Easing Financial Fright with Sweet Advice

This article was originally published in Wedgewood Life magazine and is reprinted with their permission. 

As our thoughts turn to pumpkins, candy, and costumes, this month we explore people’s most common financial fears and advice to ensure everyone has a financially delightful Halloween. Researchers at Chapman University annually ask over 1,100 adults across the United States about their level of fear about ninety-four different phenomena including crime, the government, natural disasters, and more. The 2018 results illustrate adult Americans are most concerned about government corruption, environmental concerns, and their personal finances. In this month’s article, we highlight American’s most prevalent financial concerns and advice to proactively combat these fears from haunting your long-term financial plans.

• (57%) Not saving enough for retirement – Out of the American group surveyed, 57% of people indicated they were “afraid” or “very afraid” that they have not saved enough for retirement. As we have noted before, studies have shown that when individuals take the time to write out their goals, they are 50% more likely to achieve them. However, only 3% of adults actually put pen to paper and write down their goals.

To ease concerns about not having saved enough for retirement, the answer is a comprehensive, long-term financial plan. This plan would analyze current financial position, future savings/spending aspirations, future income streams such as social security, and other unique financial variables. In addition, one should periodically assess their progress toward achieving their long-term goals and/or gauge the reasonableness of those stated goals. A competent advisor can reassure clients when they are on track or provide real-time observations when the plan is off-track.

• (53%) High Medical Bills – With roughly 60% of bankruptcies in the U.S. attributed to medical related bills, combined with nearly two-thirds of Americans not having enough cash readily available to pay for an unexpected bill (such as a $500 medical bill), it is not surprising that high medical bills are a fear.

The planning response is to build up a cash reserve of three to six months of spending, and contribute to a health savings (HSA) or flex spending account (FSA) (to the extent possible).

• (49%) Economic/financial collapse – 49% of Americans are fearful of a financial collapse or economic turmoil ala 2008 and the Great Recession. A mapped out, detailed financial plan and adequate cash reserves (both noted above), paired with a clear understanding of the downside potential of your investment portfolio during times of economic stress, are key.

A good understanding of the volatility profile of your investment portfolio should put an investor in a better position to think rationally during times of financial stress. Rational thought and an investment allocation of fixed income and equity investments that an investor is comfortable with during good and bad capital market periods, respectively, is more likely to allow an investor to capitalize on long-term investment opportunities that historically present themselves during times of high uncertainty and market turmoil.