I grew up in a solidly middle-class household. My parents owned our home; my dad worked full-time while my mom took on a part-time job.
Frugality was a way of life for us, as it often is for many immigrant families. We had to be careful with our finances.
My dad arrived on an education visa, armed with a one-way ticket. He frequently sent money back home, emphasizing the importance of financial responsibility.
Money was a limited resource, and we learned early on to manage it wisely.
Financial insecurity is the anxiety and stress you feel about your financial situation. This emotional response can linger, regardless of your income or accumulated wealth.
🎧 Case in point: Here’s a short clip of a chat between Scott Galloway (~$100mm net worth) and Sam Parr (~$20mm net worth) discussing their financial insecurities. It may seem absurd to worry about money when you have millions, but it’s surprisingly common! Khe Hy writes about it.
I have experienced this feeling myself. Even as my net worth has grown, there are still moments of anxiety. However, there are steps you can take to mitigate these feelings.
Here are a few strategies that have worked well for me:
Table of Contents
🗣️ Talk to someone
Whether it’s a partner, close friend, or therapist, discussing your feelings about money with someone you trust can be incredibly beneficial. We all have emotional responses to finances, and sharing these feelings often helps alleviate anxiety.
The person you confide in doesn’t need to provide solutions; sometimes, just having someone listen can make a significant difference. It’s amusing how money remains a taboo topic in a capitalist society. Finding a trusted confidant can greatly enhance your mental well-being.
💰 Keep a larger cash cushion
Since financial security is more about emotions than logic, consider keeping a larger cash cushion in your checking and savings accounts. This could be your emergency fund or simply extra cash for peace of mind.
How much should you keep? That varies based on your comfort level. Personally, I maintain a few months’ worth of expenses in our accounts. While it may not yield the best interest, the peace of mind it provides is invaluable.
📔 Check in on finances regularly
I update our net worth monthly, which is a crucial part of our financial routine. Each month, I log into our accounts and record the numbers. This practice has encouraged me to simplify our finances, allowing me to log into fewer accounts.
By tracking our net worth, I gain a clear picture of our financial status. This visibility helps me manage emotional responses to market fluctuations, which are inevitable.
🥅 Establish a financial plan with goals
A financial plan is essential, regardless of your feelings about money. Setting specific goals provides a sense of direction and progress.
Uncertainty breeds worry. A well-defined plan can help alleviate that uncertainty, allowing you to focus on achieving your goals. It’s important to recognize the “boring middle,” where you’re simply following your plan without making new decisions. Don’t let insecurity creep in during this phase; stay committed to your path.
📱 Calculate your debt-to-income ratio
If you’re carrying a significant amount of debt, it can be stressful. Sometimes, it’s the sheer number that causes anxiety, while other times it’s the existence of debt itself.
Calculating your debt-to-income ratio can provide context. Not all debts are created equal; for example, mortgage debt is different from unsecured credit card debt. Many young people may have a high debt-to-income ratio due to mortgages, which is perfectly normal.
📺 Stop watching the news
During the Covid pandemic, the news significantly heightened my anxiety, especially as the markets plummeted. With kids at home and constant updates on hospitalizations, it became overwhelming.
Eventually, I decided to stop watching the news. Staying informed wasn’t helping my daily life; it was making it worse. Quitting the news was one of the best decisions I made for my mental health during that time.
If the news causes you anxiety, consider stepping back. Identify anything that exacerbates your feelings of insecurity and eliminate it from your routine.
🧠 Remember, it’s a work in progress
Even now, despite being in a stronger financial position, I still struggle with spending money. The habits formed in childhood can be hard to shake, but it’s essential to let go of those that no longer serve you.
While finding a good deal can be satisfying, it often costs valuable time. I won’t drive across town for a few cents off gas, but I still search for coupons before making purchases. 🤣
It’s a continuous journey, and the work is never truly done. There will always be moments when insecurity resurfaces, but using these strategies can help you manage those feelings. What strategies do you use to combat financial anxiety?
