Fear and money often go hand in hand. That is no surprise in a world where many people constantly court financial chaos, leaving them feeling vulnerable and insecure about the future. Those fears touch people in all income groups, too. The Brookings Institution found that about one in three U.S. households — 38 million — live hand to mouth.
Fortunately, there are ways to overcome obstacles and work toward financial security. Here are eight reasons managing money triggers anxiety.
Related: Why Happy People Earn More Money
1. Past Mistakes Haunt You
Money mistakes can happen to everyone. Unfortunately, the embarrassment of past mistakes and the fear of repeating such shortcomings often induce a state of planning paralysis.
Don’t let these fears keep you from actively managing your finances. Famed automaker Henry Ford once said, “The only real mistake is the one from which we learn nothing.”
Take Ford’s advice and sweep away the rubble of past errors with a determination to build a sturdier foundation. Although it can be hard to rally from a financial setback of your own doing, recovery is possible with a change of perspective and a well-designed strategy that helps you build a healthier relationship to money.
2. Being Honest About Your Situation Is Painful
It’s often said that ignorance is bliss. But with financial matters, nothing could be farther from the truth. Avoiding opening credit card statements or failing to tally up your total debt might shield you from the severity of your situation today, but it does nothing more than delay the inevitable.
It is normal to fear the unknown. But don’t let that fear prevent you from taking action. Instead, do something about your situation. Start by being honest with yourself and taking ownership of your circumstances.
If you have fallen behind on payments, now is the time to make tough phone calls to creditors. It will likely be uncomfortable at first, but you will be surprised at how the process of choosing positive action over inaction can help build momentum.
3. Financial Jargon Overwhelms You
Diversification, derivative, short sale, equity swap, hedge fund — these are just a few examples of the words thrown around by professionals when discussing your money. For many people, this can feel like verbal combat. It might leave you simply hoping to hold off the attack long enough to find a way to retreat.
But it is important not to back down in these situations. If you ever feel like a word or concept is beyond your understanding, ask for clarification. A good financial advisor or other expert will be able to explain the concept in clear terms you can understand.
If the “expert” refuses to explain, you will have learned something valuable about him. As the great scientist Albert Einstein reportedly said, “If you can’t explain it to a 6 year old, you don’t understand it yourself.”
4. The Stock Market Intimidates You
Even after you master financial jargon, the stock market itself can seem like a foreboding place, especially for beginners. Fortunately, you can take solace in the fact that anyone who has ever found success in the market has started in the exact same place that you are now.
So, just like you learned to do things as a child, start small. Begin by honing a basic understanding of investment vocabulary and try to grasp simple concepts. For example, find out what a mutual fund is and what causes it to gain or lose value. By building a strong foundation of the basics now, you‘ll be more knowledgeable and better prepared for wealth accumulation in the future.
5. Handing Money Over to a ‘Stranger’ Makes You Squirm
You work hard for your money, so the idea of handing over your entire nest egg to a stranger with a nice smile and fancy title probably doesn’t elicit peace of mind. According to a report from the Society of Actuaries (SOA), only 48 percent of pre-retirees and 55 percent of retirees consult a financial planner for their retirement funds.
In the post-Madoff era, it is easy to understand why investors are less trusting of the financial-planning community. But deciding against the counsel of a trusted financial advisor can be a mistake, especially for those who do not have the aptitude — or the patience — to manage their own money.
If you are on the fence, venture out and meet as many advisors as you can. Explain your financial goals and ask tough questions about each prospective advisor’s money-management philosophy.
6. You Worry About Job Loss
In the current economic climate, it is common to be concerned about your job security and how a job loss might impact your finances. Even if you have never personally experienced the despair associated with the loss of a job, it is likely that you know someone who has.
Such fears can prevent you from making clearheaded decisions about your finances. To reduce the worry about losing your job, establish an emergency fund that will cover your expenses in the event you are suddenly out of work.
The personal finance community is divided on the amount you should save. Some experts recommend saving the equivalent of three to six months of your salary. Others say you can save less, even just $1,000. However, the consensus is that you should start saving something immediately.
7. You Fear Outliving Your Money
With the market crash of 2008 and the subsequent recession still visible in the rearview mirror, many people are faced with the reality that they might actually outlive their retirement savings.
A Wells Fargo and Gallup poll found that almost half (46 percent) of investors in this country are “very” or “somewhat” worried they will outlive their savings in retirement. On the one hand, that is a pretty sobering statistic, especially when you consider the effects of inflation on retirement savings, in addition to potential increases in health care costs. On the other hand, it’s encouraging that so many people are concerned about a possible shortfall, because these are the people who will likely take the steps needed to protect themselves.
If you fear outliving your savings, it is time to sit down and do some math. The first step is to look at your expected costs and expenses once you transition into retirement and establish a budget to determine how far you really are from your savings goals. Once you have that number, you will want to start saving as much as you can.
8. You Think Debt Is Just a Part of Life
Debt has become so normalized that people who choose to avoid it are often labeled as the misfits and outcasts. It’s a common misconception among those with debt that only the rich can attain debt freedom. The truth is that anyone willing to put in the work and commit to a lifestyle change can become debt free.
One of the best ways to start changing your relationship with debt is to change your thinking. Simplicity aside, getting out of debt is a challenge and requires a dedicated lifestyle change that should start with eliminating irresponsible spending habits. Once you make the decision to embark on this journey, create a debt payment strategy and follow it to the letter.
From Hopelessness to Hope
As you transition into actively taking over the reins of your finances, you will notice that the feelings of hopelessness and despair that used to fill your mind will start to subside. Soon, they will be permanently replaced by a sense of accomplishment.
Acknowledging your financial fears is the first step. Do not let past mistakes, lack of understanding, intimidation or fear of the unknown hold you back. Get educated, ask questions and be proactive about your financial future.