A few years ago I lived in a one-bedroom co-op apartment in the middle of Nørrebro in Copenhagen.
Today I live in a house in Cascais, Portugal, with five bedrooms, a pool, a garden and a view of the beach.
There are millions in my name.
And still, money can make me anxious.
It comes down to something we all suffer from, called loss aversion, and that is what this blog post is about.
But first, let me show you my numbers. And why I get so anxious.
My rent is over 6,600 euro a month (about $7,500).
I also have an unexpected tax bill from Denmark, which costs almost another 6,000 euro a month.
On top of that come two private schools, help at home, hobbies and travel.
Our life costs at least 200,000 euro a year. Probably more.
My kids are used to big houses, pools, private schools and household help.
That is their normal. It is not mine.
My normal was a co-op apartment in Nørrebro.
Over the summer, from May to September, I have no income from courses, and at the same time, spending on travel and entertainment is high.
I have no fixed salary from the fund I run, only a bonus (and so far I have not received one).
My oldest son could feel that something was changing this summer. I no longer say yes to every suggestion.
Every night he had trouble falling asleep, and he asked:
“Mom, I’m afraid we’re going to lose our house and have to move.”
He is experiencing what lies behind money anxiety for so many people: loss aversion.
A huge, fat fear of losing.
And it rubs off. A moment later, I couldn’t sleep either.
What Is Loss Aversion?
Loss aversion is a psychological phenomenon where the pain of losing something feels bigger than the joy of winning something equivalent.
Losing $1,000 hurts more than winning $1,000 feels good.
It is instinctive.
Our ancestors who were most alert to threats survived longer than those who didn’t.
But today it makes us needlessly worried.
We focus more on what we might lose in the future than on what we could achieve.
It can make us overestimate risks, underestimate opportunities and make decisions out of fear rather than long-term goals.
Here Is How You Overcome It
1. Get Clear on What Money Is For
Ask yourself what the money is for.
Be specific and write it down.
Not a vague feeling like “financial freedom”, but something concrete you can hold yourself to.
This does two things.
A. When you have concrete goals, you can calculate what they cost.
A vague worry becomes a concrete problem with a concrete solution.
B. Money stops feeling like a monster.
It becomes a tool with a job to do.
2. Stop Comparing
Most people always want more, because they compare themselves with others.
Nothing new there.
We have always measured ourselves against others. It is another instinct from prehistoric times.
We need to belong to the group.
The one who got thrown out of the group did not survive.
So we tend to look around and try to fit in, or better still, to be recognized, maybe even admired.
With social media, the basis for comparison is endless, and it is systematically skewed toward the most visible and wealthy versions of other people’s lives.
So what do you do?
Start by noticing what makes you more anxious without making you any wiser.
Stop following the people who make you feel behind.
Don’t go where you get a knot in your stomach.
Don’t check what other people’s houses cost, unless you are specifically gathering information to set a money goal.
Your financial life is not a race.
It is a private project, and you decide what you want to build.
3. Tell Useful Worries From Useless Ones
Useful worries point to something real that you can act on.
If you have no buffer and your job feels insecure, the anxiety is telling you something true:
You need to build savings.
Listen to it and do something about it.
Useless worries, on the other hand, are background noise.
They don’t point to anything specific and they don’t lead to action.
They just drain your energy.
And you know what? By far most of the financial stress we walk around with is useless.
The antidote is not more money.
The antidote is clarity.
You need clarity on what you fear, and clarity on what your plan actually is.
Here are two practical exercises that can give you the overview you need to fight the anxiety that comes from loss aversion.
4. Exercise: Exaggerate Your Fear
The Stoics had an exercise they called negative visualization.
They deliberately imagined losing the things they depended on to test their assumptions about what they actually need.
Try it with money.
Ask yourself, honestly, what would happen if the scenaria you fear most came true.
For example: “If I lost my job and my income for a year, what would I do?”
“What if the stock market fell 70% and did not recover for a year?”
What is the worst that could happen?
What would you actually do if it happened?
How realistic is it that it would happen?
5. Make a Plan
Now that you know what you want and what you fear, you are well equipped for the next step.
The next step is to make a plan.
What if?
Yes, what if the stock market falls?
Keep a cash reserve, so you don’t have to sell any of your principal for a year.
What if you lose your job?
Keep a cash reserve.
In fact, most of the financial worries I can think of can be solved with savings.
How Did the Exercises Go for Me?
I originally got hooked on investing when I was a mom who had just lost her job.
I lived in a small apartment in Nørrebro in Copenhagen with a baby and a toddler.
I was desperate to create a good life for my boys.
When I ask myself what matters most and what I want my money to do, I always land on my two boys, and the life I want to give them.
The goal was:
A. A house or apartment with a bedroom for each of us in a quiet area, so we sleep well
B. Good schools
C. Practical things to make everyday life easier as a mom. Really ordinary things like a washing machine, a dishwasher, cleaning help and a car that can drive us from A to B.
D. Time. I wanted time to be there for my boys when they needed me
The dream was never a Lamborghini.
The dream was never a gigantic house with a pool, although that is nice too.
What About the Comparison?
I don’t care about people on Instagram, and my kids don’t have social media, but we live somewhere where people are very rich.
When I drop my kids off at the private school, I see the other parents driving Porsches, Land Rovers and yes, Lamborghinis.
I drive a 7-year-old Jeep Renegade with scratches in the paint.
When I show up for parent coffee, I carry a leather belt bag with no visible brand.
I call it my dog-walker bag. (Super practical. There is room for keys and a phone, and it doesn’t fall to the ground when I have to pick up dog poop.)
The other moms carry Louis Vuitton.
My oldest son complains that we “only” travel to Denmark twice a year and for skiing (not Denmark) in the winter.
“I have never been to Bali or Japan,” he says, and adds: “My friends travel at least 4 times a year. And to exciting places.”
And the final blow: “Why do I have to take out my own plate? Why do I have to learn to cook? Milo and Vincent have a maid and a chef.”
My son wants to fit in at school. He wants to live like the others.
We are actually well off, but poor compared with people like Cristiano Ronaldo.
My son feels that, and it creates money anxiety for him.
The Nightmare Scenario
What would I do if, for some absurd reason, I never earned another penny?
I have lived on a rock before, and I could easily do it again.
As long as I can read good books and write my blog posts, I’ll have a party in my head.
But I want to give my two kids stability.
With the money we have today, we could probably stay where we are for five years.
In five years, my boys will be 15 and 18. By then, I think I can say I managed the job of giving them a secure childhood pretty well.
My oldest son talks about going to college in the US. Harvard or Yale.
“Vincent is going to,” he says.
Okay, kid. Vincent is 12.
The Plan
I float the idea that there are some pretty good universities in Denmark.
Because maybe.
In the nightmare scenario where I never earn money again, my son has to move back to Denmark and continue his studies there.
If we had to move into an apartment in five years, we would.
As I tell my son when he can’t sleep:
“We don’t have to move right now. But if we ever have to, we’ll make it cozy no matter where we live. What matters most is the three of us, and that we enjoy each other’s company. We will figure that out in an apartment too.”
But it probably won’t get to that.
It is only the worst-case scenario, and the best part is that the worst case is not that bad at all.
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