3 Proven Ways to Sidestep Financial Fear

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Whether you want to start investing, switch jobs or careers, or start a side hustle, your big goals can feel intimidating - especially when it comes to money. But I’m here to tell you, the biggest mistake you can make is to allow fear to keep you stagnant.

Today we’re talking about 3 ways to sidestep fear by managing risk. We’ll discuss a key trait many successful leaders share, an important mindset shift when it comes to failure, and the specific steps to take to mitigate your risk so you can freely and confidently pursue your boldest goals.

OUR LATEST MEGA FAIL

The idea for this episode was born about a week prior to this recording when Cory and I had a super big fail. At the time of writing this, we’re working on renovating our house in Austin in preparation for putting it on AirBnb to rent while we’re living in El Salvador.

We’re working with a company who recommended we buy some different furniture and do some tweaks to the house itself to make it feel a bit more updated. And the biggest change they recommended was that they wanted us to paint all the interior walls of the house gray.

At first, we didn’t want to because it felt like an awful lot of work on top of everything else we had going on to get ready for our move to El Salvador AND I was in the middle of launching this podcast. But we remained open to the conversation, so we had 3 different people come to the house to give us a quote on painting.

And, whoa, I know inflation is high right now, but holyyy paint prices - I did NOT expect these quotes to come back so high. We were willing to invest about $2K toward painting the inside of our home because we know when we sell it later it’ll help increase the value, but the quotes were coming back at 5x that amount, averaging ~$10K!

Given everything we had going on and the price point of painting our tan walls gray - it just didn’t feel like a huge priority for us. In an effort to compromise with the interior designers, Cory and I decided to paint two accent walls - one in the living room and one in the master bedroom.

We went the DIY route and we completed the 2 walls one evening and it only took us 4 hours, and that includes moving all the furniture, removing all the outlets, taping off the trim and connecting walls, doing the actual painting, and then putting the room back together.

The next morning we were feeling great and we were like: that really wasn’t that bad! So we took ourselves to Home Depot and picked out a paint color called White Metal and decided we were going to paint the entire house ourselves.

Wanting to rip the Band-Aid off, we started with the hardest part of our house - the entryway. And let me just paint this picture for you… no pun intended 😉

The entryway to our house is essentially one giant two-story high wall on one side, and on the other side is the staircase. Then you’ve got the front door, two side windows, a window above the door, and another window even higher above the door above this ledge, which is also at the second-story level.

So this first day of painting required two very tall ladders, a roller extender, intricate taping around the stairs and windows, and some nerve-wracking heights. But we were convinced that we could get this entire job done faster than everyone was telling us we could, so we were on a mission – and we did get that whole difficult entryway done in one day.

But there was one problem…

The next morning, we finally took a step back to take in the entire project, and it wasn’t until that moment that we realized the White Metal color that appeared like a light gray at the store and in the paint can very much looked like a light blue once it was on our walls. So basically, the entire main part of our house, and the hardest part to paint, looked like a baby blue nursery.

That was not a fun moment for us. We tried to tell ourselves that we liked it; we tried to convince ourselves we should just keep going… but the reality was, we had to call it and start over. And, yes, we had already removed all the intricate taping and all the prep materials and everything else so literally everything had to be done again.

We called our next door neighbor, who happens to be an interior designer, and asked her to come over to help us. She brought her painting sample book, and taught us how to choose colors that complement the colors in our tile, the colors in our wood, the wallpaper, and taught us about paint in different lighting. There was a LOT more to it than I’d realized.

And what was so funny was the day before when we were chose our color in about 5 minutes, I remember seeing another couple that was there before us, and who was still there deciding on a color after the kid working the paint counter had mixed up our 5 gallons of paint, which had taken 15-20 minutes, and they were still choosing their color when Cory and I left the store.

I remember thinking: dang, it’s going to take them forever to paint their house if it’s taking them that long to choose a color. But, as I learned the hard way, in this situation, Cory and I rushed into our decision without considering all the information. And it knocked me right off my high horse!

To be fair, this was our first time painting a house together so it’s one of those things where you don’t know what you don’t know. But this entire experience reminded me of something that I’d heard in my corporate career, which I think is good advice for us all… And that’s to fail fast.

HOW TO FAIL FAST

Here’s the idea: We all make bad decisions, we all make mistakes - but research shows that successful people course correct more quickly.

In an interview Fast Company did with Mike Whitaker, the author of The Decision Makeover: An Intentional Approach To Living The Life You Want, Whitaker says when it comes to dealing with bad decisions, “most people don’t act because it’s too painful."

"But when successful people have enough evidence that they’ve made a bad decision, they don’t look for more. They’re willing to shut down a business, for example, and go in a different direction. They fail fast, move on, and then they don’t talk about it again.”

I think this is mostly great advice, however, the one piece I have a qualm with is I think we SHOULD talk about our failures because that’s how we learn. But I agree that we should not DWELL on our failures. In fact, I think reframing the word ‘failure’ is incredibly important, which is why I prefer to think of my own failures as learnings.

