Money fears are more common than you might think. One recent survey by the American Institute of Certified Public Accountants showed that 44% -- nearly half – of all US adults are worried about money and that of the adults who indicated that they were financially stressed, only about 28% would see any change in their financial stress level within the next six months. Further, several studies have shown that, nowadays, almost 80% of American families are living with debt. Crunching these kinds of numbers, it’s no surprise that money fears are becoming more and more common in this day and age. What are the biggest money fears, though? And, moreover, if you have a money fear, how can you deal with it? The reality is, some of the most common money fears people have aren’t that rational even though they may seem like it. There are sensible, simple steps you can take to quash your money fears and get your financial sanity back on track.
1. I Lost My Job! We’re Never Going to Survive.
Job loss is a big problem in the US. As many as 20% of US workers have been laid off in the last five years. Understandably, losing your job – especially if you are your family’s main breadwinner – can be super stressful. Likewise, job security is never a completely assured thing. Even if you and your boss are on great terms, you have tenure or a contract, or the company is doing really well, that doesn’t mean things can’t change. A change in infrastructure, business success declines, or downsizing could mean, even if it’s unlikely, that you could lose your job.
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Since anyone could potentially lose their job at any time, preparation is a good fix for this money fear. No matter how unlikely it seems that you’ll lose your job, being prepared in case of the worst is always a wise idea. How? Make it a priority to save back an emergency fund. A good emergency fund should have a minimum of what your monthly expenses are for three to six months. This should be everything you spend money on in a month, not just bills. If you regularly go out to eat, participate in hobbies, or pay club memberships, all of those expenses should be calculated in when setting back your emergency savings. Make sure you put this money in a high-yield savings account where it will earn interest, but you can access it fairly quickly if the worst happens. Resist the temptation to go into that account for anything other than a true emergency, though, and be sure to re-evaluate if your monthly expenses have increased as time passes to be sure your emergency fund is still large enough to meet your needs.
Related Article: How to Deal with Tricky Money Situations
2. My 401K Lost Money, I’m Never Going to Be Able to Retire!
Many employees invest money into a 401K account for use during their retirement years. However, like most investments, 401K accounts have their good days and bad days. For instance, during the recession of 2008-2009, some investors lost 25-30% of their account value in a short period of time. Realistically, a loss of 5% or so is normal, to be expected, and the nature of investing. Freaking out every time it happens isn’t doing you or anyone else any good. However, if the loss in a 401K ever becomes as bad as it was during the 2008 and 2009 recession, you’ll want to make sure you’ve taken as many steps as you can to make sure your retirement is safe.
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Luckily, there are things you can do now without ever touching your 401K that can help the cost of your retirement if your 401K ever does take an honestly serious hit. Having multiple methods of saving for retirement will really help a person feel more in control of when they’ll retire and what life will be like after retirement and mitigates the fear of never being able to have a retirement. In addition to investing in your 401K, start committing to an amount each month you want to invest. Your portfolio will go through ups and downs, but if you’re regularly investing a certain amount in the market the bad days and the good days will eventually even out. Using this method, called dollar-cost-averaging, ensures you’ll keep investing and building your portfolio through times you’d be tempted not to invest because your portfolio isn’t doing well at that time. However, continued investment means your savings will continue to grow even if your 401K loses value.
3. I’m Engaged, and He or She Makes More Money than I Do.
Let’s be realistic for a minute here. The likelihood that you’ll find the person of your dreams and they’ll just happen to make the exact same amount as you do is unlikely. In almost all relationships one person makes more than the other, and sometimes the amount is significant. Relationships are already complex enough, worrying about who makes more money certainly is an added frustration the majority of couples can do without.
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Like with most relationship issues, communication is very important when it comes to money. While the temptation may be to walk on egg shells around the money issue while a couple is dating, that’s not setting you up on a great path toward the future. Instead, have a detailed conversation about money (including all the details) well before you get married. Having a plan in place can ward off this money fear before it becomes a serious issue in a couple’s relationship. Come up with and put in writing a plan together with your spouse to be about how to allocate your funds as a family. It’s important to talk about things like how much you both want to have in savings, how you’ll handle paying off any debt you both have, credit history and improving it if it’s not good, how you’ll divide up the bills and expenses, and what goals are the most important. Making sure you’re on the same page, for example, on how much should be spent on a house or car payment is very important – as is compromise since most couples all have some financial differences of opinion. Another good idea is to set up separate places each of you can store funds you use to treat or reward yourself. Make sure you allot the same money to each of you. This way, each of you can spend your “for fun” money with no questions asked by your partner.
4. My Financial Life is a Mess of Mistakes.
Oftentimes, people who have made mistakes in their financial history get stymied and feel like their financial ruin, bad credit history, or lost savings are so messy that they’ll never be fixable or able to be overcome. Getting into that place often means acceptance of staying there. Letting yourself into the mentality of a mistake being so big it’ll never be fixed can very much be a self-fulfilling prophecy. Negative thinking toward the financial future because of the financial past can keep you from overcoming mistakes you made in the past and moving on from them.
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Everyone has made financial mistakes, some of them extremely costly, but what you do after the mistakes when you realize you don’t want them to happen again is the most important thing. First, you need to realize the mistake and learn how to keep it from happening again. If you charged a lot on a credit card and lowered your credit score, making a plan to ensure you won’t fall back on using credit more than you should and working to rebuild your credit score are important parts of repairing the mistake and keeping it from happening again. This is the case no matter how big or small a person’s financial bad decisions are or how many they have. Let the guilt you feel over bad decisions go. Instead, focus on making a plan to do differently in the future and implement that plan. Then, write down all the mistakes you’ve made and tear the writing up. Letting go of the guilt from past mistakes now that you’ve implemented a new plan is vital.
Related Article: Are You Cheating On Your Budget?
5. I’ll Never Be Successful If I Don’t Own a Home.
Owning a home is part of the quintessential American Dream. It’s a goal many young adults are actively working toward. Those who rent often do so to build up experience, credit, and savings with the intention of buying their own home one day. Since the status quo suggests everyone should own a home as part of the definition of being successful, sometimes it’s hard not to fear how you’ll end up if you don’t own your own home.
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While owning a home may be part of the dream or eventual plan for most people, that doesn’t mean there’s any negative value in not doing so. If home ownership isn’t a priority or realistic for you now or at any time in the near future, that’s okay. Renting is a perfectly fine option and comes with many of its own advantages – like not having to pay real estate taxes or be responsible for certain property upkeep. Renting isn’t just for the young, either. Many adult and older Americans are finding that letting someone else take care of the home ownership duties is one less worry on their plate and a very freeing feeling. It’s perfectly fine to let this money fear go. Anyone can be successful whether you own or rent your home. If you do decide that buying a house is what you absolutely want, make sure to work with an excellent mortgage broker before you look at any houses. A good broker will help you get a loan with the best rates in order to keep you financially wise and safe. Also, a good mortgage broker will be able to tell you what you can comfortably afford to spend when buying a home. If the numbers line up, and you plan to stay in the area for a little while, and you’ve done your research and are sure right now makes sense to own a home, only then should you go for it. If that’s not your position, simply enjoy the freedom of knowing you don’t have to worry about being tied down with owning a home.
