November 3, 2010, 5:00 am

Are You Financially Insecure?

by: The Financial Blogger    Category: Personal Finance
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It was Halloween last weekend. I spent quality time with my family as we had the chance to go to the zoo, eat a Halloween supper and trick or treat with my sister-in-law and her husband. I noticed that when you are young, your worries seem bigger than an adult’s concerns and they are very basic. Youngsters are scared of monsters, storms and noises at night. We all know monsters don’t really exist, but your kids are very scared of them. So this morning I am wondering if we don’t carry some of this irrational fear of the unknown into adulthood. So I know I lack a bit of timing but I really wanted to write this post and ask you; are you scared of something financial?

Are you afraid of losing your job?

Some people may have better jobs than others. Some may think that they are irreplaceable (for them, I can tell you that you are living in a fairy tale and this is why you are not scared). But in general, most of us are afraid of losing our job at one point or another in our careers.

I was part of this group when I first started my career. Then, I was scared each time I switched job and changed managers. I thought that each time, I was losing my “protection”. Today, I realize that I was living in fear for nothing. In fact, losing my job could be the best opportunity of my life. I currently don’t have the guts to leave my comfortable 9 to 5 (which is more like 7:30 to 4!) to jump with both feet into my online adventure.

So losing my job would be the “solution” for my irrational fear. When you think about it, losing your job is not that bad. It gives you the opportunity to rethink your life, to do things that you were afraid of doing and also to get a better job at a higher level. Go read Smart Passive Income Blog story and tell me about it!

Sure we would become financially insecure, but a job is a job, nothing else. I think that losing your job could be the opportunity of your life, as long as you don’t sit down and start the “poor me” song for months.

Are you afraid of losing your home?

Another factor that makes people feel financially insecure is the fear of losing their house or going bankrupt. Many times, we avoid making financial moves because we are scared to lose what we have. When you think about it, this financial insecurity comes from the fact that we have worked hard for what we have earned and we don’t want to risk it (the poker theory). This might also be because of our financial education that tells us to get a good job, pay off our debts and retire happy. The only problem is that the last part of this advice doesn’t really happen to those who don’t take risks. In fact, it doesn’t fit at all for those who aspire for more.

When I was 14, my parents declared bankruptcy. We lost our house and our lifestyle. While it wasn’t the nicest part of my financial life, it wasn’t that bad either. This is when I realized that losing material things is not the end of the world. When we started the company, I didn’t hesitate to remortgage my house and put 20K of my own pocket in something that wasn’t earning more than $500 per month (excluding the time both my partner and I put into it!).

Since I started working in 2003, I have borrowed several times to buy more assets. Each time, my wife was financially insecure and I was excited by the challenge. Recently, we thought of investing another 75 – 100k in the company. I freaked out both my partner and my wife… but in the end, I have a feeling that we will come up with a huge project and end-up doing it. Once again, the irrational financial insecurity is based on our beliefs and not on something that exists.

Are you afraid of losing money?

Most financial insecurity is lived through someone’s portfolio. Remember the “good” times of 2008? Those were the best investor tests you will ever go through in your life ;-). On this part, I have never been financially unsecure in front of my investment statement. I don’t really care if I love money or not as I know that, in the end, I will retire with money in my bank account.

Having said that, I totally understand that older individuals would become financially unsecure. If I was 50, I would think differently. The only thing that you must be careful about, is not to make money moves based on fear (like selling in October 2008!). If you can’t handle the pressure, leave your money in the hands of someone more rational that will make good decisions.

What about you, are you financially insecure?

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I think the thing I (and many people) are afraid of is falling back into bad habits.

I think I’m financially insecure about jumping into a business and leaving a full time job. Having a good savings and dual income helps to ease the pressure – but the stable checks (and unforgiving school loans) can make it difficult to make the jump.

I guess we don’t really have anything to lose (besides our cars or credit) if we failed miserably with our own business. But it would be nice to have the major debt knocked out before jumping into full self employment or making a drastic shift in jobs. I guess that sums up where I feel financial insecurity lies for us.

Which kind of bad habits? 😉

I hear you. I have a mortgage and a car loan. I am scared of not being able to make my payments if I was to quit my job to jump in my business….

For me, financial security is defined by what I can provide for my family and be able to maintain it. If the life style is too high, then it’s wrong because you don’t have any buffers… Our life style has stayed the same for many years, even though my income has increased. Avoiding the rat race and the keeping up with the Joneses is critically important to avoid falling into a stressful situation where you don’t feel secure.

Job security is not as much a concern as the change in pay, that’s why it’s important to keep it level when it comes to spending. Borrowing and leveraging is simple risk / reward calculation.

Being a single family income, I can’t just easily drop everything and take a major risk without a plan. I have considered different initiatives but the initial capital is too much and I have not found a partner yet. Otherwise, side business is what I try to do.

I also believe that everyone’s fall back cushion is different depending on where they live, where family is and how old children are. It doesn’t mean that you don’t take risks, it means that the risk level can different marginally.

I have come to the realization that I am not “programmed” for speculative growth stocks having uncertain futures.

I have a hard time investing in stocks for example that don’t pay me a distribution or dividend. I tend to prefer a lot of ‘buy & hold’ large cap stocks that have a long history of dividend payouts.

With that being said, there are things that cause anxiety for me at all. For example, I’m in the process of applying for a home owner’s line of credit with the purpose of buying an investment property and the loan will use the equity of my principal residence. I’m totally fine with it.

Nice post!

[…] The Financial Blogger asks, are you financially insecure? […]

[…] Are You Financially Insecure? @ The Financial Blogger […]

Sleeping at night is more important than making profits in the stock market. Get your asset allocation balanced to a point where sleeping easy is your norm.

by: The Financial Blogger | November 7th, 2010 (11:43 am)

Hey JP!

glad to see you around, it’s been a while 😉

[…] Are You Financially Insecure? Fear is one of the most primal emotions, and no matter how technology or humanity improves over the years, one will never be free of fear. The finance world is no exception. Is there anything in your financial life that you are particularly afraid of? [The Financial Blogger] […]

I think what you said in your article is very true.
Stability is important, but in reality no one is safe from loosing a job, a home or money on the stock market.
The only thing we can really do – plan ahead, live according our means, be an educated investor and have savings for a rainy day. You never know what will happen tomorrow.
Great article. Thanks por posting!