The Power of Pessimism: How Negative Thinking Can Improve Your Finances

Gabrielle Karol

Presumably, you wouldn’t mind being richer, happier or healthier.

Which do you think is a better way to get there: A) think positively about how it will feel when you achieve your goal or B) worry about how you’ll manage to get there?

There’s a good chance you picked choice A, thanks to the success of “The Secret,” a book that advises visualizing your dream future to achieve it, or maybe to the popularity of motivational speakers like Tony Robbins, who encourages people to believe in their ability to walk on hot coals (and then do it).

By all accounts, Americans are obsessed with the power of positive thinking. And hey, smiling can improve your stress levels and general outlook.

The catch? Research shows that, in some cases, imagining your brighter future life actually makes you less able to achieve it, while a healthy dose of pessimism enables you to go out there and make it happen.

How Positive Thinking Can Fail Us

Thinking positively, through repeating affirmations (“I am lovable,” “I will find happiness,” “I will be successful”) or visualizing ideal outcomes can actually be counterproductive to your success in some cases. Here’s how:

1. You undermine yourself.

A study from the University of Waterloo divided participants into two groups, those with high self-esteem and those with low self-esteem, using a scale from 0 to 35. After repeating positive affirmations like the ones above, participants with high self-esteem saw their self-esteem score rise seven points. On the flip side, the participants with low self-esteem who repeated affirmations saw their score drop seven points.

The researchers found that when people with low self-esteem repeated the affirmations, it actually sparked “resistance,” or a snarky inner voice that debated the truthfulness of those affirmations, which effectively lowered self-esteem.

2. You put in less effort toward achieving your goals.

In a study published by researchers Heather Barry Kappes and Gabriele Oettingen, the researchers found that when people imagine their desired futures, “they [don’t] imagine that the path …. may contain obstacles, setbacks, pain or effort.” In other words, because of their unrealistic expectations, people exert less effort to make their dreams a reality.

For example, the research showed that people who had positive fantasies about their future ended up submitting fewer job applications and studying fewer hours for an upcoming exam, which decreased their success rate in the end.

3. You don’t prepare for the worst-case scenario.

Barbara Ehrenreich, author of “Bright-Sided: How Positive Thinking Is Undermining America,” argues that positive thinking actually helped contribute to the recent financial crisis in the United States. She told The Telegraph: “Many, many people got way over their heads in debt—ordinary people. And in what frame of mind do you assume large amounts of debt? Well, a positive frame of mind. You think that you’re not going to get sick, your car’s not going to break down, you’re not going to lose your job and you’re going to be able to pay it off.”

By thinking so positively about the future that you fail to recognize what could possibly go wrong, you might take on more risk than you should, which could backfire … and leave you in serious financial straits.

4. You don’t appreciate what you have now.

Another downside to idealizing the future? It can prevent you from appreciating what you have now. If you’re overly fixated on your dream job or future McMansion with a swimming pool, it makes it harder for you to appreciate everything you currently have in your life.

How to Do Pessimism the Right Way

When we say that a little pessimism can be a good thing, we know there’s a difference between being realistic about your future prospects and foreseeing the apocalypse at every turn.

Here’s how to harness the power of pessimism to make your dream a reality, be it getting a promotion at work, reaching a corporate goal, paying off credit card debt or getting into graduate school:

1. Consider the worst-case scenario.

As Oliver Burkeman writes in The New York Times, the Stoics long ago introduced the idea of visualizing the worst-case scenario–they called it “the premeditation of evils.” Burkeman, author of “The Antidote: Happiness for People Who Can’t Stand Positive Thinking,” says this strategy actually helps combat anxiety: “When you soberly picture how badly things could go in reality, you usually conclude that you could cope.”

What happens if you don’t get the “perfect” job you just interviewed for? Well, you’ll probably send out a few more résumés and find another, equally awesome opportunity. If you get turned down for that promotion you were angling for? You’ll talk to your manager and develop a game plan for how to prove your worth, so when you ask again, you’ll get what you’re looking for.

By imagining the worst possible outcome, you’ll realize that life will, in fact, go on—and maybe even how to get where you want to go.

2. Develop an effective game plan.

Above, we discussed how positive thinking can blind you to the real pitfalls on your intended path. Once you’ve set a goal, spend some time thinking about what obstacles might stand in your way, and how you plan to overcome, or sidestep, them.

