Money is a big source of stress for a lot of people. It consumes their thoughts at work, keeps them awake at night and can even put a strain on their relationships. Luckily, there are things you can do to ease your concerns. Here are some common financial fears and how to overcome them.
Being stuck in debt forever
Paying off debt isn’t easy, but with some patience and a good strategy it can be done. The cheapest way to get out of debt is to use the avalanche method. Make a list of your bills, arranging them from the highest to lowest interest rates. This is the order in which you will pay off your debt. Focus most of your efforts on paying off the debt with the highest interest rates while making the minimum payments on the other bills. If money is tight, consider cutting all nonessential expenses from your budget or get a part-time job. Put all the money you can towards paying off your debt. Once that bill is out of the way, move on to the bill with the second highest interest rate. Keep going until you’re completely debt-free.
Losing your job
Whether you see it coming or not, losing your job can be devastating because you no longer have a way to pay your bills. The best way to prepare is to build up your emergency fund. Having at least three to six months of living expenses saved can help you stay afloat while you look for a new job. Make it a priority to put a portion of your check into savings every time you get paid. Setup automatic transfers so you don’t have to think about it. Another helpful tip is to make sure your resume is always up to date and attend networking events whenever you can. The people you connect with now, may be able to help you later.
Not being able to work due to illness or injury
According to the Social Security Administration, over 1 in 4 of today’s 20-year old’s will become disabled before they turn 67. Therefore, it’s a good idea to see if your employer’s benefits package includes disability insurance. If it doesn’t, consider getting your own policy. This will at least cover a portion of your income while you’re unable to work.
Running out of money in retirement
Many people fear not having enough money to make it through retirement. To avoid this fate, assess your current financial situation. See how much you have saved for retirement versus how much you’ll actually need. If you’re coming up short, there are a few things you can do. Once you turn age 50, the IRS allows you to make catch-up contributions to your retirement accounts. So, if you participate in a 401k plan, you can contribute an additional $6,500 per year to the account. That gives you a contribution limit of $26,000. Those with an IRA can make catch-up contributions up to $1,000. That brings your annual limit up to $7,000. Additionally, you can work longer, downsize your home, get a roommate, delay taking social security until age 70 or work part-time in retirement.
Having your identity stolen
After working so hard to maintain good credit, the last thing you want is for someone to steal your identity. With your confidential information, criminals can open credit cards or take out loans in your name. They can also use your social security number to file a fraudulent tax return and steal your refund. Below are some steps you can take to protect yourself.
- Install security software on your smartphone and computer.
- Use strong passwords on all your accounts.
- Check your credit reports annually.
- Use secure websites when online shopping.
- Safeguard your Social Security number.
- Limit the amount of information you share online.
- Shred any unwanted documents.
Not saving enough to send your kids to college
College tuition is expensive and unfortunately, you’ll be footing most of the bill yourself. A Sallie Mae survey found that 43% of college costs are covered by family income and savings. Therefore, you need to start saving for your child’s education as early as possible. Many people opt for a 529 plan because your investments grow tax-free and the withdrawals are tax-free when used for qualified education expenses. If you don’t have much saved and time is against you, look for ways to ease the load. Have your child apply to community colleges instead of more expensive universities, file for financial aid and search for scholarships.