16-30 Segment 1: Financial Anxiety: What it is and how to alleviate it

19208847 - businessman well-dressed with empty wallet

 

A new survey shows that many Americans are suffering from “financial anxiety” and it’s affecting their health and happiness. What’s causing this anxiety and how can people alleviate it? Our guests address the issue, discuss the survey and offer ways to bring more financial security – and happiness – into our lives.

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Guests:

  • Rebekah Barsch, vice-president of financial planning for Northwestern Mutual
  • Michael Kay, financial life planner and author of the book, The Feel Rich Project: Reinventing your understanding of true wealth to find true happiness.

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Financial Anxiety

Gary Price: The American Heritage College Dictionary defines “anxiety” as “a state of uneasiness and apprehension.” That’s an apt description of what many Americans are feeling over their finances these days. Despite a better employment picture than just five years ago, people still aren’t feeling good about how much they owe versus how much they make. But how bad is it? Rebekah Barsch is vice-president of financial planning for Northwestern Mutual. They conducted research about financial anxiety to determine how people felt about their situations…

Rebekah Barsch: We sometimes think of it as what keeps people up at night worried about whether or not they’ll be able to help their kids go to college or whether or not we’ll be able to fund the kind of retirement we want. And financial anxiety, from the survey and the research that we just completed, is, unfortunately, on the rise, and in fact over a quarter of Americans say that they’re worrying about their finances every single day. And that would put that in the same camp as other things we worry about other days: an example, our kids.

Price: Financial anxiety not only intrudes on Americans’ lives and keeps them up at night, Barsch says that it also affects our health and well-being…

Barsch: Sixty-seven percent of the people that we surveyed in this research said that their financial anxiety was negatively impacting their health, and the top impact was to peoples’ happiness. So, if we strip away everything else in life and just say, in general, we want to be happy, we want our families to be happy, and yet 70% of the respondents said that financial anxiety interrupts their happiness, really begs the question, what can we do to turn this around? And what can we do to help Americans reduce that financial anxiety so they can get on with enjoying their life?

Price: Barsch says that to begin reducing that anxiety, we have to understand what’s causing it in the first place…

Barsch: It’s kind of the perfect storm of circumstance changing around American families that are causing people to really be more worried than, perhaps, the generation before us was, and maybe the biggest one is that a lot of our future financial security, particularly in those retirement years, used to be covered pretty well by some small savings, perhaps on our own, but then bigger pieces like social security and pensions that our companies provided. And now what we see is that those pensions largely have gone by the wayside, and each of us is responsible for saving for our own retirement. Social security’s becoming a smaller part of what actually is that safety net that helps us to afford our retirement, and that is a big financial goal that means pushing off immediate gratification in those early years and doing less spending on the frontend and more planning and saving along the way.

Price: In addition to the retirement problem is the high cost of a college education for those families with kids. These days even attending a state school can run into six figures over four years. So how do you relieve the anxiety and get a grip on your finances? Michael Kay is a financial life planner and author of the book, The Feel Rich Project: Reinventing your understanding of true wealth to find true happiness. He says that you start by taking a realistic look at your situation, and by overcoming the “F-word”…the one you can say on the radio…

Michael Kay: The “F-word” is “fear”, and we all have, to a greater or lesser degree, this little piece in our brain that I call the fear department, and sometimes the fear department takes over the rest of the brain and it stops us from investigating, it stops us from looking. So we’re fearful of not keeping up with our neighbors, we’re fearful of people judging us, we’re fearful of feeling that we’re less than somebody else, and so much of this fear of what happens if I don’t go on this big vacation or buy the right car or live in the right neighborhood as opposed to, “Hey, if I make the choice to spend less, it gives me the opportunity and the piece of mind to move in a direction that’s more satisfying.”

Price: Kay says that fielding calls from bill collectors or receiving letters threatening foreclosure should keep people up at night – not the fear of keeping up with the Joneses. It’s values that count when you’re trying to decide if you really need an expensive car or a trip to the islands…

Kay: Our values of what we really want in our life are the centerpiece of our life, and money is the driver, so for example, many people will say, “One of the things I value most is that I don’t run out of money; I don’t become a burden to my children.” Okay, if that’s what you value highest, what decisions can you make that bring you closer to that value versus further away? Some people will say, you know, “I really want to help my children,” or, ”help my grandchildren.” Well, we have choices. Unless we have unlimited wealth, we have to make choices, and some of the choices make us feel uncomfortable, but if we keep reminding ourselves, “Hey, this is the reason why. I’d rather have those resources so that I can help pay for my grandchild’s education or provide funding for a cause or charity that I care about,” these are the choices we make that are closest to our values.

