn and stop trying to learn how to invest and stop trying to buy other assets like real estate or businesses and just kind of grow complacent.

10:35And let me be clear, it's one thing if you are in a really healthy place and you've made the conscious decision that you are going to prioritize other things with your limited time on this earth. It's another thing entirely if you're doing so from a place of avoidance. So there are two behaviors that on the surface may appear quite similar, but depending on what it's rooted in, that's the distinction between whether it's healthy or not. Now on the flip side, you've also got people, and this is the total opposite end, people who are obsessed with money. And this is the, you got to blow it to show it mindset.

11:13The luxury brands, the fancy cars, like all flash, no cash. And so they're driven by this need to spend money in order to impress other people. You know, there's that classic saying, you spend money you don't have to buy things you don't need to impress people you don't know or that you don't like. And at the risk of stating the obvious, we see a lot of that on Instagram. We see a lot of that on social. But we also see it in our day-to-day lives, in the parking lots where we work, in the middle schools and high schools and on the college campuses that either we ourselves recently attended or that our kids now attend.

11:57You know, they say you can tell someone who's middle class because they are flashing a lot of very obvious conspicuous brands. And you can tell someone who is truly wealthy because they're not. Even if they have well-crafted, well-constructed items, there's no overt branding. That is quiet luxury. The kind in which you enjoy the craftsmanship of something fine, but you don't like or want or desire the brand cachet that comes with it. So this is money obsession. And it's one of the mindsets that causes us to be quote unquote bad with money, just as much as being avoidant or internalizing those negative scripts about money also causes us to be quote unquote bad with it.

12:54In both cases, we sort of fear money. Even the people who blow it to show it also kind of fear it. They fear that one day it won't be there. They fear that they themselves are nothing without it. And they fear that it'll never be enough. Also, so we're talking about people who are obsessed with money, but we'll go to another category. People who are anxious have that same fear that there will never be enough. But people who are really super anxious about it, and I used to be one of those people, that ultra anxiety comes from the scarcity mindset. This idea of, oh, I've got to clutch onto every single penny because maybe I'm not going to ever be able to make more.

13:39Maybe this is it. Maybe this is the last of it. The last water in the desert. So there's this huge anxiety that comes in. And that can lead to what on the surface seem to be frugal habits. Great. But it's rooted in a deeply, deeply unhealthy place. In a fear that you're trapped underground and this is the last ray of sunlight. And so you're not really thinking about making more. you're just trying to clutch onto what you have, right? That's scarcity mindset and that's money anxiety. And when you have that, it takes a lot to learn how to spend. It's funny. It's the same fear as people who are obsessed with money, different iterations, different expressions of that same fear.

14:32We're going to take a break to hear from the sponsors who make this show possible. And when we come back, we're going to talk about a closely related concept, which is imposter syndrome. We'll talk about that. We'll discuss the self-fulfilling prophecy of money mindsets. We'll discuss the myth of work as necessary drudgery. We'll cover quite a bit more ground. That's all coming up.

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16:07This Friday, the NBA on Prime tips off with their debut doubleheader. First up, Boston brings the action to the Garden as the Celtics face the New York Knicks. Then out west, it's a battle of the superpowers as the Lakers try to poster the relentless pace of the Minnesota Timberwolves. The Celtics and Knicks, who has the most hustle in defense? This game will come down to who wants it more. And the Timberwolves and the Lakers, it's two Western Conference heavyweights going toe-to-toe. Buckle up, folks. This one's going to be electric. Celtics-Knicks, T-Wolves and Lakers. Coverage starts Friday, 7 o 'clock Eastern, only on Prime.

16:59Welcome back. Now let's talk about something that may be plaguing a lot of those of you who are listening, especially if your financial situation has improved over time. If you're in a very different place today than you were in 10 years ago, 15 years ago, 20 years ago, imposter syndrome is this nagging feeling that you don't deserve your success, that you are somehow faking it or that you will be quote unquote found out as a fraud. The poet and author Maya Angelou described her feeling every time she published a book. She was like, oh, this is it. This is where they're going to find out that I can't write, which is of course absurd.

17:48She's a beautiful writer. She won the Grammy. She won the Presidential Medal of Freedom, which is the highest civilian honor in the U.S. She won that for her writing. The post office issued a stamp about her. And yet, despite or perhaps because of all of those achievements and accolades, she openly publicly talked about that feeling that, oh, man, one day they're going to find out. They're going to find out, right? That is imposter syndrome. When it comes to you and your money, this can be an incredibly intense feeling because you probably remember those early years when you were working retail as an entry-level associate making a little bit over minimum wage, and you remember all of the self-doubt But before you earned what you do now, before you amassed what you do now, you remember all the self-doubt that came before it.

18:57And when you think about your story, your trajectory, you can so clearly see the ways in which luck played a role, as it does for all of us. You can even pinpoint those inflection moments, the chance meeting, the random conversation that led to X, which led to Y, which led to Z. And all of a sudden, you had this opportunity in front of you and you found yourself in a completely different place. Even projects that are slow slogs have their points of inflection punctuated along the way. Maybe you bought a bunch of Tesla or NVIDIA stock in 2014. Heck, maybe you bought a house in 2014 and you've held on to it ever since.

19:48And you had nothing to do with the market run-up. That wasn't the result of your personal brilliance or your late nights and early mornings with your sleeves rolled up toiling. so it almost feels like an accident. You just happen to buy the right asset at the right time and poof, here you are. And you look around and you see a bunch of your friends who have worked just as hard or harder than you, but they didn't buy the asset and they're in a drastically different place. And so it doesn't feel real and it doesn't feel right. And you wonder, why me? But why me is a question that some people ask at times of distress.

