NerdWallet's Smart Money Podcast - Using Your Financial Anxiety to Make Better Decisions

Episode Date: November 30, 2023

Welcome to NerdWallet’s Smart Money podcast, where we answer real-world money questions. In this episode:  Nerds Sean Pyles and Kimberly Palmer speak with Farnoosh Torabi, author of the new book, ���A Healthy State of Panic.” She explains how we can use our fears as a superpower to make better decisions when it comes to finances, career and life. Torabi is a personal finance expert and host of the “So Money” podcast.  In their discussion, Torabi shares how her upbringing as the daughter of immigrants taught her to be fearful of certain things, but that as an adult, she realized that embracing her natural fear of negative outcomes actually helps her to make better choices. During the pandemic, she decided to take the risk of buying a new home, even though she was scared of taking such a big leap. In retrospect, she says, it was one of the best decisions she and her family could have made. Torabi also shares her advice on how to overcome paralyzing fear. Sometimes, she says, it’s a good idea to actually think through every terrible outcome that could occur, so you can realize that those results are unlikely to become reality. And in some cases, she adds, fear stops you from making truly bad choices. And while confronting such heavy topics, Torabi always maintains her trademark humor, bringing levity to difficult conversations.  Check out this episode on your favorite podcast platform, including: Apple Podcasts Spotify NerdWallet stories related to this episode: A Scarcity Mindset Can Cost You Mentally and Financially  Money Envy Harms Mental Health Emergency Fund Calculator: How Much Will Protect You? Have a money question? Text or call us at 901-730-6373. Or you can email us at [e-mail]. To hear previous episodes, go to the podcast homepage.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. We have a special episode in store for you today. Regular Smart Money guest and personal finance nerd Kim Palmer is kicking off the next episode in our book club series. Kim, who is our guest this episode? We're speaking with Farnoosh Tarabi, author of the new book, A Healthy State of Panic. It is about learning to use your fear as a superpower and to make better decisions when it comes to your finances, career, and life. Farnoosh is a personal finance expert, and she's the host of the So Money podcast. Awesome. Well, I am looking forward to joining this conversation too. Great. Farnoosh, welcome to Smart Money. Hi, everyone. Thanks for having me.

Let's start by talking about why fear is something that even plays a role in our finances. Can you explain how can fear affect our financial decision making for better or for worse? Sure. This is my love language. I think that fear shows up all the time everywhere, particularly in our financial lives. When we are afraid of money, it's not really the money that's bothering us. It's the relationship that we have to this idea of money, to this reality of money. Because money is just a tool, as we all know. It doesn't breathe. It doesn't move. It's an adamant object. So when we are fearful of money, it's typically because there's a story there. The opportunity is to explore that story because it will usually unveil so much about

who we are, what we value, the principles we were raised with, our goals, and ultimately what it is that we want to protect. When fear shows up in many realms of our lives, whether it's at work, within our financial life, in our relationships, it is usually a signal to us that there is something at stake. There is something at stake that is risky, that costs maybe more than we're willing to afford, and it begs for reflection and some recalculating. In your book, you talk about how rewriting your money story can help you take control of your and shake false narratives that people might be carrying with them. I would love to hear an example of how you've done this in your own life. Yes. When I was in my 30s, married, did I have children yet? I think I did. I think I had my son. He's my oldest, and he was still a baby. I had recently published a book

about female breadwinners. I'd been working in personal finance the entirety of my career at that point, 15 years. And so I felt very confident with regards to money and educating people about money. But there was an aspect of my financial life that terrified me that I talk about in the book. And it was this. I was afraid of making too much that if I ventured to try to earn more money, more than I already had, which I had already told myself was enough, that if I ventured to want for more, that it was going to say something about me that I wasn't willing to face, which is that maybe I'm greedy. Maybe my values are misaligned. I was afraid that the pursuit of trying to make more money, in my case, I wanted to make seven figures, like all my, what seemed to be all my peers in personal finance who were thought leaders and influencers and, you know, and I was worried that it was going to cost

my time. It was going to strain my relationship with my husband. It would mean I wouldn't be a good enough mom. I would be too focused on work. And so all of these fears kept me from pursuing this, really this desire to go out there and make a bigger impact and yes, make more money. And when I sat with that fear and ultimately did talk to a money coach around the emotions tied to this story, this narrative, I realized that this is a fear that I inherited from so much of my life growing up, seeing other women not able to reach these goals and being almost vilified when they did. When we met a woman who was, quote unquote, rich, who had nice things, it was not inconsequential. We said that she's not married and doesn't have children, that she chose this life at the expense of connection and relationship and motherhood. And when I recognized that I had sort of inherited these narratives and that this fear

was rooted in other people's fears, that I have now an opportunity to either accept it or not, that I was just sort of accepting it as a fact. This fear was a fact in my mind when it really was just a fallacy. It seems like you had to shake external expectations from what you really want in your life. Yes, precisely. And that's one of the gifts of the fear of money is that it encourages us to go down this path into our past and even into our current lives and really examine the influences, the externalities that are influencing our financial relationship, our mindset around money. And I think that when we fear these things, they're not small things and I took them to heart.

