Five Hidden Benefits To Financial Pessimism
I admit it, I am a pessimist. This does not mean I wander around all day looking for things to go wrong or be messed up, but it does mean that when something happens, I am more inclined to assume the worst. Pessimism in general is not a trait I would wish upon anyone, but it does carry with it a few positive side effects as far as how I look at my finances are concerned. In general, the overall benefit to my financial pessimism is that if you firmly believe the rainy day will come, you’ll be more inclined to prepare for it.
1. Saving an emergency fund. Although I haven’t saved a full emergency fund yet because of our focus on debt elimination, when the time comes I don’t think the motivation to save one will be a problem. My brain is convinced that emergencies will happen, which makes saving for an emergency as important to our future financial well-being as paying down debt now is.
2. Carrying necessary insurance. I am no more thrilled than anyone else to pay out money for insurance premiums, but being a natural pessimist, I am almost afraid not to have insurance. I don’t always realize what types we need, but once I do, I usually see myself move forward and take care of it sooner rather than later.
3. Being able to anticipate different unexpected scenarios. Life experience factors into this as well, but I tend not to forget the things that go wrong. Once something happens, I usually am not caught unawares about a similar situation again.
4. Motivation to improve the current situation “just in case”. This is the biggest motivating factor in our debt elimination progress. Knowing that every step we take towards debt elimination makes us more secure just in case something happens is a huge motivation to continue the progress we’ve made, even when things seem not so bad and like we could ease up a little.
5. The worst case scenario is what you expect. This is related to the motivation factor above, but on a more practical level. When something goes wrong, there’s usually a range of possible causes. My brain assumes the worst and starts mentally preparing for it immediately. Even if I tell myself it won’t be that bad, I am still running through the worst case scenario options in my brain. Two days ago the pilot light in our water heater went out. My spouse re-lit it without incident and it hasn’t happened since, but in my brain I worked out a water heater replacement plan and several different options for how we would accomplish it - just in case.
Overall, as I’ve transitioned from financial avoidance to financial responsibility, my natural inclination to expect things to be worse than they usually are has come in handy both when the worst occurs, and when it turns out to not really be that bad. A little dollop of pessimism can keep you prepared and on your toes for whatever life might throw at you.
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July 15th, 2008 at 7:53 am
I think I need to show this post to my husband. He just doesn’t see the benefits of my pessimism. But I see things the way you do. LOL
July 15th, 2008 at 10:31 am
Great article. I’m a bit of a pessimist, and I think you’re right; it will help. Of course all the worrying and tossing/turning in bed while pondering the pending bank failures, rising food prices, etc probably aren’t good for me.
July 15th, 2008 at 12:39 pm
I can absolutely relate to this. My friends always joke that I’m a little ray of sunshine because I tend to focus on the negatives. It doesn’t sound like a great quality, and at times I do wish I could be more optimistic in general. I’ve been trying to keep some of my negative thoughts to myself!
But you’re right that pessimism comes in handy in many of life’s unexpected situations, and especially when it comes to finances. The trick is to use it for good, instead of saying things like, “we’ll never be able to pay off this credit card!” or whatever the case may be.
Thanks for reminding me that being a pessimist isn’t all bad
July 15th, 2008 at 12:59 pm
The really awful thing is now we can’t trust our most basic financial institutions to be available when we need them, e.g., IndyMac Bank. What do we resort to? stashing an emergency fund under the mattress? ARGH!! I mean seriously, has anyone contemplated alternatives to a bank savings account?
Oh, I know accounts are insured, but sheesh! Scarey.
BTW, any new insights into Disability Insurance?
Thought provoking as usual. Thanks.
July 15th, 2008 at 2:19 pm
I don’t know that I call your examples pessimism, as much as perhaps proper planning. Being prepared is being responsible. Being a pessimist is deciding that the worst is going to happen and nothing you can do is going to change that. It seems you’re taking steps to avoid the worst. That’s a positive thing.
If you’re prepared properly, the hot water heater going on the fritz is no longer a worst case scenario, but a maintenance issue that you are prepared to address. The worst case scenario is the one you didn’t expect, or prepare for. That’s the whole point of an emergency fund. Perhaps a better name for it would be a preparedness fund.
I expect that eventually I’m going to have to fix my car, or replace appliances. My goal is to be financially secure enough that I am able to roll with the punches. When I am able to easily absorb those costs I will celebrate my success at money management, rather than lament the fact that I had to part with money I would rather not have to spend.
July 15th, 2008 at 3:34 pm
Nice to see you have put a positive spin on pessimism
“What is the worst that can happen in this situation?” I ask myself that alot, and once I figure out an answer, I am usually a lot more at ease over whatever the situation is. The worst that can happen is usually not as bad as one thinks, once one has time to put it in perspective…. Like your water heater… the worst would have been having to replace it, and the labor cost, etc….(maybe a rotten floor or subfloor…etc) It’s only money - it can be dealt with. As long as it’s not life and death, it can be dealt with…. and then if it’s only money (whether I have it or not) I can quit worrying about worst case scenarios.
And I agree that your positive pessimism is really a type of preparedness
I think you’ve got a good handle on things, and I surely enjoy your postings.
July 16th, 2008 at 12:39 am
this reminds me that i need to get renter’s insurance. i did some online quotes but it seemed a bit high (more than $300 per year?!). i’d like to go in and talk to an agent at State Farm around here or something. I mean, we have a ton of expensive stuff (which is why we’re in debt haha), but that premium still feels a bit high to me. Anyway. I’m trying NOT to think the worst right now until we have insurance on all our beloved electronics, haha
July 17th, 2008 at 5:58 pm
I’ve never thought of it this way, but that really is a good point. People who are too optimistic may be naive about financial realities, and not save as much in case of emergencies or unexpected situations like lay offs. Now I feel a little better about my pessimism
July 21st, 2008 at 3:23 pm
Another place it helps is in budgeting. Have variable income? Budget for your worst case and enjoy the extra. Expecting a new expense or your insurance to go up? Budget high and you’ll almost always be fine. I tend to use the extras to take care of any places I went over budget or for those pesky unexpected expenses. I never budget right at the amount I think I’ll actually spend unless I’m pretty sure it’s not going to change. I even budget an extra $5 or so into subscription services like cable or phone in case we buy a movie or I somehow end up over my minutes.