20:36But why me is also a question that you ask at times of victory. And that's what imposter syndrome is. And we feel this disconnect between who we are and the reality surrounding us. It's like we've stumbled into this life with a set of really great circumstances that wasn't meant for us. and this feeling, if you have it, know that it is enormously common, particularly among people who've experienced a big change in their life, significant financial growth. Maybe it comes up for you as a feeling of guilt about your success. Maybe it comes up for you as this constant worry that you're going to lose everything and end up back where you started.

21:27Maybe that leads you to being overly frugal, to adopting that inner Ebenezer Scrooge, right? Maybe that comes from a place of feeling like it's not really, quote unquote, your money to spend. So how can you spend it when it doesn't even feel like it should be yours? Maybe you downplay your accomplishments. Maybe you're uncomfortable when other people praise you or acknowledge what you've built or what you've done. Because again, you see people working so much harder for so much less. And you're like, why me? So if you feel that, if you feel that imposter syndrome, I want you to know that while that feeling is so common, it's not reality.

22:12It's a story in your head. And where you are today is the result of a combination of choices, work, and luck. But remember the famous quote, the harder I work, the luckier I get. It's a quote that's been attributed to a lot of people, Thomas Jefferson, Mark Twain, George Allen. So no one knows who really said it. It might be an old Amish saying, but it gets repeated often because it's so real. The harder I work, the luckier I get. And if you can remember that, then that might help take the edge off some of that imposter syndrome. Because remember, your job is to use your money in a way that aligns with your values.

23:02So stop thinking about yourself, frankly. You know, imposter syndrome is being stuck and thinking about yourself. Whereas if you're thinking about how can I be good with money? How can I be good with the tools that I have? Then you're not thinking about yourself anymore. You're thinking about how to be a good capital allocator. How to use the resources at your disposal in a way that aligns with your values, right? That's a focus on the external world. That's a focus on, so what do I do? So to tie this portion up, the stories that we tell ourselves, these become self-fulfilling prophecies. If we believe that money is evil, then we might subconsciously sabotage our own success.

23:47Or if we've achieved some success but we feel like we don't deserve it, that imposter syndrome, we also might subconsciously sabotage it. If you embrace the idea of I'm bad at money, you're going to make bad choices. You're more likely to at least. Because that is a mindset that's driven by fear, our fear of our finances. But if you adopt the mindset of I'm good with money, defined as I align my money with my values and I am a wise capital allocator. Okay, that's a powerful story that can then become a self-fulfilling prophecy. So let's move to another set of stories. And these are the stories that we tell ourselves about work.

24:31There's this idea that work is drudgery, that it's something that, you know, we punch our time cards, proverbial time cards, purely for the sake of a paycheck. and that work and life are pitted in opposition with one another. So this is the issue that I have with the construct of quote-unquote work-life balance is it is a construct that pits work against life as though the two are in opposition and it's a zero-sum game. Every hour you spend at work is an hour that you are not spending at life and vice versa. and so under this construct, work and life become boring factions, each trying to claw a few hours back from one another.

25:20Now, before I continue, I do want to pause and make a few disclaimers. First, there's a distinction between a temporary job that you take on for a short period of time just to pay the bills. We've all been there. We have to do it. And when I say temporary, sometimes temporary might be five years. Temporary doesn't just mean seasonal. It might be something that goes on for a while. But even if you're in this position for five years, five years over the span of a 40-year career is nothing. It's just over 10%, which means almost 90 % of the rest of your working life could be spent doing something more fulfilling.

26:04even if you have to take this temporary measure in order to do the work required in the evenings, on the weekends, in the margins, in order to ascend to the next level. So I want to make the disclaimer that I'm not saying that every job should be puppies and unicorns. Some jobs do suck and they are drudgery and you just have to stick it out until you can get yourself to the next level. And what is that next level? That next level is a career that you actually want, one that has mastery, autonomy, and purpose. We know from the literature, we know from research that the three biggest predictors of workplace satisfaction is a sense of mastery.

26:50Are you improving within your craft? A sense of autonomy? Do you have time and space to do your thing and some reasonable level of freedom within your day-to-day activities? And do you have a sense of purpose? Are you satisfied that what you are working towards, the contributions that you are making within your organization, are they leading to something better? Is there purpose within those outcomes? I know a lot of people who find the FIRE movement, financial independence, retire early, because they want what is fundamentally a well-funded career change. Most people that I know inside of FIRE, there are some exceptions, but most people I know, if they are in their 30s or 40s or even early 50s, are not looking for a complete and permanent cessation of all income.

27:54Instead, most people want to do something that's more fulfilling. They may not know exactly what, and whatever that thing is may or may not pay very well. You know, we spoke earlier about puppies and unicorns. Maybe, maybe you want to work at a non-profit animal shelter. Maybe your purpose is to rescue puppies and senior dogs and blind dogs and disabled dogs and dogs of all varieties. Maybe animal rescue is calling you, but that would require such a drastic change in your finances. That you want to batten down the hatches and make sure that you and your family will be okay. And so I think what's beautiful about fire is that it gives us the freedom to go pursue our calling.

28:45And to do so in a manner in which we feel secure. And so work is only drudgery if you're not doing the thing that fits you. By contrast, if you've found the thing that fits, like the late Betty White or Charlie Munger, you might, might be happy to do it until you're 99. And maybe you take a break for a while. Maybe you take a break from the time you're 70 until you're 85. and then at 85 you get back in. Because heck, if you're 85 and you're going to live until 99, you still got a good 14 years. So never say never because you don't know what you're going to want when you're 85. And if you are healthy and if you found your calling, there's a chance you might want to do more of it.

29:36Okay, we're going to take one final break to hear a word from our sponsors. And when we come back, we're going to talk about the ire of fire.

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