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By Bill Jacky
Yes, money matters can be intimidating – even frightening. It’s easy to run away from financial concerns that keep haunting you, and tempting to curl up in a ball and hope they’ll go away. You’re not alone: According to a Mind over Money survey, 77% of Americans are anxious about their financial situation. And more than half of Americans have difficulty controlling their money-related worries.
But don’t trick yourself into treating these fears like they’re imaginary. You only heighten your fright by putting off those things you know you should – and shouldn’t – be doing with your money. Taking action can help silence nagging fears and increase peace of mind. To help get you started, let’s unmask four of Americans’ top financial fears, along with manageable steps you can take to put these fears to rest.
Let’s jump right in with Americans’ biggest fear: Having an unplanned emergency. According to a Northwestern Mutual study, 38% of Americans share this fear. How to face this fear? Build an emergency fund. Even a small emergency fund can help offset the unexpected costs that invariably accompany unforeseen circumstances, and maintain financial stability when you need it most.
There is debate about how much you should put away in an emergency fund. Some experts suggest a fund that covers three months of living expenses, but the majority recommend an emergency fund that covers six months or more of living expenses. Why six months? That’s about how long it takes most people who are laid off to find their next job, and will cover the out-of-pocket expenses for most people facing a major illness (provided they have medical insurance).
When it comes to preparing for uncertainty, one thing is certain: People are using high-yield savings accounts—often designated as emergency savings accounts or supplemental savings accounts—as their method for starting and growing their emergency funds. High-yield savings accounts make great emergency funds because they:
Best of all, once you’ve established an emergency fund, the thought of situations like job loss, medical bills or major home or car repairs are less scary.
32% of Americans fear not having sufficient funds to retire. How to face this fear? Do a gut check on your progress by your age, then take steps to save as needed. Here’s some basic guidelines, keeping in mind that everyone’s financial needs are unique.
Preparing for retirement–at any age–requires a clear financial strategy with a financial advisor. If you want to get a more exact picture of where you stand financially, and what you need to do to pursue a more secure retirement, meet with a personal financial planner. Together you can to review your current assets and savings situation, and receive an expert’s evaluation and recommendations. A 2022 Northwestern Mutual study suggests people are less fearful when they work with an expert, finding people who work with an advisor “feel they are on more solid ground.”
Just 16% of Americans fear identity theft…but with one in every 20 Americans being affected by this crime each year, maybe more of us should be worried. How to face this fear? Keep vigilant about protecting your identity.
According to a 2022 Northwestern Mutual study, 32% of Americans’ monthly income on average goes toward paying down debt other than mortgages. Additionally, debt has caused people to delay making a significant purchase (31%), saving for retirement, even getting married or having children (both 8%). How to face this fear? Focus first on credit cards, the top of source of debt (excluding mortgages).
Personal finance expert Suze Orman suggests that even if you have other forms of debt—student loans, mortgages, etc.— focus on credit card debt first. While all debt may feel negative, remember some things are considered “good debt” by lenders, like student loans and mortgages. These types of debt are viewed as an investment in your future.
There are multiple methods for paying off credit card balances. To start tackling your debt, first add the minimum payments of all your credit cards together. Then, find 20% of that total amount, and pay that extra 20% to your highest-interest credit card. For example, if you owe $200 in minimum payments total, you’d make the minimum payment to your highest-interest credit card, and pay an extra $40 on top of that.
Once you’ve paid off your credit card with the highest interest rate, you can put the extra 20% to your next highest-interest card and so on until you’ve successfully paid off all balances to zero.
Getting credit card debt under control is a process, and unfortunately can't be done overnight. Trust in the process and know that these things can happen to everyone.
What financial fear are you ready to face? Alliant is here to help you work through what’s keeping you up at night. Learn more about our high-yield savings account, retirement services and more at alliantcreditunion.com.
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