Yahoo Finance The Most Common Money Worries and How To Deal With Them
If your finances are a major source of fear and anxiety for you, you’re not alone. A 2019 GOBankingRates survey found that 25% of Americans are worried about their finances for a variety of reasons, including feeling overwhelmed by debt, not making enough money to get by and losing their job. It’s likely that even more people are fearing for their bank accounts since the outbreak of COVID-19 in March. While some money fears are warranted, there are ways to be prepared for these events that can help put your mind at ease.
To handle these matters better, take a look at some the most common money worries, plus how you can deal with them.
Last updated: Sept. 4, 2020
1. Never Getting Out of Debt
Between mortgages, credit card debt, student loans, car loans and medical debt, it’s not uncommon for Americans to carry debt in one form or another (or multiple forms). A recent GOBankingRates survey found that the average American is $63,000 in debt — a tough pill to swallow if your finances are tight, especially as missed or late payments just add to the debt in terms of fees, penalties and interest. If your take-home pay just barely covers your bills, you might fear that you’ll never get out of debt.
How To Deal With It
The best way to overcome your fear is to face it head-on. Make a list of all your debts, including the monthly payment and interest rates. Then, come up with a plan to pay it back. There are two popular strategies to pay back debt, including the snowball method, which involves paying your debt off in order of the smallest balance to the largest, and the avalanche method, which involves paying your debt off in order of the highest interest rate to the lowest interest rate, regardless of the balance. Once you have a plan in place, determine how much you can put toward paying down debt every month once you account for other fixed expenses.
If you find that you have very little left over (or nothing at all) each month to dedicate toward debt repayment, you will either need to earn more or spend less — or both. Get a side hustle and/or cut down on any unnecessary spending until all your debts are paid off. It’s a tough process, but for many people, it’s not impossible.
2. Not Understanding Money
Money is a complex subject, and it can be overwhelming. You might think you’ll never fully understand investing, retirement savings plans, healthcare expenses or other financial topics, which can lead you to stick to what you know — and this may or may not be in your best financial interest.
How To Deal With It
In this situation, knowledge really is power. There are numerous blogs and websites that break down complex financial topics in a way that’s easy to understand, books on any financial area you’d want to know about and podcasts that can improve your financial literacy during your daily commute. Depending on your financial goals, it might be helpful to get some professional help from a financial advisor or money coach. Ask friends for a referral or ask for references before hiring someone, as this needs to be someone you can trust.
3. Losing Your Job
Unless you’re your own boss, there’s always a chance you will be laid off or fired — which can be a scary prospect. The best way to deal with this worry is to be prepared.
How To Deal With It
The most important thing you can do to be prepared for job loss is to have an emergency fund with three to six months’ worth of living expenses saved up. If you have nothing or very little saved, make building up an emergency fund your financial priority. Contribute a portion of your paycheck to a savings account to build this fund ASAP.
You should also always have an updated resume ready to go and look for opportunities to network so that you have connections if and when the time comes to look for a new job. You should also have income streams outside of your full-time job — such as a side gig or passive income — so that you would still be making money in the event you lose your main source of income.
4. Talking About Your Finances With a Romantic Partner
While there’s no need to discuss your finances on a first date, if you’re at the point in a relationship when you are talking about moving in together, buying a home together, getting engaged or planning a wedding, it’s definitely time to have a talk about money. This conversation might be uncomfortable, but it can prevent disagreements — or even a breakup — down the line.
How To Deal With It
If the idea of talking about money with your partner has been causing you anxiety, you’ll likely feel a sense of relief by simply having a frank conversation. The best way to go into this conversation is to be prepared with the topics you want to discuss, and you might want to break down your money talks into several “money dates” to really go through everything thoroughly. Topics you should discuss with your long-term partner include attitudes about money, such as whether you’re more of a spender or saver, how much debt you have, what your credit score is, whether you have declared bankruptcy, whether or not you have money saved for emergencies, what your long-term financial goals are and how you are saving for retirement.
