Anxious About Your Finances - Top CFP & Advisor to Access Wealth Management Offers These Tips to Consider
Being anxious about your finances depends on the relationship and perspective you have about money. You may have plenty of money but still be worried. Or have higher income but fear it’s not enough. Conversely, you may not have much money, but feel little anxiety.
The reason there so much financial anxiety these days – anywhere between 50 and 80 percent of investors have it according to recent articles – is hardly a surprise. An environment like today, where inflation is the highest it’s been in nearly a half century coupled with slumping stock and bond markets and a potential recession on the horizon, is certainly a good reason for concern
Yet, this fear that you will outlive your money or that you’ll never be able to retire is hardly new. For some, it can be due to a general lack of education or understanding of your financial welfare and/or a realization – far more likely now than during the recent bull market prior to 2022 – that your money seems to be going out much faster than it’s coming in. It could also be due to a real-life event – e.g. loss of a job, expensive medical emergency, death of a loved one, changing circumstances like the birth of a child or caring for an elderly parent, and/or a lack of preparation.
So, what can you do? Leo Chubinishvili, CFP, an advisor with Access Wealth, a wealth management firm in East Hanover, NJ provides some things to consider:
Plan. Put in place a detailed plan – perhaps with the help of your financial advisor. This will help you manage your debt, which is one of the biggest causes of financial stress. Have plans A, B and C for “what if” scenarios. Be prepared for potential increases in expenses or future reductions in income. Preparing for worst case scenarios will give you peace of mind. This plan must include an emergency fund. Rule of thumb: it should include 3 - 6 months of monthly non-discretionary expenses.
Evaluate your current financial status. This will give you a better idea if you can reduce some spending. Understand all your bank and financial accounts and make sure you have definite goals and time horizons for each. Know what you save and where you save it. Go over your expenses in detail and see where and why money flows out. Since many people have multiple checking, savings and brokerage accounts and credit cards, this can sometimes be difficult to discern (which is why using a software program that consolidates all these different accounts can give a clearer picture of inflows and outflows). See if you can cut back on some expenses. Break down expenses based on non-discretionary (expenses you need to survive – fixed payments like mortgage, rent, utilities, food, etc.) and discretionary (those you can survive without, like restaurants and entertainment).
Understand the risk in the markets. Investing in the stock market involves risk and volatility. More risk includes higher variability in your returns. No or limited risk assets could provide principal protection and lower annual returns. Avoid investing in anything with higher variability of returns if you will need those funds in the near term. Don’t try to time the market (no one can consistently). Take advantage of higher variability return assets, such as stocks over the long-term, as history shows the returns are much higher than cash in your bank account. History shows stock and bond markets go up. Recession and economic downturns may crash the markets, but history shows it is cyclical and over time they come back. Understand that and don’t panic if you see your retirement money invested in the market losing value. Don’t let emotions take over based on short-term market volatility.
Ask for help. Don’t feel you have to do this alone. When you don’t feel well you call a doctor. Similarly, when your finances make you anxious, call your financial planner. They will hold your hand and walk you through the difficult times. They will not let your emotions get the best of you. This can prevent you from making poor decisions. Have the advisor do a financial plan including analyzing your status and developing projections, implementing recommendations and, ultimately, monitoring the plan.
Money worries can cause you to lose sleep. They can make you sick. That’s why it’s important to think about the reasons behind your financial anxiety and start addressing them.