The word ‘failure’ gives off a sense of negativity; saying you’re a failure takes away your power and puts you in a place of defensiveness or in a victim mind state. But saying that you learned something simply means that you figured out something that you didn’t know before, possibly because the outcome of a situation maybe didn’t go the way you expected or wanted it to.

That doesn’t mean you failed or that you’re a failure - it just means that you’ve learned. And you’re better off now because of that experience.

Thinking of these moments as learning opportunities puts you back into a place of power and positivity and, I’d be willing to bet you’re more likely to keep trying with this type of a mindset, rather than the negative mindset that comes with the word ‘failure’.

Let's tie this back to the big, bold goals we’ve set for ourselves because, if they’re big enough, they should scare you, or at least make you feel a little uncomfortable. But fear of failure or, like we talked about, the fear of things not going the way you expect them to should NOT keep you from trying!

Whether your goal is to start a side hustle or to start investing… you have to just TRY. Try to make informed decisions, work to manage risk as best you can, but then, if things don’t work out, remember that it’s not the end of the world; you can course correct, and keep moving.

THIS COULD'VE DEVASTATED US

Here's something else that happened to us recently. You know one of my favorite subjects to talk about is investing. I wrote a post about how to understand investing in 4 minutes where I go through a simple definition plus 5 different assets you can invest in... and one of those assets is cryptocurrency.

I like to remind people that, because it's a new asset class, investing in crypto can be risky and the prices are often very volatile so it’s important to never put in money you’re not willing to lose. In fact, that advice is true for any kind of investing… but I’d say it’s especially important when you’re investing in risky assets. You may know where this story is going…

We put some of our crypto holdings into a company called Celsius because they promised a sizable return simply for us to hold our investments with them. Although it was tempting, we did not put all of our crypto holdings into Celsius because we believe in diversifying our investments, as well as where we hold those investments.

Spreading out your money among different types of investments, and holding those investments in a variety of places requires organization, yes, but it helps manage the risk if any of the investments fail, or if any of the companies holding your money fail. And that’s what happened with Celsius.

Earlier this month, we got notice that Celsius had filed for bankruptcy, and - as far as we can tell - there’s no way for us to get the money back that we were holding with them. Of course this is not news we wanted to hear and, while it’s unfortunate, there’s really no reason to dwell on it because there’s nothing we can do about it.

The good news is that we managed risk going into that arrangement because 1) we did not invest money that we couldn’t afford to lose, and 2) we spread our money out so, although we lost all the money we were holding with Celsius, we did not lose the money we’re holding with other companies.

I believe that you have to spend money to make money and, in some cases, you have to be willing to lose money to make money. And of course it’s not ideal, but you have to be willing to TRY.

3 WAYS TO SIDESTEP FEAR

No one has a crystal ball; we don’t know what the crypto market or even the stock market is going to do. But we know inflation is high and we have to put our money somewhere where it’s at least going to grow faster than the rate of inflation… and we know that holding it in the bank isn’t going to achieve that.

Whether you decide to invest in yourself through starting your own side gig, or you want to try investing in the stock market, or maybe you’ve saved up enough for a down payment and you want to try investing in real estate – mitigate your risk, and TRY.

Just do it. Seriously. The worst thing that could happen is you lose all your money, but if you’ve mitigated your risk, that won’t matter. Look, I don’t want that to sound crass, because, again, if you’ve mitigated your risk, you’ll be just fine. So let’s dive deeper into what I mean by mitigating your risk, and what EXACTLY you can do to accomplish that.

Here are 3 proven ways to mitigate risk so you can sidestep financial fear.

1) BUILD AN EMERGENCY FUND

I’ve talked about this before, and you’re going to hear me talk about it often because having an Emergency Fund is hands-down one of the most important things you can do in order to mitigate risk and ultimately grow your wealth. But what is an Emergency Fund, how much should you put in it, and how do you go about the whole thing?

The general definition of an Emergency Fund is 3-6 months of living expenses - but it can really be whatever you want. Basically, you need to decide if you suddenly lost all forms of income unexpectedly, how long do you think it would take you to find another job or source of income?

I tend to be more conservative, so I like to have 6 months of our living expenses saved up at all times so, in the worst case scenario of suddenly losing all forms of income, we’d have plenty of time - 6 months, to be exact - to figure something out (whereas if we only had 3 months to figure out our next move, I’d be panicking… but 6 months feels comfortable to me).

To build out your Emergency Fund, you need to calculate the difference between what you're bringing in and what you’re spending each month, and use that number to set up a monthly auto-draft from your checking account to your Emergency Fund, which you can keep somewhere as simple as your bank’s savings account, or if you’d like a higher return, you can look into a HYSA (high-yield savings account).

For example: if you're bringing in $5K per month and you're spending $4K per month, the difference is $1K, so you’d set up a monthly auto-draft for $1K to your Emergency Fund. Since you’re spending $4K per month, if you want 6 months of living expenses saved up, that’s $24K that will need to be in your Emergency Fund ($4K x 6 = $24K). Knowing you can afford to save $1K per month, it'll take you 24 months (2 years) to save up your $24K Emergency Fund goal ($24K/$1K = 24).

