Episode Details

Episode 70 – Financial Anxiety - is it holding you back?

I've spoken in past episodes about the potential for overwhelm to lead to procrastination. Procrastination is evil because it results in no progress. You're stuck in the cement.

But there's another element to the no-progress problem, and that is financial anxiety or financial stress.

If you've never worried about money in your life, I'd say you are a very rare human being. For most of us, most of the time, money worries are a transient thing that we get through, and then move on to planning our next holiday or getting the kids to basketball practice.

But having worked with many, many people over the years, I've come to recognise that often, the reason we don't make progress on the big, really important life and financial goals, is because of financial anxiety. So in today's episode, we're going to explore what are the most common causes of this financial stress, and some strategies you might be able to use to reduce or perhaps even remove this worry, letting you make clear and confident decisions to move forward on your financial autonomy path.

There are 3 main types of financial anxiety that I come across on a regular basis:

1. Inherited
2. Debt
3. Longevity

Inherited financial anxiety is the most common and debilitating. It is experienced by those who have grown up in households where their parents regularly argued and fought about money. Money therefore becomes this stressful topic, and so the thought of sitting down and doing any sort of planning is about as attractive as volunteering to have a root canal done by a first year trainee dentist.

Those suffering inherited financial anxiety tend to follow one of two patterns. Either they put their head in the sand. They don't open their superannuation statements, don't budget, and certainly don't discuss financial matters with their loved ones.

Alternatively they go to the other extreme, and micro analyse everything, to the point of complete paralysis. They're convinced that whatever decision they make, it will be the wrong one.

The next type of financial anxiety that I see is that caused by debt. In 99 out of 100 cases of debt induced financial anxiety, credit cards will be a central element. And there is never just one. Often there'll be a car loan and perhaps a mortgage, but credits cards certainly seem to be the gateway drug to debt related financial stress.

The final form of financial anxiety that I see I've somewhat imperfectly termed longevity. This manifests itself in being stressed about the normal ups and downs of investment markets – actually not so much the ups, but definitely the downs.

For people suffering this form of financial stress, they worry so much about market volatility, that they either buy and sell at the completely wrong time – selling when markets are down and buying when they are up – or they hold all their savings in cash or similar, and in so doing actually damage their long term financial well-being. (See Episode 48 – The 10 worst things you can do to prepare for retiring early).

So what can you do to prevent Financial Anxiety from holding you back?

The first thing to do is have a separate bank account for your bills and regular expenses, and have an automatic transfer from your everyday account every time you get paid, to top it up.

Go through your bank statements for the last 3 months and tally up all of your regular expenses – electricity, phone, insurance, etc. Whatever number you get, multiply it by 4 to get your approximate ann