Discover how to break free from common financial anxieties and build a more confident future with practical strategies that help you take control of your money without letting fear hold you back.
Have you ever wondered why so many people enjoy a thrilling walk through a "haunted" house during Halloween? Despite the chills and screams, we know it's all make-believe. The lurking monster is just a teen in a costume, and we're actually safe. This makes the contrived danger enjoyable.
If only we could apply this mindset to our financial fears!
Almost everyone has some level of anxiety when it comes to money. As we navigate significant life changes, managing these financial concerns can be challenging. However, with the right financial advisor and a comprehensive Life-Centered Financial Plan, a lot of these fears are just as illusory as a bowl of peeled grapes masquerading as eyeballs.
Let's demystify common financial fears that may be haunting your Financial Life.
Investing inherently involves risks, leading many to view Wall Street as a rigged game. Due to the fear of their investments not yielding the desired results, these individuals prefer the perceived safety of keeping their money in banks or government-backed bonds and CDs. This cautious attitude often extends to other areas of their lives. Why subscribe to a gym when past fitness goals have failed? Why risk starting a business when the odds seem unfavorable?
However, both in finance and life, growth requires risk. The dynamic between buyers and sellers causing market fluctuations also generates value and, for disciplined investors, long-term wealth. A Financial Life Plan is designed to navigate and even leverage these measurable and manageable risks.
You can also strategize to make more effective investments in other areas of your life by replacing big resolutions with achievable goals. For instance, if your goal is to lead a healthier lifestyle, don't overwhelm yourself with multiple objectives like starting a rigorous diet, working out for two hours every day. Choose one achievable goals, such as going to bed at a specific time (e.g. 9 pm) or going for a 15 minute walk every morning after waking up outside in the fresh air. If its a bigger goal then break it down into small daily actions that are achievable like including a serving of vegetables in each meal or one meal to start out and dedicating 1 minute to exercise in the morning if your not currently exercising, gradually increasing the duration over time. Yes, I know 1 minute you may laugh at but its about making a commitment that you know you can do and you remove failure as an option then before you know it 20 minutes has gone by.
While a diversified investment strategy, living within your means, and managing debt are essential for financial success, an unhealthy fear can turn frugality into a negative relationship with money.
People who work tirelessly to accumulate more wealth often miss out on life's most precious moments. An obsessive pursuit of a financial "magic number" can distort one's retirement planning. Some people work longer than necessary, missing the prime years of health and leisure. Even after achieving their "magic number," many retirees are terrified to spend their savings, struggling to shift from a saver's mindset to a spender's mindset. They delay dream vacations and personal comforts, waiting for the "right time" that never arrives.
John’s Story
Consider John, a successful lawyer who worked relentlessly for 40 years to accumulate a significant nest egg. He was so focused on reaching his "magic number" of two million dollars, that he missed out on many of his children's milestones and neglected his health and hobbies. Finally, at age 65, John reached his financial goal. Yet, despite his substantial savings, he found himself unable to enjoy his retirement. He was scared to spend any of his hard-earned money, constantly worrying it would run out. Instead of going on the European vacation he'd always dreamt of, he stayed home, missing out on the experiences he'd saved for. This is a classic case of an unhealthy fear of spending, where excessive frugality led to a negative relationship with money and hindered the enjoyment of life's precious moments.
Emily's Story
Consider the case of Emily, a highly successful software engineer. Emily was always careful with her money, living frugally and saving diligently for retirement. Her initial "magic number" for retirement was $1 million, a goal she achieved by her early 50s. However, instead of celebrating this achievement and starting to enjoy the fruits of her labor, Emily moved the goalpost. She decided that $1.5 million would provide a more comfortable cushion.
Working tirelessly, she reached this new target in her late 50s. But again, rather than retiring and starting to spend, she revised her "magic number" upwards to $2 million. Emily's obsession with reaching her ever-increasing financial goals meant she missed out on many opportunities: she delayed travel plans, missed family gatherings, and often neglected her health.
Even when she finally reached her ultimate goal of $2 million in her mid-60s, Emily still couldn't bring herself to enjoy her savings. She was trapped in a mindset of accumulation and was afraid to transition to spending. Even though she had more than enough for a comfortable retirement, Emily continued to delay her dreams, waiting for a "right time" that never seemed to come. Emily's story serves as an example of an unhealthy fear of spending, where constant goal shifting and excessive frugality can lead to a negative relationship with money and missed life opportunities.
A common fear, which goes hand-in-hand with the fear of spending, is the anxiety over running out of funds. This worry often intensifies during the retirement years when steady income might lessen. People tend to curb their spending due to concerns about unforeseen future expenses, particularly those related to health or long-term care. To counteract this fear, it's crucial to set aside money specifically for potential health or long-term care needs. This strategy allows you to give yourself permission to utilize the remaining funds freely. Moreover, a planned budget that takes into account all discretionary and non-discretionary expenses, and is reviewed regularly, can provide reassurance that your funds will suffice.
Linda and Mark's Story
Meet Linda and Mark, a retired couple in their early 70s who have always been diligent about their finances. They saved consistently throughout their working years, built a comfortable nest egg, and have been enjoying their retirement with some travel and hobbies; but never fully going all in on what they wanted to do because both have worried more about their health and the potential costs of long-term care.
Linda and Mark have watched friends and family face significant medical expenses and the high cost of assisted living facilities. These experiences have made them anxious about their own future. Despite having a solid financial plan, they fear their savings might not be enough to cover potential health care costs, especially if both of them need extensive care.
This fear began to limit their enjoyment of retirement. They started cutting back on their travels and hobbies, worrying about the financial implications of any unexpected health issues. The constant anxiety over potential future expenses made it difficult for them to fully enjoy the golden years they had worked so hard to secure.
To address these concerns, Linda and Mark decided to consult with a fee-only financial planner who has helped people in similar situations. The advisor helped them understand that while health care and long-term care costs can be substantial, there are strategies to manage these expenses. For example they can set aside a specific portion of their savings into a health care / long-term care fund, ensuring that they have dedicated resources for medical emergencies and long-term care needs or look into long-term care insurance, or here locally in the Cedar Valley we have another option called Fortified Life with Western Home.
By taking these proactive steps, Linda and Mark were able to alleviate their fears and regain confidence in their financial future. They now feel more secure, knowing they have a plan in place to handle potential health care expenses, allowing them to continue enjoying their retirement without constant worry.
Alongside the fear of running out of money, another common fear is the fear of being scammed. This fear can often be managed by only working with credible and trusted financial institutions and advisors. It's essential to do your research and make sure that the people you entrust with your money are reliable and have a good reputation. Additionally, staying informed about common financial scams can help you protect your money. By understanding the tactics that scammers use, you can be on the lookout for any suspicious activity and protect yourself and your finances.
Other safeguards include regularly monitoring your accounts for any unusual activity, setting up alerts for large transactions, and keeping your personal information secure. It's also wise to educate yourself about the latest scams and fraud tactics, and to never share sensitive information over the phone or via email unless you are sure of the recipient's identity.
Other safeguards include regularly monitoring your accounts for any unusual activity, setting up alerts for large transactions, and keeping your personal information secure. It's also wise to educate yourself about the latest scams and fraud tactics, and to never share sensitive information over the phone or via email unless you are sure of the recipient's identity. Utilize the two-factor authentication that many institutions have now, and listen to our podcast episode #34 on whether freezing your credit is right for you.
Take Control of Your Finances
Don't let these financial fears keep you from enjoying your life. Take a proactive approach to controlling your money rather than letting it control you. One question we love to ask is, "What is the money for?" Addressing your financial concerns can help you confidently navigate 2024.