I said, okay, well, is there a way to do this, to pursue making more money that actually doesn't compromise my time and it doesn't compromise my relationships? Is there a world where those two things can coexist? And I then made it my job to go make that plan, to go create that roadmap. So all of these things

came out of an initial conversation with fear that I had. Why do I fear this? Where does it come from? What do I want to protect in the pursuit of this thing that feels scary to me? What is that new roadmap? And then going and taking the steps, taking the action. So our financial fears or fears in general can prevent us from doing things that would actually benefit us in the long run. For example, if someone is afraid of losing their money in the stock market, they might end up not investing for their retirement, which could leave them in a pretty rough spot when it comes time to retire.

So Farnoosh, I would love to hear how you think people can find the middle ground between listening to what their fears are trying to tell them and then also not letting those fears control their lives. A really great exercise when the fear of money shows up. And in this case, perfect example, the fear of investing. What's scarier than that? So much uncertainty. And we're talking about our future money. We don't want to risk that. But sometimes when we're afraid of something in the present, which is maybe the nothing or not invest, because that's what feels like protection is in the moment and the things that you value, imagine you don't invest. Is there something scarier awaiting you on the other side of that journey? And I would say yes. I think it's more terrifying to arrive in retirement without savings than today committing to investing, knowing that it's uncertain, going through the motions, because honestly, that's what investing is. And you are taking

risks, but you can still do it in a very risk-adjusted way. So I think it's scarier sometimes when you sit with this notion of like, if I do nothing with this fear, if I allow this fear to keep me stuck, to keep me from taking action, what is the consequence of that? Is it scarier than what I'm feeling now? And if it is, then you have your answer, you have to go do the thing. But having said that, you do the thing by factoring in your comfort level. So I don't just say blindly invest in the stock market. Nobody says that, right? It's about making sure that it is adjusted for risk. It's taking into account your timeline for retirement. So it's not like you're just doing it fearlessly. You're doing it actually with an understanding of your fears and with a plan that is aligned with protecting the

things that you want to protect. Yeah. And you share a story in the book that I think is a really good example of finding this balance. You talk about how you bought a house just as the pandemic was starting and you were scared. You say you were scared. Can you share that story and how you balance that fear? Yes. It was the third week of March 2020, which if you recall, was when everybody was told to stay home and the market was tumbling 800, 900, 1,000 points consecutive days. And I had just made an offer on the home and I couldn't reverse it. And I'm just like, this is either going to be the most brilliant idea or the most catastrophic idea in my life.

But here's the thing, why I felt confident doing this scary thing. I was more terrified of staying put. I was living in Brooklyn with my two children in a small apartment. We couldn't even go on the roof. We couldn't go into the lobby. We were terrified. My kids were riding their bikes in the hallways. We were at the epicenter of the pandemic, New York City. I just said, you know, staying here is actually more terrifying than pursuing something that is

unknown, that is uncertain, because at least it means that I can go somewhere else and think more clearly about what I'm going to do next. It wasn't an inexpensive move, but we could afford it. We had run the numbers. But I was also very clear, my husband and I, we talked about it. If this doesn't work out, it'll be fine. We will have a plan B. We will have a plan C. But we just know that where we are is not sustainable. And sometimes when the fear of money, which is sometimes coupled with the fear of uncertainty, shows up, your opportunity is, again, sort of a weighing of two fears.

You know, what's scarier? And when you do that, I think the path becomes clear. I think exercising and examining your own fears is a really helpful exercise for everyone to pursue. I have this financial fear that everything that I've worked to build in my life, being a homeowner and saving diligently for retirement and building up my emergency fund could all just wash away in an instant when a crisis hits. And I think this is a pretty common fear. And rationally, I know that I do have support and resources that I can tap to help me through a hard time. But yet it's such a persistent fear. Do you have any tips for people who are

still in that process of self discovery where they're getting really deep into their fears and maybe moving from the part where they're understanding their story to rewriting it and trying to find rational solutions to these things that might not be totally rational. Yeah. So the journey from recognizing that what you're fearing may not actually be something that you are using your intelligent brain to deduct. It's actually irrational or it came from external influences and you've inherited it because they were so powerful. And you want to change that narrative. I think it's about sitting down and taking inventory of all of your resources, not just the money. Because as we know, wealth is an accumulation of not just the money, because as we know, wealth is an accumulation of not just cash and dollars and cents. It's actually your relationships, your community, your own resilience, your own intelligence, capabilities, experiences, ambitions, all of that you can leverage.