If you’re feeling discouraged or overwhelmed, don’t worry - it's not just you. It takes all of us awhile to save up an Emergency Fund, but what’s great is once it’s done, you typically don’t have to worry about it anymore unless you do in fact have an emergency… in which case it’s a great thing because you have the cash to help deal with that emergency - just be sure to replenish anything you use.

But for our conversation on ways to manage risk, once you set up your Emergency Fund, it’s (for the most part) a one-and-done kind of thing.

If you feel like being an overachiever, you can hit your Emergency Fund goal faster by reducing your expenses and/or increasing your income. Make it fun! Make it a game. How fast can you save up 3-6 months worth of your living expenses? And be patient; these things take time.

2) DIVERSIFY

You may have heard this word before when it comes to investing, but I want to be clear on what it means. To diversify essentially means to spread your money out… in other words, do not keep all your money in one place… or, as the old saying goes, don’t put all your eggs in one basket.

Here’s an example of what I mean by that. Let's look at two scenarios where you're investing differently.

In the first scenario, you for a company and invest in shares of that company (which can be smart, especially if you have an ESPP, or Employee Stock Purchase Program, where you can buy stock of your company at a discount). But you only have stock at the company you work for (let's call it $10K). You don’t have any other investments.

In the second scenario, you invest in 10 different companies in the stock market - one of which is the company you work for (you still have $10K total invested, but you only have $1K invested in each company, including your employer). You also own a house.

Now, let’s say that the leadership team at the company you work for makes some poor decisions, and the stock price for the company plummets 50%. In the first scenario, since you ONLY have stock in that one company you work for, the value of your total investments would drop to $5K.

In the second scenario, yes, you'll lose a bit of money… but you have 9 other companies you're invested in that are still doing well; so you're affected much less, financially-speaking, than you would be in the first scenario where you have ALL of your money in a single company (your employer). In this scenario, the value of your total stock investments would only drop to $9,500.

Finally, let’s say the entire stock market goes way down, which hurts you in both scenarios… but in the second scenario, you're less affected by this because you also own a house - or, in other words, you hold a different TYPE of asset besides only stocks… you DIVERSIFIED because you own both stocks AND real estate.

Here's the point: the more you spread out your money, the less risk you have. And, again, this is true for both investments AND if you plan to use companies to invest in your behalf. Think back to the story I told earlier about Celsius, the crypto company Cory and I held money with that ended up going bankrupt.

If we had held ALL of our money at Celsius, their bankruptcy announcement would have royally screwed us. But, because we hold our money across a variety of different companies, the Celsius bankruptcy hurt, yes, but it didn’t destroy us (plus, thanks to our Emergency Fund, literally any money we invest is money we’re willing to lose since we know we’ve got 6 months worth of savings to fall back on).

3) STAY ORGANIZED

The third way to manage your risk is to get, and stay, organized. And I mean this in terms of your own personal budget, income, and expenses, as well as your investments. It is in your best interest to keep close track of any new recurring expenses you're adding to your monthly expenses, as well as any new regular income, and a list of what and where all your investments are.

Things can get really complicated really quick, so prioritizing your organization from the very beginning is key. This will help you avoid any unforeseen overdrafts, miscalculations, missed opportunities, and more.

And while it may seem small, this is one of the most important ways to make sure you’re getting the most out of your financial efforts, and managing risk.

THE BIG PICTURE

To summarize, the 3 proven ways to mitigate risk so you can sidestep financial fear are to:

Build an Emergency Fund
Diversify
Stay Organized

Remember, it’s easy to get frustrated when you’re working on any one of these things; each of them takes patience and intention, but trust me, it’s worth your effort because mitigating risk - through these 3 steps or otherwise - is THE way you protect yourself and create a situation where you can then take calculated risks that can really pay off.

If you lay this foundation first, and then go TRY those big scary things you’ve been wanting to try but keep putting off because of fear… it really doesn’t matter whether things go your way or not because, even if they don’t - you get to learn something new AND you’ve got your Emergency Fund, diversified money, and organized finances to fall back on.

Big risks do reap big rewards. But the truth is… they’re not really THAT big of risks if you lay a proper foundation in the first place.

So get out there and TRY. Try new things and if they don't work out - fine. In that case, you get to learn. But don’t NOT try. Take action, move forward, and re-adjust if things don’t work out.

Make informed decisions, and don’t be afraid to fail fast and course-correct quickly. And if you’re feeling inspired to take action today, here’s the biggest item on your to-do list: take a look at my free budget calculator.

This single tool will help you determine your monthly expenses and, in turn, the amount you need to save for your Emergency Fund. It’ll also show you the amount left over after you pay all your monthly bills, and you can use that number to set up your auto-draft into your Emergency Fund.

My monthly budget calculator is my go-to tool for staying organized and keeping all my financial information in one place; it’s how I add in new monthly expenses, remove old monthly expenses, keep track of all forms of income, and a list of all our investments.

Now’s your time. Don’t wait. Take action. Go build your solid financial foundation that will give you the confidence and freedom to take the big risks and reap the big rewards.