When Friday the 13th rolls around, as it did recently, I get to thinking about some of our everyday fears, particularly our financial fears. In my role as a financial advisor, I take the time to understand not only my clients’ hopes, dreams and future plans, but also their fears.
A recent study showed that Americans’ top two concerns regarding their finances are not having enough money to cover a major medical expense or accident, and not having enough money for retirement. Two additional fears I see among clients are taking too little—or too much—risk, and not saving enough for their child’s education. Here’s a look at each one, and some potential solutions.
Handling the unexpected. Unfortunately, the nature of emergencies is that they happen when we least expect them. Whether it’s a job loss, a health crisis or an accident, it’s important to plan for the unforeseen. You can do this by adding a line item to your budget specifically for contingencies. Once that money is put into a savings or investment account, consider it “spent” and not available for any use other than true emergencies.
Outliving your money. I increasingly hear more women share that they fear running out of money due to longer life expectancies and rising costs of health care. These women want to make memories with family and friends but they’re hesitant to spend now because they don’t want to outlive their funds. To avoid this outcome, consider working longer if you are able to do so, even if it is just part time. Most importantly, develop a saving and investment plan that can help meet your financial goals and enables you to spend wisely on what’s important to you now and into your retirement years. No matter how big your 401(k) or retirement nest egg looks to be, continuing to budget and adhere to sound financial principles will be just as important after retirement as it is when you’re preparing for it.
Experiencing market volatility. Risk is important to consider when investing, and many related factors play a role. For example, how much should you hold in cash and backup reserves, and how much should you put into the market? Should you invest in promising-looking startups or stable companies? This is where a good financial advisor will be invaluable to you in helping determine your risk tolerance and making sure your financial plan fits with your long-term life objectives.
Saving for a child’s education. Just like with retirement, the earlier you start to save for your child’s college education, the better off you will be. Take advantage of compound interest over time, along with a 529 college saving plan. With 529 plans, contributions grow tax free—and tax-free withdrawals can be made for qualified educational expenses.
Fear can stop us dead in our tracks if we let it. When it comes to financial well-being, doing nothing or ignoring the issue doesn’t help. Start now, take one small step after another, and utilize the many resources that are available so you can live life to the fullest now and into your golden years.
Lisa Taranto Schiffer
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