Even after you know where each of you stands on all of these big topics, it’s important to have regular “financial check-ins” to make sure you’re staying on the same page.
5. Having a Medical Emergency That Will Prevent You From Working
Getting injured or being diagnosed with a long-term illness might prevent you from working. Even if you have paid sick leave, this might not be enough to cover the days you will have to miss work. On top of missed earnings, you might also be saddled with medical expenses you weren’t prepared to pay for.
Although this money worry is not unfounded — over 1 in 4 of today’s 20-year-olds will be disabled before reaching age 67, according to the Social Security Administration — there are things you can do to mitigate this fear.
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How To Deal With It
This is another worry that could be eased by having a substantial emergency fund. The funds can be used if you need money to cover living expenses when you are out of work and cover unplanned medical expenses, depending on what your financial needs may be.
You should also check to see if disability insurance is part of your healthcare plan. If it isn’t, consider purchasing private disability insurance.
6. Unexpectedly Dying and Leaving Your Family in Financial Ruin
If you’re responsible for providing for your family, you might fear sudden death more than those who are not in that financial situation. Although it’s unpleasant to think about the worst-case scenario — and you might not think you need to if you’re in perfect health — creating a plan is the best way to overcome this worry.
How To Deal With It
Get life insurance if you don’t have it already so that your beneficiaries will be provided for in the case of your death. You should also prepare a will and other estate planning documents with a legal professional. Gather all paperwork and put it in a place that will be easily accessible to your loved ones in the event they will need it.
7. Getting a Divorce and Losing All Your Money
Not only does divorce mean living on a single income instead of two, but it also means expensive attorneys’ fees and possibly owing your ex-spouse support or giving up shared property, depending on the agreement you reach. Divorce can end up being a big burden on your finances — in addition to your emotions — so it makes sense that this would be something to worry about.
How To Deal With It
After infidelity, money issues are the top reason couples get divorced, a 2018 study by Ramsey Solutions found. That’s why it’s so important to keep an open dialogue about your finances throughout your marriage.
Of course, that’s not enough to keep a marriage from falling apart in all cases. That’s why you should consider a prenuptial agreement before you get married or a postnuptial agreement if financial circumstances have changed since you wed. Although it’s not the most fun or romantic thing you can do as a couple, it can ensure that you’ll be financially OK in the event your marriage doesn’t work out.
8. Not Being Able To Pay For Your Kids' College Education
College has become increasingly expensive, with the average tuition and fees for an in-state public college at $10,116 and the average tuition and fees for a private college at $36,801, U.S. News reported. Even if you start saving early, you might worry that you won’t have enough saved to pay for your kid’s college education by the time they’re ready to enroll.
How To Deal With It
Unless your kids are about to leave for college, it’s not too late to start saving — and the earlier, the better. Consider opening a 529 plan, which is a tax-advantaged savings plan that can help pay for future education costs. Other options for college savings include a separate savings account, a CD, a Roth IRA (if you will be 59 1/2 by the time your child goes to college), a brokerage account, a custodial account or a Coverdell Education Savings Account. All of these options have benefits and drawbacks, so be sure to do the research to figure out which plan is best for you and your family.
If it’s too late to save, you have other options to provide financial support, including taking out a home equity line of credit, taking out a personal loan or co-signing on your child’s student loans. However, if you choose these options, be sure they won’t derail your own financial security or retirement plans. You can also cut down on college costs by having your child apply for scholarships and financial aid packages, enrolling them in a community college or having them live at home if they attend a local school.
9. Having To Declare Bankruptcy
If you are truly struggling to pay down debts even after cutting down on your spending and maxing out your earning potential, you might decide to declare bankruptcy. This is not a decision to be taken lightly, as it ironically costs a lot of money to file, and it can hurt your credit score for years to come.
