Diffuse vs. Specific Financial Fear

One of the questions I get asked a lot (because of my TED talk and all the writing I’ve done on taking risks) is “how do you know if it’s a bad idea to take a risk?”

It’s such a good question, because one of the predominant feelings when you’re staring at something that feels risky is fear. It’s the emotion that frequently causes people to not take risks — fear of failing, fear of feeling incompetent, fear of leaving safety or surety. And part of my point when I talk to people is that to get good at taking risks, you need to start seeing fear as a green light. If your body or your brain is saying “I’m scared, I can’t do this,” that’s a sign to run toward it, not away from it. One of the biggest benefits of taking risks is proving to yourself that you’re capable of much more than you know – of overcoming fear.

But how do you know if the fear is a different kind of fear? One that’s telling you this is actually a bad idea?

Because the truth is, there’s a type of fear that will make you bad at handling all the discomfort and uncertainty that comes with risk. Taking a risk is jumping off a cliff and falling for a while — often 6 or 9 months of feeling crazy, incompetent, inept — before you start to reach the other side and realize you’re learning and growing and this is leading you somewhere. Making it through that period means you have to have enough steadiness underneath you to survive the fall. So there are types of fear that will make it almost impossible to get through that phase.

One of the biggest kinds of fear I talk to people about is financial fear. “I’m scared I’ll run out of money” is a type of fear you should examine before you quit your job without another one lined up, or before you decide to start the company you’ve been dreaming about, or go back to school. It is really hard to stay sane and make it through the hard, uncertain moments that come with taking a risk if you’re worried you can’t feed yourself, your family, or your cat — or if you’re worried about losing your home.

But not all financial fear is a red light.

There’s a difference between what I call “diffuse financial fear” and “specific financial fear.”

Most financial fear starts diffuse. “I’m scared I might run out of money.” “I’m scared of not earning money.” “I’m scared I’ll never find another job.” All of those are diffuse financial fears, meaning it is just a low hum or dread or anxiety preventing you from even exploring your options. And because it’s diffuse, you can’t actually do anything about it — you can’t solve “I might run out of money” the same way you can solve a problem with a number attached to it.

And a lot of financial anxiety is actually solvable. You just have to figure out what’s behind it and turn it into something more concrete. Diffuse fear feels permanent and unsolvable because it’s shapeless. Give it a shape and, more often than not, it turns out to be a problem you can actually work on.

When someone comes to me with this kind of fear, my job is to turn diffuse into specific. Not because specific is always comfortable — sometimes it’s worse! — but because specific is actionable. Diffuse fear just sits on your chest. Specific fear gives you something to push against.

Honestly, I usually start with: what are you actually afraid of, and do you know where it comes from? Some percentage of the time, this fear is inherited. A friend of mine has parents who immigrated to the United States from China and went through a lot to create opportunities for her and her siblings. There was a spoken expectation that all of them would always have jobs and would always try to earn as much as they could. Just that much detail is helpful, because it puts a shape on the fear. Now the conversation becomes about whether she wants to do the psychological work of untangling that expectation from her own goals right now, or whether she believes this particular risk is worth taking anyway, even with that voice in her head. Sometimes risks lead to greater financial outcomes, even if they don’t start that way, but if your fear won’t even let you start the conversation, then you’re stuck. There’s a lot you can do to talk through inherited financial fear and help someone decide whether they can handle the baggage that comes with the risk.

But the best case is to get even more specific. “I’m scared I might run out of money.” Okay — do you know what your savings actually are? Do you know how much of it you’re comfortable spending if you need to? If you have a partner, have you had this conversation with them? [A partner who isn’t on board with your risk is its own problem — it’s genuinely hard to make it through the dark middle of a risk if the person next to you doesn’t believe in it.] Do you know your monthly burn rate — how much your household actually spends each month?

All of this is just getting at one question: what do you need to feel financially safe? Is it something you can practically achieve?