And I think that when we are clouded with this fear or anxiety around losing it all, which is a very common financial fear, we can lose sight of some of these other very valuable assets in our arsenal that in an event where, God forbid, there is a fire or you lose your job or there is a sudden accident and suddenly your whole financial life is turned upside down, that it'll be hard maybe to throw money at the problem. But what else can you throw at the problem, but what else can you throw at the problem, right? There's other things. Maybe there's, again, your network, your resources. You often hear people say, I would just sleep, I would couch surf. And that isn't

what we want to be doing. But you know what? In those dire situations, that is an invaluable resource to be able to have someone to fall back on, to have a support system. And if you don't have that yet, well, then you know that's the gap you want to fill. In the book, I talked to a woman who was robbed by Bernie Madoff, who if listeners who need a quick history lesson on that, he was the man who threw a Ponzi scheme from his clients and left many of his clients panelists. So the woman I interview in my book, she lost her entire life's savings, she and her husband. But she said, in order to kind of take herself off the floor and put one foot in front of the other, it wasn't a matter of being angry and continuing to focus on the problem. It was actually to focus on what

has endured? What else can I pick up here? And it was the fact that, you know what, she had her health, she had her husband, she had the home they lived in, which was paid off. She had her friends and guess what? She had her acumen for writing. So she started to journal and write about the experience. It turned into a book, which she sold, which then became a source of income. And so we are more resilient than we know and think and get credit for. Humans, we've survived a lot. And I think it's been because we are very attentive to fear. Well, one exercise that you talk about in the book, and you just briefly mentioned, I am fascinated by and I want to ask you a bit more about this, the whole idea of thinking through the worst case scenario when you are feeling fearful.

It sounds like it would make you feel even worse, but you're saying it actually can help to really dwell on that absolute worst case scenario. Can you explain that? I know it doesn't sound very clear, but I say there is a gift in fearing the financial worst. And studies have actually found that the thought of losing money is naturally linked to fear and pain in the brain. And so, yeah, this may seem completely masochistic, but it can be really beneficial in life because when we're afraid of going broke or losing money in the stock market or losing our homes, losing our jobs, it's painful. And our defense mechanisms switch on.

The brain goes into protection mode and we start to look for solutions. So I always say that when you're fearing something, are you actually fearing the worst of it? You know, when we fear, for example, recessions, that's scary, but it's a little too abstract. Like it's actually not painful when you just throw out the R word. But when you bring it home to your doorstep and you make that recession a reality in your day-to-day life, and what do we know about recessions? Usually leads to layoffs and a lot of uncertainty in the stock market. And when you think about that impact on your life, not just someday, but tomorrow, what would that actually look like? Go to the edge. And I think that a lot of us would be encouraged to start at least

getting a little bit more educated on the reality of what we have in our lives today, the financial reality of our life today. How much do I have in savings as it turns out? How much would my company give me as severance? Because it's usually a policy. What is my state's unemployment? And from there, you can start to craft a plan during a time when the worst case scenario hasn't yet happened, but imagining it has prompted you to get there. So in your book and in your podcast, Renouche, you bring a sense of humor to topics that can be really intimidating and in the book specifically things that can be really scary. Can you talk about why you think it's important to bring a sense of levity to these subjects and to what extent

you do that really intentionally in your work. Thank you for picking up on that. I work really hard at it, but I also would like to think that it's my personality. I think growing up the immigrant daughter in new schools, often I was using humor and self-deprecation as a way to get people to like me and connect, and it usually worked. So it has stuck. And I think especially when we're talking about taboo topics like money and fear and the dark sides of our emotions, in order to make this an approachable topic so that we can learn and engage and grow. It needs to be accessible. And I think laughter connects us. Laughter makes us feel seen. And it's more inviting than maybe coming at it from a really academic and scientific standpoint, although there's a lot of research in the book,

too. But I try to balance it. I try to give the facts with the funny and using myself as a main character in this world of fear. It's just kind of who I am at this point. And Farnoosh, one thing you write about with so much humor is your own background. How do you think being the daughter of immigrants has influenced how you think about fear? Oh, I was intentionally raised with fear, intentionally. My mother was 19, new to motherhood, new to America. And she has said, I raised you to be purposely afraid, purposefully afraid, because it was the only way she knew how to keep me in line and not steering down what she thought were like bad paths. And I think the Western culture way of doing things did sort of unsettle my parents.

This irony of like they ventured to come to this country. They took so much risk, right? My parents left Iran during the revolution in 1979. So the backdrop of their immigration was terrifying. And they come here and it's like, they're not willing to take any more risks. And I think it's because they just used up all the risk coupons. They were done. And then it reflected on me. And so I grew up very risk averse, told I couldn't do a lot of the fun things. And so as a kid, it was a little, it was hard. I'm not going to lie. Like I was like, I had a bit of a problem making friends. But it was probably, as my mother says, it all worked out. And here you are today. Well, Farnoosh,

thank you so much for being on Smart Money. This was so fun. I love this podcast. Thank you so much. Thank you. And that is all we have for this episode. To share your thoughts about talking about money fears or anything else financial, shoot us an email at podcast at nerdwallet.com. Visit nerdwallet.com slash podcast for more info on this episode. And remember to subscribe, rate, and review us wherever you're getting this podcast. This episode was produced by Kim Palmer, Tess Vigeland, and myself. Kayleigh Monahan mixed our audio. And a big thank you to NerdWallet's editors

for all their help. Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.