Bankruptcy also doesn’t clear student loan debts, government debts, child support, alimony and expensive items purchased shortly before you filed. But it can be a lifesaver for some — bankruptcy can prevent a foreclosure on your home, property repossession or garnishment of your wages, according to Dave Ramsey.
How To Deal With It
Bankruptcy can be an emotionally taxing process — and it does not mean your debts will just magically disappear, as you will have to pay all or some of them via a payment plan or by liquidating your assets — but on the bright side, it can give you the opportunity to get a fresh start on your financial life. As part of the bankruptcy filing process, you are required to attend credit counseling and complete a debtor education course, both of which can teach you valuable financial lessons to implement going forward.
10. Needing To Financially Support Aging Parents
If your parents are retired or nearing retirement, you might be worried that they won’t have enough money to live off of as they get older. This can lead to further worries about having to financially support them and not having the means to do so as you juggle paying for your own day-to-day living expenses, saving for your own retirement and financially supporting your children.
How To Deal With It
The first step you need to take is to have a frank discussion with your parents about their financial situation. Do they have retirement savings? Will they have income streams once they retire? Have they created a budget for their retirement? Do they plan on downsizing? Knowing the answers to these questions will give you a good idea about if you actually need to be worried about them, or if you’re really worrying for no reason.
If it does turn out that your parents are not in the best financial shape, help them get back on track. This can involve helping them to create a budget, going through their expenses and seeing where they can cut back, and moving their savings to a high-interest-earning account. These small steps can help them stretch their money further and make them less reliant on you down the line.
11. Being Unable To Meet Job Expectations in a New Role
You might be fearful of accepting a promotion or searching for a better-paying position at a new company because you doubt your own abilities to be able to fulfill expectations. Even if you rightfully earned the promotion or are fully qualified for the new job, impostor syndrome might be filling you with dread. This could stunt your earning potential.
Find Out: 19 Downsides of a Promotion Your Boss Won’t Tell You
How To Deal With It
It’s normal to have some worry when you are offered a job opportunity that’s different from what you are used to. However, the manager who offered you the promotion or the company that offered you the job clearly believes you are up for the task — so you should believe that too. Remember that it’s OK to ask for help and to make mistakes along the way. Don’t let your fear stop you from taking on a new job that could increase your income.
12. Asking For a Raise — and Being Rejected
It can be scary to ask for a raise. You might fear that it will upset your employer or that they will reject your request, leaving you both feeling awkward or upset. However, if it’s been a while since you got a raise — or if you’ve never gotten one — and you know you are worth more than you are being paid based on salaries at comparable jobs, exceding your goals or taking on more responsibilities, this is a worry worth facing.
How To Deal With It
Come up with a plan of action so that you are more comfortable going into the conversation. If you have an annual review, this is the perfect time to bring up getting a raise — especially if the review goes well. If you don’t, set up a time to speak with your manager.
Make a clear case for why you deserve a raise. Maybe you’ve brought in more sales, increased your team’s efficiency or accomplished other achievements that have helped your company as a whole. Highlight why you are worth more than what you’re making now. If all goes well, you might see a bump in your next paycheck. If your employer explains that money is tight and they can revisit the conversation down the line, ask them for a reasonable timeframe and be sure to follow up. If they flat out say they won’t give you a raise in the foreseeable future, this might be a sign that it’s time to start looking for jobs elsewhere — and it’s better to know now than to wait for a raise that will never come.
13. Having Your Identity Stolen
It seems that every month or so there’s news of a major data breach, so it’s not uncommon to worry about having your identity stolen. If someone steals your identity, they may open bank accounts or new lines of credit in your name, which can wreak havoc on your credit score. And if they have access to your credit cards, they can use them to make fraudulent purchases. Fortunately, there are ways to protect yourself from identity theft.
How To Deal With It
Take precautions to protect your identity from theft, including keeping your Social Security card in a secure place, being wary of who you share personal information with, using a VPN when you’re on public Wi-Fi, checking your credit card statements for unauthorized transactions and using complex passwords for all of your online logins.
