A wonderful, once-in-a-lifetime family vacation had me out of the office for the first two weeks of January. One completely unintended benefit of not going to work was being unable to watch the stock market.
Had I been here, watching the big slide in stocks already this year, I would have been anxious.
It’s not exactly a stunning admission to say I sometimes worry about finances. In survey after survey Americans admit to having a lot of money worries. One out just this week concluded that more than four in 10 Americans have lately been concerned about rising interest rates.
There doesn’t seem to have been one published yet on how much the recent stock market decline has affected the mental health of Americans. Maybe the answer is so obvious no one thought to actually run a survey.
Managing money anxiety seems to be the biggest challenge there is in personal finance, far bigger than figuring out the nitty-gritty of mortgages or retirement savings plans. When a colleague asked for money tips for 2016, it occurred to me that I’ve worked out a few things to do with money worries that seem to have really helped.
The first thing to do is make a shortlist of things that are worrisome and then write down next to each whether there’s any chance it’s something you can control. If there is nothing you can do to make something happen or keep it from happening, then it has to be forgotten about.
The top of my list, and the only thing that can sometimes tighten the chest still, is watching the value of retirement savings drop. That’s even though that money won’t be needed for a long time. But because that’s the case, by far most of those savings remain invested in stock funds rather than in more stable investments.
With the rough start so far in 2016, this could very well be a down year for stocks. The question is whether it makes any sense to worry about that.
Global stock markets? They seem comfortably beyond my control.
Moving on emotionally is easier to talk about than do, which is why the handwritten list of money worries is important. It’s sort of an informal supplement to the financial plan, to be taken out once in a while just to remind me of what I know I can’t control.
That advice to put things you can’t control out of your mind shouldn’t be taken as an excuse to ignore some pretty well-understood risks. If other people are depending on you being around and working, like your kids, then life insurance makes as much sense as it ever did. The same goes for disability insurance.
Having enough in the bank to cover at least part of a big unexpected expense, like maybe for a car repair, also is a must.
For the other money worries you actually can do something about, the thing to do is pick the top one off the list and then do something about it right now. Even a little progress should make it easier to sleep at night.
Many Americans are concerned about not having enough savings, for example, and so the thing to do is find a way to take up the savings rate right now.
If the family finances feel really stretched already, just increase the savings rate a little. Maybe that means taking the savings rate up only one percentage point in a 401(k) kind of plan at work.
The other thing that helps people save more, of course, is to spend less. But from my experience, “spend less this year” is a very elusive goal.
Costs for big expenses like health care and housing never seem to stop rising. Along with everything else you need to buy, the goal of spending less stays out of reach.
So rather than obsess over how much you spend, the thing to do is to look closely at spending to make sure you are buying what you really care about.
Once again it might be helpful to have a sheet of paper and a pen, along with things like credit card statements, itemized receipts from retailers such as Target and the checkbook register.
So in carefully combing through all the spending, what stands out? In addition to the services needed to run the house, like the bills for electric service and garbage collection, there’s bound to be visits to restaurants and coffee shops. Target, Best Buy and Amazon.com likely show up a lot, too. Even purchases from Apple can mount up, even at only $1.29 per song.
Look through the spending carefully. There will be items there that did not add much to your life, or maybe not nearly enough after taking into account how much work it took to earn the money.
Forgive me for pointing out the obvious, but you need to stop spending on those things.
In addition to leaving a little bit more money at the end of the month for savings, cutting back on things that just don’t seem to add that much also should help you feel better about what you did buy. Your spending becomes more intentional.
Looking at spending in this way has another important benefit, too, one that only occurred to me well after I’d first started doing this: It helped me realize that my family has enough money. It then becomes easier to save money, and it becomes easier to give money to charities.
And, of course, it becomes a little easier to relax.