And Why You Shouldn’t Sweat Them
Haunted houses, scary movies and Fear Factor — these are just a few of the many things we indulge in to be both scared and entertained at the same time. Thankfully, fear in these settings is only temporary! In reality, there are some things we would prefer to never be fearful of, with finances being one of them.
At Creative Planning, it’s our job to ease your financial fears and help you feel more confident in your present and your future. Here are five common financial fears and the reasons you shouldn’t sweat them.
Fear #1 – Unexpected emergencies
No one knows what the future may hold, which is why it’s common to worry about the unknown, such as medical events, sudden home repairs, car accidents, family emergencies, lawsuits, etc. If you’ve ever lost a little sleep about these things, don’t worry — you’re not alone.
Establishing and maintaining a liquid emergency fund is an excellent way to help calm the mind for when these unknowns pop up. While everyone’s comfort zone looks a little different, it’s best to have at least six to twelve months of living expenses saved in this fund. If you prefer to have more financial comfort, you may decide to keep a little more than 12 months available in this fund. Knowing you have easy access to funds in the event of unexpected emergencies can go a long way toward calming this fear.
Maintaining the appropriate insurance coverages can also help to bring peace of mind when it comes to larger unexpected events. In addition to standard policies (medical, homeowners and auto insurance), you should consult with your wealth manager to determine whether the following policies are necessary:
- Umbrella (or “excess liability”) insurance
- Non-owner car insurance
- Disability insurance
- Life insurance
- Errors and omissions insurance
- Malpractice insurance
Fear #2 – Job loss
A common concern expressed by those who are financially stressed is the fear of losing a job. Even if you have adequate savings, the thought of losing a steady stream of income can be terrifying.
Having an idea of your personal “contingency plan” can help to alleviate these fears. Perhaps your professional skills and abilities are able to be applied in another capacity, such as freelancing or consulting. Or you may be able to take your talents to another industry altogether. If you’re in or pursuing a career in a highly competitive field, the change could provide for an opportunity to pursue additional professional training or certifications to make you more marketable to employers.
While there are many reasons why losing your job may be outside your control, taking steps to prepare for other career options can help you feel more prepared for the future.
Fear #3 – Insurmountable debt
The cycle of debt can make you feel like you’re drowning, and you may worry you’ll never be able to swim your way to shore.
By instituting and remaining accountable to a plan, rescuing yourself from debt can be achievable. Two effective strategies include:
- The Snowball method – This involves paying off your smallest debt balance as quickly as possible, then moving on to the next-smallest balance. The benefit of this approach is that it can help you gain a sense of accomplishment as you knock out one loan after another.
- The Avalanche method – Using this method, you begin paying on whatever loan has the highest interest rate. Once that loan is paid off, you move on to the loan with the next-highest interest rate — and you continue to do so until all loans are paid off. This approach allows you to pick up speed as your go, because each payment saves you more money than the one before.
Fear #4 – Investment loss
Especially during periods of market volatility, the fear of “losing it all” in a market crash can keep worried investors up at night. However, if you respond emotionally by taking your money out of the market during a downturn, you may cause irreparable damage to your long-term investment potential and potentially derail achieving your financial goals.
So, what should you do instead? Work with a qualified wealth manager to establish a diversified portfolio in line with your specific goals, risk tolerance and time horizon. This can help you face bear markets with confidence and avoid making an emotionally based decision that keeps you from achieving your goals.
Fear #5 – Not enough retirement savings
As you approach retirement, you may begin to wonder if you’ve saved enough to last after you’ve stopped working. A variety of factors, such as lifestyle expectations, life expectancy, income requirements, family situation, legacy goals and more, all play into the equation.
The best way to determine whether you have enough to retire on your terms is to work with a qualified wealth manager. They can run a wide range of projections based on various scenarios to give you an idea of where you stand in relation to your goals as well as steps you can take to improve your outcome.
Are financial worries keeping you up at night? Creative Planning is here for you. We help clients take charge of their financial lives and feel more confident in the future. To learn more, schedule a call with a member of our team. We look forward to getting to know you.