Financial fears are perfectly normal, but if they are getting in the way of your financial success it’s time to make a change. Taking the right steps can help you overcome your financial fears and take advantage of financial opportunity instead.
It’s not uncommon for Americans to feel weighed down by their financial fears. In fact, 81% of working Americans have fears about retirement according to the latest COUNTRY Financial Security Index.
Being able to live comfortably in retirement, afford the lifestyle one envisions in retirement, and not running out of money all contribute to this high level of financial fear. It is the uncertainty over how much money is enough and what life will actually cost in retirement that leaves so many Americans concerned over their future financial security.
What if we told you that you didn’t have to be fearful about your finances? That there are steps you can take, right now, that could help you stare your financial fears in the face and overcome them once and for all? Well, there are steps you can take and ways to replace financial fear with financial confidence.
Here are the five steps you can follow to overcome your financial fears:
1. Understand the role fear plays in your financial life
Write down your financial concerns. What is it about your current financial situation that troubles you? When you can create a list of what your fears are, then you can begin to address them one at a time. Maybe you are worried you won’t have enough saved to support you and your spouse through retirement. Perhaps you are afraid you will underestimate your future healthcare costs. Another common fear is not being prepared in the event that something unexpected happens and how to plan for those “what if” moments on a fixed income. Even before you reach retirement age, you can have financial fears about making a bad investment choice that can have lasting consequences on your portfolio.
Whatever your fears are, write them down. Then, reflect on how your fears are affecting your life. Some people find that their happiness is limited because of their financial concerns. Other clients we have worked with have used financial fears to motivate them to take certain action steps – some that are reactive and others that are proactive. Knowing your fears and how these same fears impact your life is the first step in overcoming them.
2. Get comfortable with the basics of investing
There is a key principal of investing that we want all of our clients and listeners to understand so that they can not only make wise investment decisions, but also become familiar with an opportunistic mindset. “Buy low and sell high.” This may sound familiar, but what does that really mean? It means that you are going to be greedy when others are fearful and fearful when others are greedy. It’s not a good time to sell when the market is on the decline. Instead, that’s the perfect time to start buying more. Likewise, when markets are on the upswing and people are buying with the hopes of a continued increase in stock prices, it is a much better time to sell.
In practice, most of us are not trading on a daily basis. Therefore, it is just as wise to stick with a dollar cost averaging investment strategy that buys the same amount of shares every month. Investopedia defines dollar cost averaging as a technique of buying a fixes dollar amount of a particular investment on regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are purchased when prices are high.
This allows you to invest purposefully and objectively. Being comfortable and confident in your investment strategy can reduce the temptation to react to financial fears.
3. Build on your financial education
Understanding your personal finances does not mean you need to be a financial expert. On the contrary, it just means that you learn what you need to so that you can make smart financial decisions. The more you know about your finances, the more confident you can feel about your financial situation.
A financial advisor can be a tremendous resource to you to help answer any questions you have and explain strategy or financial concepts you want to know more about, within the context of your own financial circumstances. Fear is oftentimes a response to uncertainty and the potential for pain, so when you have more certainty and knowledge around your finances, fear is less of a factor in your life.
4. Learn from the dark moments of your life
When you can look back on those hard moments of your life from the other side of the pain and hardship you endured, it may be easier to identify the opportunities in those places. We all know that famous saying, “Experience is the best teacher.” When you can learn from past mistakes and make better financial decisions in the future, that is a win and a life lesson that can serve you well going forward.
Everyone makes mistakes, everyone. And everyone makes financial mistakes, too. Some financial mistakes are more devastating than others, but the point is that if you can take your experiences, learn from them, and benefit from the wisdom you’ve gained then you are doing well. Oftentimes people fear the unknown or the potential of something bad happening. If you have lived through the bad and survived, you are better prepared to avoid making the same mistake again.
5. Write down your goals and create a plan
Just like we recommend that you write down your fears, we also encourage you to write down your goals. What do you want to accomplish in your life and how can your finances support your goals?
Writing down your financial goals is one of the best ways you can take the focus off of your financial fears and refocus your energy on the positive outcomes you want to achieve. Once you write out your goals, the only thing left for you to do is create a plan to reach them!
Ask yourself, “What am I doing today that is helping me accomplish [insert your goal here]?” Actively work towards what you want, take control of your finances, and watch how you steadily overcome your financial fears in the process. What used to hold you back can now function as a catalyst for action and opportunity.
Financial fears are completely natural. And if you can turn fear into an opportunity for self-awareness and understanding, financial education, and purposeful action – you can overcome your financial fears and find lasting success in its wake.