How to overcome the fear of investing & start saving now

Investing is the most important element of our financial future — but sometimes it takes a while before we really get it, so to speak.

Biggest success factor: Pull the trigger

There are many reasons why investing believers have not turned into investing doers. These two come immediately to mind:

They don’t think they have enough money.
They have fears about inflation or other extraneous factors they can’t control, and so forth.

Those reasons may sound valid, like the reasons kids offer when they are told to brush their teeth before going to bed. But no matter how valid the reasons sound, they still don’t remove the simple fact that, if you don’t invest now (and you continue not to invest), you will discover somewhere down the road that retirement is not an option for you.

I’ve spent a lot of time interacting with people who invest and those who don’t, and I’ve discovered something few people talk about: the overwhelming majority of people who get started with any form of investing, stay at it. And the ones who don’t, don’t.

Action reinforces action

I can’t base it on any scientific evidence, but I believe the biggest single factor for your future financial well-being is simply to get started investing. The human mind is wired in such a way that, once we begin with something, we acquire an emotional attachment to it (an investment, if you will), and we will make significant sacrifices to keep that thing going, whatever it is. It may be allegiance to a political party or figure, a cause, or values like eating correctly, respecting the environment, and, of course, getting rich slowly.

Our minds will continuously reinforce the positions we take: if I’m committed to eating at McDonald’s, I will only read things (down to silly jokes) which reinforce my position. That is also true for people who don’t invest. Just like the McDonald’s customer will mentally agree that stuff is slow poison but continue to eat there nevertheless, the people who don’t invest might nod their heads sagely and agree that investing is essential to their future financial health … and continue on without investing.

How do you break the inaction mindset?

The key to success, therefore, I believe, is to simply break the bad habit/mindset and replace it with the healthier one. Easily said, you might say, but …

In hundreds of conversations by email and in person, I’ve concluded the biggest thing holding people back from getting started on their investing careers is very simple: They just don’t know how to get started.

I know it held me back till I was over 50 … and I had a graduate education in money matters and, in fact, made good money. The biggest thing which held be back, though, was: I didn’t know what to do to get started. Sounds silly now, but it was real to me, and I know it’s real to many others.

What got me off the schneid (to use Chris Berman’s now famous expression) was two things:

1. Knowledge

The more you learn about any subject, from exercise to investing, the less intimidating it becomes. More knowledge also adds mental ammunition to take the jump and stay on course, all the way to retirement. Also, the more knowledge you have, the more assurance you will feel that you’re not making obvious mistakes. There are many resources, free and paid, to learn more about investing.

2. Simply setting aside money

As we saw recently in the interviews with people like Thomas Frank who successfully turned their financial lives around, success started with scaling back our lifestyles and making a simple, yet firm, decision to set aside money for the future. It’s like the old Nike ad: JUST DO IT ™.

Making the decision to cut back is the hard part. Once you have done that, you get to the choice of where to put that money you set aside each month.

Play to your strengths

Again, drawing from my observations with hundreds of people I have encountered, I believe there is no one-size-fits-all answer to investing, whether it be for retirement or any other future purpose. For instance, I have two neighbors, Jim and Mario. Jim worked an ordinary job his whole career, never making much more than an average income, and yet today he’s a millionaire. His strategy: investing in individual stocks with a conventional investing account (i.e., not through an IRA or 401(k) plan).

Mario, on the other hand, has an auto repair shop, and has for many years. He immigrated legally from Mexico and knows nothing about index funds or anything traded anywhere. His wife works for a realtor, and so they began buying rental homes a decade or two ago. He’s a hands-on type of guy, used to fixing stuff and dealing with customers, so to him and his wife rental property was (and still is) a no-brainer investment. In every recession, they picked up a house on the cheap, and all their houses are cash flow positive today. They are saving now for the next recession, when they hope to pick up another bargain. Mario is still much younger than Jim, but it doesn’t take a rocket scientist to see that he will probably be in the same position as Jim when he reaches retirement.

The point is: Figure out who you are and what you’re comfortable with, and go with that. Jim is a bit of an Eeyore; and if he started with rental properties, it wouldn’t have taken him long to just say, “Oh, just forget it!” So, don’t listen to what others say you should invest in: Consider all the options and pick one or two investments that resonate with you.

Keep it simple at first

But whatever your investment interest is, start out with something simple. The two simplest options are:

Sign up for a 401(k) or similar plan at work, or a low-cost (or free) IRA account, into which you put an amount you’re comfortable with every pay period. Automate that transaction, so it gets taken right out of your paycheck and you never see it.
If you don’t have a job with regular pay, open a savings account and decide what you’re going to put in there … and do it. Automate it if possible.

That is simple and easy.

Once you’ve stayed with the savings account or retirement plan for a year or so, you’ll discover that, while you weren’t looking, that switch in your mindset shifted from trying to justify not investing to trying to justify investing.

You are on your way to a secure financial future!

The important thing is not what you start with, but that you get started. That is how you can benefit from the extraordinary power of compound interest. The sooner you start, the more options you will have in your future when retirement beckons.

Future flexibility

One of the beauties of investing, too, is that you are never locked in. If, let’s say, the returns on savings accounts stop requiring a magnifying glass to detect, you can change your allocations to include more savings, CDs, bonds or bond funds. Or, if your closest friends decide they want to buy a rental property but they don’t have the down payment, you can always switch part of your investment by liquidating one and putting the proceeds into another. (Please note, I’m not advising you do stuff like that. All I’m doing is highlighting that when you invest, you’re never locked in. You can always change as you go along and learn more.)

But you’ll never have that flexibility if you have nothing invested.

There is no way you will enjoy retirement or financial freedom later in your life if you don’t invest. If you have been holding yourself back by not knowing where to start, be held back no more.

Have you had to overcome the fear of investing? What made you finally decide to pull the trigger? What advice would you give to someone that is trying to overcome their fear?

See more from Get Rich Slowly.