5 common financial fears and how to overcome them

Fear can consume you. Fear of the unknown can make you pull the covers over your head, whether you’re worried about a rustling noise outside your bedroom window or not having enough retirement savings.

Financial anxieties — not wanting to check your credit, confront your debt, or even discuss your student loans — can feel particularly embarrassing. But facing those fears can empower you to take action.

1. Burden of student loans

Student loans topped the list of top feared financial issues among US adults, according to a 2019 TD Ameritrade survey of 1,006 consumers. Student loan debt at 36% even surpassed living paycheck (26%) and credit card debt (20%).

How to conquer it: Understanding your loans in detail is the key to knowing if you have the best repayment plan. Know the term, balance, and interest rate of each loan, and whether it is a federal or personal loan.

For unaffordable federal loans, look at income-based repayment plans. With personal loans, you may be able to refinance at a lower monthly rate (but it may cost more overall).

2. Recession Fear

Indicators such as the slowdown in global economic growth are pointing to an imminent recession, fueling fears of job losses and wealth erosion.

How to conquer it: Increase your savings and diversify your skills. Build at least $500 in savings to cover an emergency, advises Boston-based financial trainer Kimberly Zimmerman Rand. After that, work towards saving a few months on expenses in the event of a job loss. Make saving easier with direct deposits from your paycheck or automatic transfers from check to savings account.

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“On the professional side, as we are not in a recession right now, see how you can improve your professional skills, network and resume. So by the time disaster strikes, you’ve already laid the groundwork for transitioning to a new position,” says Zimmerman Rand.

3. Worried about credit card debt

Pay off credit card debt can feel like a never-ending task, but there are ways to get it done.

“I’ve had clients come to us for debt counseling who feared they were in the worst situation we’ve ever seen financially, and that’s never the case,” says Maura Attardi, director of financial wellbeing at Money Management International , a nonprofit credit counseling agency.

That fear can be a self-fulfilling prophecy: you’re afraid to check your overall debt because it could be so high, but while you’re not looking, interest keeps accumulating.

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How to conquer it: List each account, interest rate, and balance. Then choose a payout strategy. A popular option is the debt snowball, in which you pay off your smallest debt first, and then roll those payments over to your larger debt.

4. Credit Crunch

Have you ever been afraid to take a credit check or apply for a loan because you thought your credit profile wasn’t up to par? You’re not alone: ​​46% of 1,503 US adults surveyed by financial services company Finicity found themselves in this exact situation.

How to conquer it: Check your own credit score on your favorite personal finance website or bank website and access your credit reports for free with AnnualCreditReport.com. Looking at your score and reports can help you better understand your opportunities to improve your credit score.

“Go through your credit report with a fine-toothed comb and dispute any false information,” says Zimmerman Rand.

“To increase your score, start with positive financial behaviors, such as B. making payments on time,” she says. If you use credit cards, it also helps to keep the percentage of your credit limit that you use on all cards below 30%.

5. Breaking the retirement blues

“There’s a kind of hopelessness among my clients when it comes to the thought of retirement,” says Zimmerman Rand. But the most important thing is to start early and not wait until you can take a lot.

How to conquer it: Choose a retirement plan. If you have a company pension plan that offers an employer match, contribute enough to receive it. An individual retirement account is a good alternative if you don’t have a workplace plan. Prepare for success by automating posts and increasing your savings with every raise.

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Avoid withdrawing money from your retirement account to get the maximum benefit from compound interest, where you earn interest on your interest.

“The magic of compound interest is really magic — and it works,” says Zimmerman Rand. “After years of saving, your investment starts doubling at a much faster rate. Now is the time for millennials to start investing.”

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