Forget things that go bump in the night. Many of us are losing sleep over our fear of money—more than half of Americans rank “not having enough money for the future” as one of their top five fears.
From possibly being laid off, to lacking retirement funds, many of us are scared when it comes to our finances—which can lead to avoidance.
But even though fear is natural, it doesn’t have to control the way you save or spend. Like the monster under the bed, these fears can be faced head-on.
Below, we’re taking on five common fears around finances, and potential ways to overcome them.
Drowning in Debt
In 2019, American household debt hit an all time high of $13.95 trillion. Sure, that bottom line can be scary, but what’s more frightening are the interest and late payment charges you might accrue when you ignore your debt altogether, making that total even larger.
While you might be tempted to avoid thinking about your student loans or credit card debt, they’ll still be there month after month. What’s worse, neglecting debt can adversely affect your credit score, haunting you long after that late credit card payment is resolved.
Exploring Debt Repayment
You could think about taking a close look at what you owe, whether it be student loans, car payments, or high-interest credit card debt. And remember, you’re not alone in this struggle. There’s no one right way to tackle your debt, but consider the following:
• Avalanche or snowball method. The avalanche method to taking on debt uses a mathematical approach: making minimum payments on all debts and then tackling the debt with the highest interest rate which may save you more on interest. The snowball method uses a behavioral approach and involves taking on your smallest debts first, which can give you the confidence to approach the more daunting ones. The fireball method is a hybrid approach that focuses on tackling your bad debt from lowest balance to highest balance while paying the minimum on your good debt. Regardless of which strategy you use, adopting a plan to pay down your loans can give you a clear course of action, outweighing monthly dread when payments come due.
• Consider a personal loan. If credit card debt has you overwhelmed, you might consider taking out a personal loan, where debt from multiple credit cards can be consolidated into a single monthly payment. This could even lower your interest rate, which could decrease your stress.
• Ask for a lower APR. Sometimes, simply asking for the help you need can bring relief. If you’re struggling with credit card debt, you can call the financial institution and request lowering your APR (annual percentage rate). This would mean lower interest on the debt you carry, which could get you debt-free faster.
Unemployment
If you don’t feel solid financially, the instability of employment can cause major stress. The fear of losing your paycheck could lead to ignoring your savings account balance.
Although dwelling on potentially losing your job could cause greater anxiety, preparing for the worst could offer relief.
Face Your Fear: Building an Emergency Fund
Instead of unconstructive worry, you could consider building an emergency fund. Setting aside even a small amount of money each month can create a sense of security—and accomplishment.
Although you can start small, most recommend putting away three to six months worth of living expenses. With a high-yield savings account, that amount may grow even faster.
Having a backup plan in the form of an emergency fund may help you face the unknown more easily.
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Preparing for Retirement
With monthly bills looming, it can be difficult to think in the long-term. Retirement seems far away, while that $40 food delivery will arrive in 20 minutes.
Understanding retirement funds may be intimidating—in fact, over one in five Americans don’t save anything each month for retirement.
Face Your Fear: Filling Your 401(k) or IRA
If you haven’t started saving for retirement, don’t beat yourself up. Instead, you could consider saving what you can each month, no matter how small.
See if your employer offers a 401(k), or consider opening an IRA. Though it may feel insignificant, putting away even a small sum each month may make a large difference over time.
Fear of Spending Money
For some, anxiety around spending could make you fret over the smallest purchases. If you fear overspending, a dinner out could lead to cold sweats as you calculate the cheapest menu item.
Or in extreme cases, you may even avoid going out altogether. While minimizing expenses may be good, this pennywise, pound foolish mentality may strain your relationships and decrease your quality of life.
Face Your Fear: Sticking to a Budget
Knowledge is power. By creating a budget, you can alleviate the stress that comes with everyday purchases.
Knowing exactly how much money enters and leaves your account each month can be empowering. With automated apps like SoFi Relay®, you can track all your spending in one place.
It’s Too Late
It’s easy to get down on yourself when it comes to money fears and forgo saving or paying down debt because it feels easier to avoid it.
You might think you’re too far along in your career to start saving for retirement, or too busy to keep up with an emergency fund. Finances, especially when you’re afraid, can seem complicated, intimidating, or overwhelming.
Face Your Fear: Getting a Fresh Look at Your Finances
Sometimes starting fresh is all you need. It’s never too late to adopt personal finance habits like paying off debt, budgeting, and saving. While you’re at it, consider an easier way to earn while saving.
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