Planning and saving for retirement is a major source of stress for many people. According to a survey from insurance company Allianz Life, 61% of Americans say they’re more scared of running out of money than of dying.
With the landscape of retirement benefits changing, economic uncertainty and rising costs of living, it’s understandable to feel anxious about securing a comfortable retirement. Constant money worries can keep you up at night and negatively impact your quality of life.
While anxiety won’t make financial problems disappear, there are actions you can take right now to get your finances on track for retirement and finally rest easier. Here are eight effective ways to alleviate retirement fears by proactively fixing your finances before you reach full retirement age.
Understand Your Current Financial Situation
It’s impossible to create a plan if you don’t know where you’re starting from. The first step to take to stop worrying about money is to identify your assets and your liabilities, or debts, said Michael F. Kay, a certified financial planner and founder of Financial Life Focus.
Your assets include savings, retirement accounts, home equity, investments, and any other resources you have. Liabilities are debts owed, which may include mortgage, credit cards, student loans, medical debt, and car loans.
This accounting gives you a snapshot of your net worth along with problem areas. For most, the issues are too little savings and too much debt. But without this clear picture, it’s easy to feel overwhelmed. Once you know what you have and what you owe, you can identify your biggest problem and assess what needs to change. For most people, it’s too little savings and too much debt.
Track Your Spending Habits
Once you know your financial status, analyzing your spending patterns is crucial to identify where money is going each month. Break expenses into needs like housing, utilities, transportation and wants like dining out, vacations, hobbies.
If you’re spending $1,000 on discretionary items, ask yourself what else you could do with that money, Kay said. You might be worried about living paycheck to paycheck or not making ends meet. But by tracking your spending, you might realize you have the cash you need to boost savings, pay off debt or get ahead — if you cut back on unnecessary expenses.
Examining the last few months of bank and credit card statements helps quantify where cash is flowing so you can make changes. If you find $500 a month is being spent on wants, that money could be redirected to debt payments or savings which reduces retirement worries.
Reduce and Eliminate High Interest Debt
Carrying debt strains monthly cash flow and impedes the ability to save.
“If this is your normal way of living, it’s time to take stock and think about why,” Kay said. He suggested working with a counselor to figure out what triggers your spending and how to get it under control. Visit the National Foundation for Credit Counseling’s website to find a certified credit counselor near you.
Make a list of debts owed with corresponding interest rates. As much discretionary income as possible should go toward eliminating the highest interest debt first, usually credit cards. This pays off balances quicker, resulting in less interest paid over time. Freeing up monthly debt payments allows that cash to be redirected to building retirement savings.
Have Clear Financial Goals
One source of money stress is uncertainty about what constitutes financial success. Determine what must happen, either a dollar amount or lifestyle, for retirement to feel secure. Common goals are becoming debt-free, saving for kids’ college, or amassing a certain retirement nest egg.
With clear goals, you have purpose behind spending and career decisions. Evaluate if your current path supports achieving the priorities. A second job or education to boost career earnings may be warranted.
Increase Financial Literacy
Some anxiety comes from lack of knowledge about personal finance basics. But mastery of the subject is not required. Simply identify where you need help and use free online resources to improve. If you don’t understand credit or retirement plan investing, websites like myFICO or Reddit forums can provide education.
Increased financial literacy gives you confidence and control. Be open to continually learning.
Prepare for Worst Case Scenarios
Anxiety thrives on uncertainty. Considering worst case money events like job loss or disability and taking preventative measures reduces stress. Steps like building an emergency savings fund, buying insurance policies, and managing debt provide stability.
No one can fully control the future, but you can mitigate risks through smart contingency planning. This clears mental bandwidth previously occupied by doomsday money thoughts.
Don’t Try To Keep Up With Others
A major source of financial pressure is trying to maintain lifestyles comparable to those around you. But comparing yourself is toxic and unrealistic. Define your own values and goals to guide spending rather than what friends or neighbors have.
Find contentment in living the lifestyle you can responsibly afford. Make decisions aligned with your priorities, not based on keeping up appearances.
Seek Help From a Financial Advisor
For comprehensive guidance, a financial advisor can help with any of the above assistance – assessing your situation, reducing debt, setting goals, risk mitigation, improving money behaviors. Look for fee-only fiduciary advisors who are legally obligated to provide unbiased advice in your best interest.
Implementing even a few of these tips starts to alleviate retirement worries by putting you back in control. Small wins with finances build momentum. Anxiety thrives in murky unknowns. Shedding light on your status, bad habits, and solutions brings confidence.
Stay consistent with new positive money behaviors. Be patient but persistent. With focused effort, your future retirement reality can align with your hopes rather than your fears.
Cameron Huddleston contributed to the reporting for this article.
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