Don’t Let Fear and Uncertainty Cause You To Make Poor Financial Decisions
Paul K. Fain, III, CFP®
In personal financial planning, fear is not your friend. Anxiety and worry cloud our judgement and compel us to make poor decisions. If a world of worry is the new status quo, what is the road less traveled? Identify your fears, accept the worries beyond your control, review and modify the concerns you can influence.
As we conclude the first quarter of 2025, what are we scared of? People are facing fears about the cost of living (inflation), market volatility, job security, retirement shortfalls and more.
Many worry that inflation will continue to make everyday expenses, from groceries to housing, more expensive. While prices remain high, strategic budgeting and prioritizing needs over wants can help. Investing in assets — like equities and real estate — that historically outpace inflation can also protect wealth over time.
With economic and geopolitical uncertainties, many fear another major stock market downturn or unpredictable swings in their portfolios. We need to remind ourselves that volatility is normal, and long-term investing is key. Historically, markets recover from downturns. Diversification and a disciplined approach, rather than emotional reactions, can safeguard and grow wealth. Staying invested is better than trying to time the market.
Sweeping government layoffs and concerns over a potential economic slowdown make people anxious about job security and income stability. While some economic indicators hint at a slowdown, the labor market remains resilient. Building an emergency fund (three to six months of expenses) and enhancing skills to remain competitive in the job market can provide financial security.
With the aforementioned market uncertainty and inflation, people fear they will not have enough saved for retirement. Small, consistent increases in savings — even 1-2% more per year — can make a significant difference over time. Maximizing employer matches, investing wisely and delaying Social Security benefits (if possible) can help secure retirement income.
Jonathan Clements, author of the HumbleDollar blog, says, “We are, alas, hardwired to worry.” He adds, “Often, when it comes to money, the path to less worrying involves simplifying our finances, keeping a healthy cash reserve, settling on the right stock-bond mix, making sure we diversify broadly, limiting debt, buying the right insurance, getting our financial affairs organized and listening less to market pundits.”
Let’s get out of our heads. Do not spend all your finite time and energy focused on money. Work on things bigger than your bank account: relationships, communications, helping others, experiences, learning and growing. Having a purpose other than fretting over your finances can get you through the challenging times.
This article originally appeared in the Knoxville News Sentinel online on March 21, 2025.
