By Christina Lavingia, Editor
It's not surprising financial fears keep most of us up at night, rivaling mortal fears like dying or being alone forever. Money determines our comfort in life, and the U.S. financial system is such that one financial misstep could snowball, robbing people of the basic ability to provide for themselves.
While it's wise to be mindful of the possibility that your financial situation could change, becoming debilitated by fear is damaging to your psyche and emotional state.
GOBankingRates recently conducted a survey to find out people's biggest money fears -- here are seven financial fears highlighted from our poll and how to overcome them with some planning and financial savvy.
1. Always Living Paycheck-to-Paycheck
In July, GOBankingRates and the Penny Hoarder found that 73 percent of Americans have less than $1,000 in emergency funds. If that's the case, they might have even less on hand in their checking and savings accounts to cover regular costs. If you're not in the habit of saving and don't know how to start, try by saving a certain dollar amount up front each month. By putting $400 in your savings account each month on the first, you'll ensure that you're saving money systematically and not coming up short.
2. Falling Into Serious Debt
Similar to the notion of saving to escape a paycheck-to-paycheck existence, growing a large savings will mitigate ones fear of debt, since he'll have enough to cover unexpected expenses and will be able to put down more money up front on loans when borrowing.
3. Becoming Homeless
Growing a savings, diversifying your investments and maintaining a degree of liquidity to your funds can all ensure this doesn't happen to you. If you're in a position where you realize you can no longer afford your mortgage payments, there are many resources and mortgage products that can be of service to you before you'd have to sell your home. Furthermore, selling your home doesn't have to result in becoming homeless. Downsizing to a smaller, more affordable housing option will keep a roof over your head and help free up funds to cover expenses that have now become hard to manage.
4. Losing Your Job
Having more than a month's worth of expenses in your account will help you start to get past the paycheck-to-paycheck lifestyle, but an emergency fund is a resource worth building to get over your fear of unemployment. An emergency fund is only supposed to be touched in case of medical emergency or job loss -- not to cover your dinner out or shopping spree.
A good rule of thumb is to save up between six and eight months of earnings for a comfortable emergency fund. It will take time to both grow your regular checking account and an emergency savings, but this fund will ensure you can float in the interim should job loss occur.
5. Getting Your Identity Stolen
Some preemptive measures can be taken, however, to protect your identity. For one, don't carry your social security card in your wallet. Should you lose it or have your purse or wallet stolen, a social security number is the Holy Grail for an identity thief. If you're worried about debit card security, opt for a credit card or prepaid card, which are more secure payment options.
A credit freeze is another affordable security measure. For just $10 to each of the three credit bureaus, you can freeze your credit, which will prevent your credit information from being released without your expressed consent. It costs just $2 to $10 to temporarily unfreeze your credit with each bureau should you need to do a credit check for a new apartment or loan.
As commonly advised, use various passwords on the web for your banking and online shopping use, and be wary of suspicious emails or calls requesting your personal information. Being proactive can help you overcome this financial fear.
6. Having to Work Forever
Changing your mindset to prioritize your future over your immediate wants can empower you to save for retirement. Yes, it'd be nice to have a few extra hundred dollars a month, but due to compound interest and growth rate of retirement funds, that money will accumulate into enough wealth to sustain you for decades if you save early on. That $100 each paycheck in your 401(k) is just $100 today, but it will increase in value over time and provide more gratification in the future if saved.
Take advantage of employer benefits and always max out any matching your employer is offering. Think of that as free cash on the table that will help abate this fear.
7. Losing Your Life Savings in the Stock Market
Yes, higher risk comes with higher reward, but this fear is in your hands. Pick an investment option that you're comfortable with and only gamble what you are OK potentially losing.
(Photo credit: Cliff)