If you feel that your identity could have been compromised, freeze your credit and report the theft to the Federal Trade Commission.
14. Never Being Able To Buy a House
The average young American now spends over $6,400 a year on rent, a recent GOBankingRates study found. With so much money going toward rentals, it can be hard to save enough to put a down payment on a home, make mortgage payments and be financially able to pay for repairs and other maintenance that comes along with homeownership. For some people, the idea of being a homeowner seems more like a dream than a realistic goal.
How To Deal With It
Depending on your income and where you live, saving for a home might require some sacrifice. Keep rent costs as low as possible by moving to a cheaper area or living with a roommate. Find other ways to cut back on costs and funnel the extra savings into a fund intended to purchase your future home. Ideally, you should save enough to make a 20% down payment — otherwise, you’ll have to pay for private mortgage insurance, which will make the home more expensive in the long run. You should also have a separate emergency fund that you can use to pay for necessary major home repairs as they arise.
Having enough saved for a down payment and for home-related emergencies might take some time, but it’s better to hold off on buying a home until you are truly financially ready than rushing into buying one simply because it’s a financial milestone you want to check off.
15. Losing All Your Money in a Scam
In recent years, scammers have been identifying themselves as government employees to steal millions of dollars from unsuspecting victims. According to the FTC, government imposter scams have been the top fraud type since 2014, with over 389,000 reports of this type of scam in 2019 alone. The average victim loses $1,100, and the losses from government imposter scams totaled a whopping $153 million last year.
Because this scam has become so prevalent, you might worry that you’ll become a victim too.
How To Deal With It
The best way to protect yourself from scammers is to be able to identify them as such. Scammers typically present themselves as members of the Social Security Administration and will ask you to transfer money to them in the form of gift cards or as a wire transfer. According to the FTC, government agencies do not call people out of the blue to make threats or promise money, and they will never request payment via a gift card or wire transfer. If you get such a call, hang up immediately and follow up directly with the government agency the caller claimed to be from to confirm if there really is an issue.
16. Losing All Your Money in a Stock Market Crash
Coronavirus fears and an oil price war led the stock market to have its worst day since 2008 on March 9, CNBC reported. If much of your money — and your retirement plan — is dependent on market performance, you could be in a panic.
How To Deal With It
Although it might be difficult to do when you see the value of your portfolio continue to plummet, it’s important to not panic — especially if you see investing as part of a long-term financial plan. Don’t go crazy selling all your stocks, but you might consider rebalancing to put more money into CDs or Treasury bills. Diversify your holdings so that they are spread out among stocks, bonds, cash and alternative assets, which will protect you in the event that one asset class takes a major tumble. And as a general rule, only invest what you can afford to lose.
17. Spending Too Much on 'Wants'
If you have a saver mentality, spending money on anything that qualifies as a “want” might fill you with worry or guilt. You worry that spending money on a handbag or a vacation will harm your financial stability or leave you worse off down the line. This mentality can prevent you from ever being able to enjoy the fruits of your labor.
How To Deal With It
Create a budget that accounts for all of your necessary expenses, plus contributions to your savings and retirement fund. If you have money left over, don’t be afraid to use it for discretionary spending! Sen. Elizabeth Warren’s famous 50/30/20 budget rule advises dedicating 50% of your after-tax income to needs, 30% to wants and 20% to savings. As long as you keep your discretionary spending within your budget, you should not feel worry or guilt each time you buy something for pure enjoyment.
18. Running Out of Money in Retirement
Even if you’ve worked hard to save a sizeable nest egg for retirement, you might be worried about running out of funds once you stop working. And if you haven’t been diligent about saving, you’re probably in a panic.
How To Deal With It
The first step in dealing with the worry is to actually take a look at how much money you will have for retirement — between retirement accounts, other investments, other income streams and Social Security benefits — and how much money you will need to cover expenses. Meeting with a financial advisor or another professional can be helpful for this step.