For instance, if you want to save up an emergency fund with six months of income (here’s what an emergency fund is), what will your challenges be? Maybe it’ll be hard to devote money to it each month; maybe little things tend to throw you off budget. If that’s the case, you might avoid those obstacles by setting up an automatic deposit from your checking account to your savings, or creating a budget you really stick to in the My Money Center.

3. Be realistic, not irrational.

In other words, base your “worst case scenario” expectations on real past experience, not everything under the sun that might, or could, go wrong.

For example, if you tend to get nervous during interviews and have one coming up for a new job, it makes sense to develop a plan of action in case anxiety strikes again on the big day. On the other hand, if you always use your credit cards responsibly and are generally pretty frugal, there’s no sense spending sleepless nights worrying if you’ll spin out of control and drop thousands on dresses and handbags.

Know thyself: Plan for the feasible worst situation, not the proverbial sky fallling.

4. Live positively in the present.

Although thinking through the potential negative outcomes of different scenarios can help you, that doesn’t mean you should take a negative view of everything around you. When we say “pessimism,” we’re really talking about planning ahead so you can respond effectively.

In the here and now, take the time to be grateful for what is good in your life, as it will enrich your outlook without making you blindly, and maybe harmfully, optimistic. One great way to do this is to make a gratitude list.

  • Townsendtamara

    This is a GREAT article. My mother & I talked years ago how about how being so optimistic causes more money trouble for us. We always think our lives will get better, we will make more money, etc. If we learn how to live within our means (& it’s so hard sometimes to do this), & when and IF we make more money some day; to remember to continue living within the means we were before, instead of spending more when we make more. Thanks for sharing this!

    • Connie B.

      I think being pessimistic is very healthy when it is realistic! This was a great article and it hit the nail on the head!

  • Deb

    This is a great example of how misunderstood the concepts of The Secret and positive thinking are. Action must always accompany and match thought and intention. It’s not about fantasy or being naive. It’s much more subtle and powerful than simple affirmations and envisioning your fantasy life.
    The article may have some valid points but is sadly way off the mark, as are the studies, which are just fluff.

  • Shariahnolen

    This is so true!

  • mwyatt79

    Great article, I learned about this the hard way.  Now that I am on the right track I am teaching others how to do it at their on pace check out: 

  • Anonymous

    I agree, great article. One of my husband’s sayings is “Why is it always death with you?” Implying my mind jumps to the worst possible scenario. But my pessimism has allowed me to prepare for our financial future. At a young age I established an emergency fund, life insurance, retirement accounts and savings for future goals. Because I don’t believe the future will be rosy and “magically taken care of” if I don’t plan for it.

    • Deb

      I think that’s common sense, not pessimism. Pessimists can’t enjoy the present because they are so busy safeguarding against possible future doom.

  • Rob Drury

    What you’ve described here is not so much pessimism versus optimism, but simple risk management; hoping for the best while preparing for the worst. This is always the philosophy applied in proper financial planning. Qualified financial planners and advisors set their clients up to benefit from opportunities while ensuring that the worst case is never a doomsday scenario.

    Rob Drury
    Executive Director,
    Association of Christian Financial Advisors

  • Rick_millward

    Positive and negative both contribute to any manifestation created as they do in electrical application.

  • Smart1

    I believe the author is discussing realism vs. “magical” thinking. Pessimism would be more along the lines of “nothing good will EVER happen, no matter how hard I try”.

    Realism, like common sense, seems to be a rare commodity.

    • Realist

      i totally agree! that was my first thought, as a analytical realist, that this article was really talking about being a realist, not a pessimist. i am a realist through and through! if i come up to a 20 ft wall with an optimist and a pessimist, the optimist will stand there staring at the wall saying “i can jump over it! i can! i will!” and will try endlessly to accomplish something impossible, while never actually making any progress. the pessimist will sit down and say “this is the end. the wall is 20 ft tall. i will never get past it. life is over.” but me, the realist, will say “this wall is too tall to jump over, so i will use my analytical skills to find a way AROUND it!” 

      • CrankyFranky

        yep – I’m a positive realist and have a great life – so this article does have a misleading title – but hey you know what headlines are for – to attract readers – do you think replacing it with ‘The Power of Realism: How Realistic Thinking Can Improve Your Finances’ would attract more readers – no ? – didn’t think so …