Price: It’s not just the boomers who are anxious over money. Barsch says that millennials are also fearful of not having enough savings to live a comfortable life…

Barsch: Millennials are surprisingly worried about having financial anxiety also, and as we talk with millennials and think about what might be behind that, a lot of the contribution to their anxiety is the fact that they’ve really watched their parents go through some tough economic times. So they’re more aware than, maybe, other younger generations have been about how fragile a financial foundation can be, and we hope that that will eventually turn into millennials really stepping up to the plate, and stepping up early, and beginning to plan for their financial futures.

Price: No matter what age group you’re in, Barsch says that the key to a secure financial future is having a plan…

Barsch: We’ve all got a pretty big planning challenge ahead of us, but it is doable if we can spend some time and really go over our situation – think about what’s important to us. And one of the things that we notice as we’re talking with clients is that it’s fun to sit down and plan for a vacation, and I know when my husband and I take trips with our kids we have a lot of fun figuring out what we’re going to do and how much it’s going to cost and laying out options etc., but some people will spend more time planning for a vacation than they will for a thirty year retirement. And really that retirement deserves the time to plan and make sure that we’re prepared and then figuring out how that works in the context of the things that we want to spend money on today and tomorrow.

Price: Kay says that it’s not easy to forego all of those things that we enjoy doing or accumulating the stuff we really love, but it’s doable in small steps…

Kay: One needs to build better messages, better habits, better beliefs and better behaviors that support peoples’ abilities to get through these small shifts. The idea is not to make it so difficult. Think of the idea that someone who goes on a weight loss regiment and they’re eating nothing but celery sticks for six days. By the seventh day they’re doing a triple gainer into a fudge brownie because they feel so denied and so depleted from the energy of trying to live on celery. It’s the same idea; we need to make small shifts.

Price: He says that everyone will make mistakes along the way, but buying those expensive shoes or spa treatment aren’t fatal errors. Just start over without blame or shame, and get back on track to pay off debt or save for a child’s education. To start with, you might want to seek the services of a certified financial life planner, who looks not only at the numbers but also at the qualitative side of a client’s plan…

Kay: I would tell and encourage anyone who isn’t sure, make sure that if they’re going to deal with a professional out there, that it’s someone who has a fiduciary responsibility to act in your best interest, someone who is family, someone who is not going to sell you products, and understand what their qualifications are. There’s some planners who will work on an hourly basis, and that’s perfectly fine if you just need someone to help get you started, that your resources don’t support an ongoing relationship. Ask questions. There’s lots of great resources out there, but it starts with your mindset and getting professional help doesn’t mean you’re a failure. It’s like going to the doctor; you don’t want to use Web m.d. to diagnose yourself, that’s why you go to a professional.

Price: Barsch agrees that professional services – even just to get the ball rolling – are helpful when you want to secure your financial future…

Barsch: Sometimes the mark of an advisor you can trust is a company that you can trust who backs them. So, look into the history of the firm that the financial advisor represents and see what they’re track record is for delivering value over time and what their reputation is in terms of how they treat clients; that would be number one. The second thing is that a good financial advisor will not show up and meet a brand new client and try to sell them something. So, you want a financial advisor who really wants to invest the time and get to know you and understand what your goals and your hopes and your dreams are as well as what your current financial situation is. So, if you meet somebody who is sitting down with you in the first meeting and making recommendations on what products to buy, that’s probably a red flag. And then the third thing, in terms of finding someone you can really trust, is to talk with people that you know and just find out who they have had experience with and who they might recommend.

Price: Barsch adds that a good financial planner will also encourage you to have a will in place, and protection for your income and your family should something happen to the breadwinners. Both of our guests say that the biggest step is to get started, even if you are in your 50s and retirement is looming large. Rebekah Barsch says you can learn more about the financial anxiety research study and about financial planning at NorthwesternMututal.com. For a step-by-step guide to naming your financial and life goals and working toward them, pick up Michael Kay’s book, The Feel Rich Project at stores and visit his site at MichaelFKay.com To learn more about all of our guests, visit our site at Viewpoints online.net. You can find archives of past programs there and on iTunes and Stitcher. I’m Gary Price.

 

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