Are You Afraid Of Money?

It seems there’s a new medical condition introduced every week. Did you know there’s even a condition related to the fear of money?

“Chrematophobia” is the abnormal and persistent fear of money, according to WebMD. It comes from the Greek “chrimata” (money) and “phobos” (fear). Some of its symptoms include heart palpitations, anxiety attacks, sweaty palms, and an intense desire to flee. Sufferers worry they might mismanage money or that money might live up to its reputation as “the root of all evil.”

If you have it, maybe you can blame it all on your brain. California Institute of Technology neuroscientists discovered that a fear of losing money is tied to a brain structure called the amygdalae, which generates emotional reactions to money.

Researchers found two subjects with damaged amygdalae and asked them to participate in an “experimental economics task” in which they were faced with variety of financial gambles, each with a different possible gain or loss. The subjects took risky gambles much more often than control subjects of the same age and education. In fact, they showed no aversion to monetary loss whatsoever, a sharp contrast to the control subjects. Researchers believe that the amygdalae is critical for triggering a sense of caution toward making gambles.

If you don’t want to blame your brain, blame your folks. Others contend that a fear of money is related to subconscious beliefs from religion or parents who told us that money is the root of all evil, is power (and power corrupts), will change your life, and can’t buy you happiness.

Are you chrematophobic? Here are some telltale signs:

–Not opening bank statements, bills, or mortgage statements
–Not checking account balances, or refusing to track net worth or spending
–Being defensive about a lack of financial literacy
–Trusting someone else too much with your money or letting someone else make your financial decisions
–Worrying excessively, but refusing to think about finances at all
–Not planning for the basics such as retirement, and forgoing life insurance and wills
–Overspending or over-saving

So let’s say you’ve got a little chrematophobia — what does that mean for retirement investing? It gets down to whether you should hire an adviser to help you, or if you can invest on your own.

There are two tasks involved in retirement investing: putting together a financial plan, and implementing an investment strategy. The plan should be built with you by a professional, paid by the hour who can learn your individual circumstances and map out an appropriate plan. This plan will assume a rate of return on your investment portfolio and a savings rate. For example, the plan may show how, if you save and spend certain amounts and achieve a 6 percent after-tax rate of return, you can retire at 65 and have plenty of money.

After you have a plan, you have to decide whether to invest on your own, or hire an investment professional. Today, with software and online brokerage accounts, anyone can build and manage a low-cost retirement portfolio. But the real test happens when the market plunges. In these “emergency” situations, does your fear of money prevail or are you able to stay the course?

If you know you are prone to panic, chrematophobia will cost you. Investors who did not stay the course and got out of the market in March 2009 have missed the nearly 100 percent bounce back.

Pilots spend 99 percent of their time training for the rare life-and-death events that occur less than 1 percent of the time. Like a pilot who is paid well for the emergency situation, a competent adviser with low fees will help keep you on course, talk you off the ledge, and make sure your emotions don’t lead you to bad decisions. Knowing yourself and whether you can handle market ups and downs as a do-it-yourselfer is the first and most important decision you can make as a retirement investor.