This is a guest post from Plonkee Money. Plonkee lives in England, where she writes about personal finance.
A friend of mine has a tendency to be swayed by conspiracy theories, his favorites being The Da Vinci Code and the fictionalization of the Apollo Moon Landings. I was talking to him the other day, and he asked if I knew that money held in savings accounts was loaned out to other people and that banks didn’t have any money of their own. I was unfazed by these revelations.
There is no secret to the way banks work. I actually visited a fascinating museum exhibition on the history of money that explained all these details and more. I told him that, in my honest opinion, it was nothing to worry about.
I am comfortable with the realization that in some sense, modern money isn’t real and it doesn’t exist. Money has no intrinsic value, and isn’t sought for its own sake. Instead money represents other things.
For some people, money represents freedom — money gives them the freedom to do as they please, and not having money (or worse, being in debt) constrains them. For me, money represents security. Having money means being secure; not having money means that at any given moment my whole life could come crashing down.
The extent to which I feel that money represents security isn’t particularly healthy or rational, but it does have some beneficial effects. I have no consumer debt, and I prefer to have a reasonably healthy savings cushion. I pursue these goals not because they are sensible, but because they enable me to sleep at night.
On the other hand, I waste time worrying about money. Worse, spending large sums of money — even on things that I need — makes me extremely uncomfortable.
On the surface, my attitude toward money might seem reasonable, but in reality it isn’t. My weirdness is masked by its very sensible effects. 
After all, the best personal finance advice usually involves maintaining a certain level of savings, and avoiding excessive debt or risk that makes you uncomfortable. But I always feel like I’m on the edge of a slippery slope, where the sign is pointing to rack, ruin and the end of my happy little world.
I don’t want to surrender to my money-security fear because deep down, I know it’s irrational. For many people, chronic overspending can be a symptom of an underlying unhappiness unrelated to money. I’m concerned that my own fear of not having enough money is actually a symptom of something else, and that I could be happier than I am. I don’t want to restrict my dreams because I am frightened that the sky will fall in.
J.D. says: If I’d read this five years ago, it wouldn’t have made sense to me. I didn’t share these fears. But with my upcoming transition to full-time writer, I know exactly what Plonkee means. Suddenly I’m worried about the future, too. Is this normal? To what extent are your money habits motivated by fear?
This article is about Psychology
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I agree with Financial Philosopher here. Sure, fear is what makes some of us horde money. It’s rational. Anything can happen to you, and the things that happens to you might not kill you so you will still need money while you’re alive and kicking. It’s worse to be living and living in poverty. Fear is healthy to a degree.
However, aversion to spending even on something you need is a worrying sign. It’s a sign that perhaps the fear and the money is ruling your life too much. What is the use of having that money if you just want to keep it? Maybe we’d like to keep it for future generation, that would make a bit more sense. But not spending on something you need just because you don’t want to see your account depleted?
That’s not quality of life at all. Money is supposed to be a tool for one to have a quality life, not the other way round. In many ways, that is still a sign that money rules your life.
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Personally, I don’t feel secure without at least some gold and silver because precious metals have a longer history of preserving wealth than any fiat currency and aren’t under the control of a central bank that is institutionally biased towards inflationary policies, but that’s an entirely different topic.
It’s healthy to have a bit of worry about your finances. It keeps you from going wild and splurging it all. The important thing is finding a balance between saving for the future and living in the now. It’s a very difficult problem and I haven’t found that balance myself.
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[...] pay, but they split the rent and the bills equally. Since she’s not blessed/cursed with the fear of debt, she’s currently paying off her credit card debt, and can’t devote additional money to [...]
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It’s important to note that there is a bit of an inaccuracy in saying that banks loan out the money you deposit. In reality, they are allowed to create, in the form of loans, 10 times the money that is on deposit. That’s right, they collect interest on money they create. Furthermore, all money that exists is actually created by a loan. It starts from the top at the Federal Reserve. The Federal Reserve Act grants all banks the power to print money. This is a subtle detail that the “how money works” article you linked to doesn’t mention clearly. So whereas before paper money was backed up by gold, it is now backed up by our trust in the ability of new loan money to pay back old loan money.
But otherwise I should say that this article is an interesting and accurate examination of some of the forces behind money.
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This is like going deeper down the rabbit hole.
Plonkee wrote an excellent portrayal of her irrational fears around money, and how it undermines her confidence. Others have stated that they wake in the night even after having saved and created what they thought was financial security. Others have advised actually insuring their savings??!!?? Thus spending in order to save? How about it being healthy to worry and have fears about what “might” happen one day…why get up at all?
Money does not need to be saved and there is no security that it can create. I have never “saved” for some future disaster and I have always been able to have everything I need….money is only good for one thing…spending. Anything else is like cutting the electrical cord after plugging it into a wall…you misdirect the energy and based on what I’ve read above it seems obvious that the results are fear, worry, stress and anxieties about some imagined horror.
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