Money is life’s necessity. For all the good that can be done with money, a lot of thoughts about money cause us a lot of stress. Just like in childhood, stories of ghosts in the park and getting bullied from seniors kept us awake in nights, money issues have become the cause of serious late-night worries for many adults. Financial fears can range from anxiety of getting a bill in the mailbox to piling-up debts.
Humans have an odd way of reacting to threats. Getting scared, we try to ignore and avoid them. Truth is, these are fears because you haven’t faced them yet. Don’t get so overwhelmed with your financial fears that they become bigger than yourself. Face them, understand them and bust them. Remember, things can always get better. Only when you are thinking clearly, can you become a smart money manager. Let’s clear some air around your financial fears to give some hope to both- your finances and sleep.
- I will never be able to get out of my debt
Having been caught in a bad debt is most haunting financial fear for people of all ages. Bad debt is the debt which you borrow to buy things/services, but that doesn’t earn you any money. Repaying bad debt may feel like you are working for the past and it is draining you out of your cash flow, time and intelligence. You may feel you will never be able to rise out of it. Well, you aren’t alone! Most people in debt feel like this.
Is your debt fear holding you from managing your finances? Don’t let it. The secret to eliminating debt fear is to stay calm and manage finances.
First and foremost step towards managing debt is to make a budget. With a budget you will get to know how much you will be left with every month to save, invest and direct towards reducing debt. Secondly, in order to increase your surplus (Earnings-Expenses), look for the areas you can trim your expenses. Also, if possible, try to increase your income by getting a second job (part-time or freelancing). It will mean more money in your pocket. Finally, take baby steps and set small goals of repayments- for today, for this week and this month.
For those who have credit card debt, you can talk to the card vendor and see if you can get them to lower your interest rate. Say, you are shopping around for other profitable vendors.
Tip: Try to take only good debt (i.e. borrow money to invest in areas which will earn you income). If you have bad debt lurking on your head, develop a financial game plan for repayment by availing above suggestions.
Another dreadful financial fear is-
- I don’t have adequate savings in my bank account
The fear of lack of adequate saving worries people about two things- how will they ever be able to retire? And how will they manage financial emergencies?
It’s said; when money is tight, savings are the last thing people want to think about. A report suggests that many Gen Xers and Millennials are living paycheck to paycheck lives, thereby socking away their entire earnings and failing to save much. Amidst debts, maintaining a fine lifestyle, giving good education to kids and fulfilling day-to-day needs, we often fail to acknowledge this aspect of our finances. And suddenly, this neglected aspect hits us in face. Lack of savings brings retirement and emergency fund horrors for many. Savings can give a cushion and soften the blow of unexpected medical expenses, car repairs, kid’s college education etc. Savings also proves to be a great lifesaver in old age.
Even though, creating a safety net of savings may sound daunting, but it is easy. It all really boils down to saving a little amount of what you earn in an account you cannot touch. We suggest saving 5%-40% of your paycheck (lower limit for millennials and upper for those reaching old age) every month into this account. The secret to maintaining consistency in savings is to ‘make this transfer automatic’. This way, a certain portion of your monthly earnings will automatically get saved every month.
Tip: Save by opting for automatic funds transfer mechanism, but DON’T become an ‘over saver’ or go into casino mode to put all your eggs in one basket. Use other part of your earnings in spending and investing. Don’t let your fears overpower your financial faculties. Stay smart, Get rich!
Don’t let your financial fears derail your finances. Address them and take your first step towards financial freedom.