Once you know how much you will need, you’ll be able to tell if you have enough. If not, there are steps you can take to boost your retirement savings. Take advantage of catch-up contributions for 401(k) and IRA plans — you can add additional funds above the usual maximum contribution limits if you are 50 or older. Consider rethinking your investment strategy to allow for more investment income. If you can continue to work, do so until you have saved enough to comfortably retire. You should also consider delaying Social Security benefits until age 70 so that you can get the maximum amount.
If all of those measures still will not be enough to retire comfortably, consider applying for government assistance. You can use BenefitsCheckUp.org to find what assistance you will qualify for. And if you think you will need financial help from your adult children, now is the time to have a frank discussion with them so that they can be prepared to assist you when the time comes.
19. Not Being Able To Find a Well-Paying Job
If you’re not making as much money as you would like, you might worry that you will never be able to find a job that pays better. This worry might stem from a job market that you see as being unfavorable or a lack of confidence in your own skills.
How To Deal With It
Finding a job is a situation that is not entirely in your control, but there are steps you can take to make yourself a more appealing candidate. If you think a lack of education or knowledge of specific skills is holding you back, consider taking night classes or an online course to get the degree or skills you will need to boost your earning potential. This might be tough to budget for if your current salary is low, but the long-term payoff could be worth the short-term financial sacrifice.
If you already have the skills you need to qualify for a better paying job, just keep applying. It might be discouraging to face rejection, but it’s a normal part of the job search. The labor market is expanding, with more jobs being added all the time, and sustained job creation is driving wages up — which means that a better paying job could be just a few applications away.
20. Not Being Able To Cover All Your Monthly Bills
Many Americans live paycheck-to-paycheck, so it’s not uncommon to have a month when it’s tough to pay off your bills. But what if you end up charging too much on a credit card or an unexpected medical event occurs and you can’t afford to pay your bills in a timely manner?
How To Deal With It
Tracking exactly how much money is coming in and how much you are spending is the best way to ensure that you won’t find yourself in this situation. Of course, unexpected expenses do pop up, which is why it’s so important to have an emergency fund.
21. Being Stuck With a Low Credit Score
A low credit score can make it hard for you to qualify for new lines of credit, including credit cards, mortgage loans and auto loans. It might also make it difficult for you to rent an apartment, as a credit check is often a part of the application process.
If you don’t understand what a credit score is or how it is calculated, you might fear that you’ll be stuck with a low score forever that will continue to ruin your financial life.
How To Deal With It
Your credit score is calculated based on a number of factors, including the number of accounts you have, the type of accounts you have, how much of your available credit you utilize, the length of your credit history and your payment history.
Once you understand what makes a credit score, you can start taking steps to improve yours. Some simple things you can do are to pay bills on time and use less credit to lower your utilization rate.
22. Not Being Able To Afford Health Insurance
Although many people receive health insurance through their employers, millions of Americans are uninsured. As of 2018, 27.9 million nonelderly individuals were uninsured, according to the Kaiser Family Foundation. The main reason people remain uninsured is that they say they can’t afford it — 45% of uninsured adults said that they remained uninsured because the cost of coverage was too high.
How To Deal With It
If you are in between jobs or work for an employer that does not provide health insurance, you should make buying health coverage a priority even though the cost is high. The Kaiser Family Foundation found that the uninsured are twice as likely as insured Americans to have had problems paying their medical bills in the past 12 months. This can lead to medical debt that can be hard to pay down.
Shop around and compare coverage and costs to find the best policy for you. Having a low level of coverage is better than none at all. If your income is low and you apply for coverage through the Health Insurance Marketplace, you might qualify for a premium tax credit that will lower the monthly amount you pay for your insurance.
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This article originally appeared on GOBankingRates.com: The Most Common Money Worries and How To Deal With Them
