According to the Chapman University Survey of American Fears 2016, financial worries topped the list of America’s biggest fears, with 39.9% of people saying they were afraid they wouldn’t have adequate funds for the future. Another study found that 85% of U.S. adults suffer from financial anxiety. It’s no wonder Americans are worried: nearly half are living paycheck to paycheck.
Fortunately, there are ways to protect yourself from the financial worst-case scenarios that keep people up at night.
These are some of the most common financial fears that haunt us, and how to confront them to rest easier.
The prospect of losing your source of income is scary for obvious reasons. And, studies show that too much fear of job loss could actually hurt your career.
How to face your financial fear: Taking care of your career and keeping your skills sharp is a good way to ensure future employment, whatever may happen with the company you’re working at. Beyond things you can do professionally to make sure you’d survive a job loss, make sure you don’t overextend yourself financially. Most experts recommend having enough on-hand to cover six months of expenses. A job loss is easier to weather if you aren’t living beyond your means and have savings to hold you over until you find a new job.
Serious illness or other major expenses
A New York Times survey last year found that one in five working-age Americans with insurance encountered problems paying medical bills, which can have serious consequences on overall financial well-being.
How to face your financial fear: Appropriate insurance can be an important first step toward protecting your most valuable assets from unforeseen events like an auto accident or medical event that you hadn’t planned to pay for. However, even with insurance you’ll need to plan in advance to be able to cover any deductibles or out-of-pocket expenses. At minimum, plan to have enough cash available to pay any deductibles.
Whether it’s a stack of maxed-out credit cards, student loans or an underwater mortgage, few things are as scary is being over your head in debt — not just because it can be difficult to pay back, but it can also negatively impact your credit score.
How to face your fear: Never take on more debt than you are sure you can afford. Many people are overly optimistic in what they expect to be able to pay each month on homes, cars, and other major expenses. The more debt you take on, though, the more pressure there will be to meet those debt obligations. If you’re already struggling with multiple high-interest payments, you may benefit from consolidating debt with a personal loan, with fixed-terms and fixed rates and a clear line of sight as to when the debt will be paid off.
Financial scams/ID theft
With the recent Equifax hack still making headlines, Americans are as concerned as ever about the consequences of identity theft and other financial scams.
How to face your financial fear: Companies such as LifeLock and Experian are available to provide different levels of protection from identity theft, but make sure you understand the fine print in advance. Regardless of what protections you utilize, it is important to continuously monitor your credit to stay on top of any red flags.
We all hope that one day we’ll be able to retire and enjoy what life has to offer beyond work. However, a recent survey found that 51% of Americans are worried that their retirement savings won’t cut it.
How to face your financial fear: As you’ve probably heard many times before, the earlier you start saving the better. Building up a healthy retirement account of any kind can give you peace of mind that you’ll enjoy your post-work life.
However, many people worry about a sudden stock market decline that could erase a lifetime of hard work. To prevent this, be smart about how you manage risk. Experts commonly advise that higher-risk investments are more appropriate for younger savers who have time to ride out any market downturns. The closer you get to retirement, the more you’ll want to move your money into safer investments that are less likely to be affected by something like a recession. A financial advisor can help you find the right balance of risk for your goals.
There’s no need to be spooked by personal finance. It may seem tempting to hide from things like debt, but you’re better off confronting your fear and taking action. As laid out above, there are options to be proactive in protecting yourself from the worst nightmare scenarios.
One final piece of advice for the Halloween season: don’t be the house that gives out apples to trick-or-treaters (trust us on this one!)