How To Let Go of Your Money Fears

One way to reduce anxiety around finances is to face your fears, I mean really look them in the eye. What is it that keeps you up at night? Is that scenario likely to happen? Is there a way to protect yourself financially from such a scenario? Most importantly, if there is a way to mitigate those financial losses, is it worth the cost?

For many people, the prospect of losing a loved one or being unable to work for health reasons causes angst. That’s why life insurance and disability insurance have become so popular. Life insurance is a terrific tool and can be very affordable in certain situations. But that doesn’t mean everyone needs it. Disability insurance, on the other hand, is more expensive by comparison. Can you guess why it costs more than life insurance? Because the risk of disability is greater than the risk of death. The more likely the scenario (death, disability, etc.) the more you will pay to cover yourself against those losses.

If you had plenty of money, you could cover practically every single possible financial pitfall that exists. But most of us can’t afford that, so we would be wiser to cover those liabilities that are most likely to happen. In addition to death and disability, the scenarios below may be worth covering – especially if they are robbing you of financial peace and making your worry.

Job loss – Emergency Fund: Have you noticed that there’s a range of suggested emergency fund ratios? We recommend a savings account that holds between 3 and 6 months of your household income. The actual size should reflect the likelihood of a job loss. If you have an extremely steady job, you should do fine with 3 months. But a more tenuous position would warrant an emergency fund that will cover 6 months of income. This is application of the “cover your highest risks” rule as you bank an appropriate amount to cover the most likely scenario.

Medical Diagnosis – Health Insurance: [Author’s update: When this post was written, health insurance coverage was obtainable for the vast majority of Americans. As of mid 2017, you can still obtain health insurance even with a pre-existing condition, but we don’t know how long this opportunity will exist. If there are any doubts about your future coverage, now is the time to act.] We all know people who are having a hard time paying medical bills due to a catastrophic event or diagnosis. It’s not easy to mitigate the possibility of this type of loss without a pretty expensive health insurance policy. But it’s important to shop around and invest the time necessary to learn about your options. Unless you are covered by Medicare or Medicaid, getting health insurance through an employer is still likely to be the best deal. However, it could still be worth it to take out an individual/family policy (through the HealthCare Exchange) on your own to protect you in case you lost that job. Pay close attention to certain statistics when combing through possible policies, here is a great free resource from Healthcare.gov  to help you make a selection.

In addition, if you are eligible for a Health Savings Account, consider opening one to help pay for chronic illness or even alternative treatments. Here is a list of qualified medical expenses from a HSA. Our family opened a HSA and it has really dampened the emotional side of paying bills for our chronically ill family members. Plus, if you don’t “use” those funds for medical expenses this year, you can roll them into the future and even invest them if you would like. Unlike the Flexible Spending Accounts of yesteryear, there is no “use it or lose it” policy.

Divorce – Human Capital and Retirement Fund: Financially, divorce causes two identifiable hard ships; the present, and the future. (I know that’s everything, but it helps to break it down.) To mitigate your losses in the present, have a good idea of what you’re worth in the marketplace. This doesn’t mean you have to maintain a full-time career, but even stay-at-home moms can have side jobs once their kids are in school. This helps you stay current, and increase your options should you find yourself in a position to need to work again (remember, it’s not just divorce that might require you to work, a job loss or disability on your husband’s part would have the same result). Remember, you are worth a lot, because: you are a resourceful woman who is a problem solver, you are highly motivated to work if you need to protect her family, and you know how to make things run smoothly whether it is the 24/7 operations of a home, special events, or a workplace that is only “open” five days a week. Stay-at-home moms, don’t forget what they say at Salary.com where they assign a monetary value ($118,000+ a year in 2014) to all the services and overtime in your day: Here’s the infographic.

As for your future finances, it is important to maintain your own retirement account and do everything you can to fund it on a regular basis. Should there be a divorce in your future, you may also be entitled to a portion of your ex’es retirement. But it’s a great idea to fund your own, even if you’re not working and you fund it out of your spouse’s income. Here is a great article about retirement funds for Stay-At-Home Moms.

Bag Lady Syndrome – Count All Your Resources: All of the above will go toward helping you avoid the status of “bag lady.” It’s important to note that men to do not have a corresponding term for this fear, there is no such thing as a “bag man.” When I have asked men about the idea, they fear for the women in their lives, the male psyche doesn’t see the possibility of ending up homeless as a likely scenario. Women tend to equate money with security. And what we are really fearing in the bag lady scenario is being without anything: no money, no love, no hope, no resources.

Let’s cut to the chase, if you really had no money when you get older, there are many ways to protect yourself from ending up on the streets. You have other resources. First among them is hopefully love, and we’re not just talking about the romantic subset of love. Even if you are without heirs or loving relatives, opportunities abound now for your to invest yourself into the lives of others. Love is the most effective way to multiply your resources. But you also have your abilities and your motivation to stay off the streets. Both can be monetized so you can earn an income. The key is acting now to make sure you are rich in resources before the bag lady scenario is a possibility. By acting now, you will also get rid of the fears that lurk in the back of your mind.

Peace is possible. Your income doesn’t need to radically change for you to usher in more peace today. Maybe all you need are some different strategies.

I have ideas to help you become more financially well. Let’s talk.