Are financial fears keeping you awake at night? We all worry about money, but there are steps we can take to make sure our worst financial fears don’t come true. These are six financial fears and how to overcome them.
Is there some aspect of your finances that keeps you up at night? Unlike some fears, terrorist attack, being struck by lightning, you can actually do something to alleviate your financial fears. Read on so you can get a good night’s sleep.
A Medical Catastrophe Will Bankrupt Me
You have a good job, you save and invest. But you can’t get rid of the niggling worry that you are one disaster away from the poor house. This one can come true, even if you have insurance.
Medical bills are the leading cause of bankruptcy filings and 78% of those filing, had health insurance. Even with insurance, what if you needed a drug that this dickhead sells? (Get him Anonymous!) Insurance doesn’t cover gauging by doctors, hospitals, and drug companies. It often doesn’t cover all legitimate medical expenses either.
Until this country joins the rest of the civilized world and considers health care a human right, not a commodity, and implements a single payer system, this is the reality. So your six-figure salary, job security, emergency fund, and retirement accounts may not make you immune to crippling medical debt.
Face Your Fear
Being proactive can help assuage this fear. There are various types of supplemental insurances you can buy in addition to whatever policy you currently have.
Policy Genius, whom we interviewed on the show, have an insurance checkup you can plug your numbers into to get some guidance on what additional insurance might be appropriate for you.
If you do come out of the hospital with a big bill, ask to see an itemized bill. Check it for mistakes and for treatments and tests that you might not have actually received. If you are a guy and go into the hospital, you are unlikely to have received a pregnancy test even if there is one on your bill.
Once you get the explanation of benefits from your insurer, call and ask why something wasn’t paid. Billing codes change (one of the many nefarious tricks insurance companies get up to) often and if your doctor or hospital billed an old code, it wouldn’t be paid even if it’s for a covered service. The insurer is not going to point this out to you; you have to find out for yourself.
If everything on your bill is legitimate and there are some charges your insurer will not pay, there is still help available. Many doctor’s offices and hospitals will work out a long-term payment plan with you. There are also charities that help with medical bills.
I’ll Lose All My Money In The Market
Do you know someone who has tens of thousands of dollars in a checking or savings account? This is probably why they’re afraid of the stock market. This is fueled partly out of ignorance. For a lot of people, investing seems like this complex thing that no average person can understand.
It’s also sometimes caused by reading or watching the news. Like any other subject, the media will high light the worst of the worst personal finance stories. So you hear about the person who lost ten million in one day but doesn’t hear about the person who has been investing in index funds for thirty years and retires at fifty.
Face Your Fear
Big losses happen to investors short term. If you buy and hold, you are unlikely to lose money over the long term. Big losses also happen to those trying to get rich quick. Again, buy and hold long term, and you will be insulated against this.
If you want to grow your wealth, passive investing is almost always the way to do it. If you want to lose money, the strategy of letting it sit in a sub 1% interest checking or savings account is a sure-fire method as that money won’t keep pace with inflation. Just invest already!
This is our guide to budgeting simply and effectively. We walk you through exactly how to use Mint, what your budget should be, and how to monitor your spending automatically.
A Robot Will Take My Job
This one is not entirely unfounded. It’s been predicted that by 2025, 30% of jobs will be automated. That sounds like a long way off, but it’s only ten years. Another four years later, 2029, it’s predicted that robots will have achieved human levels of intelligence. I for one welcome our robot overlords.
What jobs will be the first to go? Telemarketers retail sales, accountants, typists, and real estate agents are the top five.
Face Your Fear
If you’re thinking about college, either starting or going back, consider these fields: medical, dental, mental health, teaching or the clergy. These all have less than a 1% chance of being overtaken by technology.
You can see why these are fields where human emotion plays a part. We’ve all had doctors with bad bedside manners, but even that beats being told you have cancer by a machine. Teaching, especially young kids, requires keeping order. It’s probably easier for a human to corral a group of unruly five-year-olds during story time than a robot.
The clergy is easy to understand too. Part of their job is compassion (at least it should be) and compassion is a pretty hard thing to program.
If you’re in one of the soon to be gone jobs, start saving so you can retire early and not have to worry about it. Or I suppose we could all smash the robots like the British weavers smashed mechanized looms in 1826, but that didn’t really work out so well for them.
My Credit Score Is Too Low
For some people (PF weirdos), a high credit score is a status symbol, worthy of bragging rights. They loooong to join the mythical 850 Club. Some of them have abandoned family and friends who had lesser credit scores. It’s a real problem people, breaking families apart!
Even if you managed to achieve 850, you wouldn’t stay there for long. Credit scores change constantly. Fair Isaac estimates that just 0.5% of consumers have the perfect score.
Face Your Fear
A good credit score is important. The better the score, the better the rates you will get on loans. The magic number to achieve that though is not 850; it’s anything above 760. When do you need a good credit score? When you are about to make a big purchase or sometimes, rent an apartment.
If you aren’t planning to do any of those things in the near future, don’t worry about the score too much. If you are planning on a large purchase and the score is not where you would like it to be, there are ways to boost it.
I’ll Never Be Able To Retire
Long gone are the days of a nice pension at the end of working life for most of us. And for those in the age bracket below Baby Boomers, we aren’t too sure we’ll have Social Security either. It will be a nice bonus if it’s there, but you can’t count on it.
People are living longer too, but a longer lifespan doesn’t always translate into a good quality of life. So for some people, they may live to 85 but the last years won’t necessarily be years in which you are able bodied or able-minded enough to work. But you still have bills to pay and food to buy. The money can run out years before your life does.
Face Your Fear
Just like anything else, when it comes to having enough money to retire on, if you want something done right, you have to do it yourself. Start saving for retirement as early as you can. Invest in your 401k at work, open an IRA account. The longer that money has to marinate, the more it will grow.
The best thing to secure your retirement may be to find a form of passive income. You can write an e-book, start a blog, freelance your hobby but if you want to make serious passive income for retirement, rental properties are the way to go.
Our Community member Allison Karrels, who has written extensively on the subject, has recently closed on her sixth
Paying For College
If you have a kid or plan to, you probably want them to go to college. And you would probably like to pay or at least help, to pay for it. For most of us though, it’s just not realistic. Since 1985, the cost of a college education has risen 538%. There is $1.2 trillion in outstanding student loan debt currently. You would probably also like your beloved children to move out of your home, maybe get married and have kids of their own someday. Tough to do with that kind of debt.
Face Your Fear
Start a 529 Savings Plan. It’s like a retirement account for college. You contribute with after taxed money and aren’t taxed on it when it’s withdrawn as long as it’s used for educational expenses.
Even this may not get you very far though if rates continue to rise so quickly. I don’t think they will. This is not sustainable and not good for the larger economy to have so many young people crippled by debt, but again, you can’t count on a correction.
I think we will have to change our current perception of what college looks like. Once upon a time, you went to the best school that would have you and your parents paid, or you took out student loans. Doing that now is going to stick your parents or you with a big bill.
Going to a less prestigious, less expensive school for the first few years while you live at home will cut down the costs. You can switch to your dream school later and still get the degree with the fancy name on it.
It might take longer than four years. One of our listeners works a semester, saves up and then goes to school for a semester.
Whatever you do, don’t take money out of your retirement account to pay for your kid’s education. They have a lot longer to work and pay off loans than you have to work and pay for retirement.
Worrying Won’t Change Anything
We all have money worries, but worrying doesn’t change anything. There are countermeasures for all of these fears. Take action so you can put your fears to rest.
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Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
