Mind Over Money (2nd in a series)

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STEP 2: Face your fear.
It's like shining a light into the closet of a scared child: Whatever she sees in there is going to be less frightening than the scaly thing with all the heads that terrorizes her imagination.


On the other hand, I'm afraid that if I take a hard look at my finances I'll discover an unmitigated disaster. But no matter how bad it is (and it's rarely as bad as you think) there are concrete steps you can take to change your situation.

I was talking with someone about this the other day. She works for a financial planning company. She said so many people are afraid because of a lack of knowedge. I agreed and told her "Knowledge is the mortal enemy of fear". The example of the child above illustrates that so well. She's scared not because of what's in the closet but because she doesn't know what's in the closet. As humans it is so easy to let the "what ifs" turn to fear that rules our life.

As it says above, reality is rarely as bad as your fears. Even if it is that bad or worse, you now know how bad it is and can make a plan. Otherwise it's like a doctor making a diagnosis without asking you any questions about what's wrong or performing an exam. You would just walk into the office, the doctor says you have "x condition and we'll do y to treat it". You wouldn't trust your health to someone's random guess, and you owe your money the same respect.

Real Life Example
A few years ago Larry Winget had a show called "Big Spender". Each show was essentially a financial intervention for an individual or couple. I'll never forget the couple who never opened their bills. They just took the unopened envelopes and threw them in a basket. It was a BIG basket. One of their first assignments was, surprise!, they had to open all the bills and find out where they really were.

Summary
It's like taking a trip- You have to know where you are now to figure out how to get to your destination.

Some things to find out if you don't already know:

1. What's your credit report look like?

You can get your free reports here

Note: Most credit reports contain errors. Read over yours carefully, and follow the dispute process given to fix them. If you don't know your credit scores, purchase them AFTER you've fixed errors to your report.

2. What do you have in assets?
- Checking account(s)
- Savings account(s)
- Retirement account(s)
- Stocks
- Bonds
- Value of car(s)
- Value of real estate
- Anything other assets not mentioned

3. What do you have in debts?
- Mortgage
- Student loans
- Credit card debt
- Car loans
- Personal loans
- 401(k), 403(b), etc. loans (you borrowed it, it's a debt)
- Home equity loan
- Any other debts not mentioned

If you really want to go all out, subtract your debts from your assets to get your net worth.

Yes, I know it can be scary, but remember "knowledge is the mortal enemy of fear".