Strategies if you feel stressed or anxious about money

We define our lives by the decisions we make every day. Whether it is an unexpected or unwanted election result or life transitions like death, divorce, or job loss, how we deal with these crises will define who we are (and who we become). It is tempting to wallow in self-pity, obsessing about worst case scenarios, engaging in bitterness and blame, or spending to forget, but these will only hurt and control your life. These behaviors will not provide lasting satisfying experiences or happiness within yourself. I encourage you to take the time, this year-end, to examine how you handle uncertain or stressful times and what actions you can take that will create positive experiences that will make you stronger, more resilient, and empowered.

Think about the good, the bad, and the ugly and decide what you want to keep or change in your financial life. Below are some thoughts on financial strategies to consider.

•  Build up an emergency reserve. We typically recommend that two-income families (with kids) maintain a reserve equal to six months of living expenses and nine months for one-income families. Couples without kids can keep their reserves at 4 months of living expenses and single earners need at least 6 months. During stressful times you may want to increase these amounts if you become concerned about the future. Let us know and we can help you define and create your reserve.

•  Pay down debt. These days unnecessary debt is very expensive, so consider paying down any unnecessary debts, such as credit cards, car loans or home equity lines of credit (anything with an interest higher than 4% should be paid – anything below should be aligned with your financial goals)

Review your cash flow (or budget) each month to keep you financially connected.

•  For those who spend during stressful times … I encourage you to engage in “Stress saving” as opposed to “Doom spending”. The savings will add to your safety net and make you feel more stable and secure whereas an increasing credit card balance adds stress and uncertainty.  By focusing on strengthening your savings you’ll become more resilient in the face of uncertainty.

Focus on gratitude and the things that make you smile. If you’re feeling unhappy with the world right now, focus on what you’re grateful for. The evidence is clear that being grateful and smiling each day can help improve sleep, lower stress and enhance relationships. Practicing gratitude can be a powerful antidote to the negativity we may feel around us, especially when the things worrying us are beyond our control. Find time to acknowledge each day the good things in your life.

If you’re feeling anxious and stressed, anchor yourself to what you can control and give yourself permission to release what lies beyond your sphere of influence. Remember, as Seneca The Younger wisely observed, “We suffer more in imagination than in reality.”

If we’re honest with ourselves, most of what we fear never comes to pass. Or if it does, it often brings unforeseen opportunities for growth or positive avenues for change. So, during this upcoming holiday season, if you’re feeling fearful or have a sense of doom and uncertainty, focus instead on strengthening your financial foundation, practicing gratitude, and managing what you can control. In time, you’ll feel more confident and better equipped to face whatever the new year brings our way.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Fostering Financial Peace of Mind

According to a study (conducted by the Research Intelligence Group) we struggle with regret over financial decisions, argue over spending, feel pressure to keep up with friends or colleagues, and bend the truth to friends and family about our financial situation in order to save face. In many cases, the primary response of stress is denial. Unfortunately, putting off these financial conversations can affect mental and physical well-being and the quality of our lives. The longer we stay silent about challenging financial situations, the bigger the problem is likely to become. Often this leads to regret for not having created a financial plan (and good financial habits) early in our lives – but is it ever too late?

Without a financial plan in place it is difficult to know if you’re making the most of the resources you have. It is also difficult to establish financial habits that will support you regardless of what life throws your way. Moreover, it is difficult to annually monitor and adjust the various competing demands for your finances in a way that allows you to sleep well at night.

According to many studies women are significantly more likely than men to lose sleep over financial worries. Fifty percent of women admit losing sleep over financial worries and forty percent of men. It is these issues that bring out some of the differences in how women handle financial adversity. For women, financial planning is inclusive, focused on building and maintaining the family, community and even beyond, well into the future. For men (on average) it seems that the focus is less on the relationship and more on the short-term transaction. According to financial author Kelley Keehn, in the face of considerable stress, men release higher doses of adrenaline, activating a “flight or flight” response, while women produce higher levels of oxytocin, activating a “tend and befriend” response.

Keeping in mind how we tend to react to financial stress, a clear well-defined financial path and a trusted financial professional with whom you can maintain a sincere collaborative and communicative relationship can go a long way toward building confidence, and hence, peace of mind.

Here are a few things you can do to ensure that you’re not the one losing sleep over finances:

  1. Do your due diligence. Demand that those giving you advice have your best interest at heart and have the qualifications and experience to provide this advice (especially if you have very specific needs). Moreover, find out if your advisor has any real or potential conflicts of interest.
  2. Understand what fees you pay and what value they add to your ongoing and future financial needs.
  3. Be prepared when you meet with your advisor. Do your part, keeping track of your finances and letting your advisor know in advance of your meeting of any items that you would like clarified as part of the agenda.
  4. Get to know your financial and personal goals intimately and be sure that they are reflected in all your financial decisions.
  5. Seek opportunities to enhance your financial education. Keeping abreast of valuable (not hyped) financial news. Stay away from pundits and financial hype.
  6. Include your partner and your adviser in your process. Don’t try to “go it alone.”

At Aikapa, we choose our clients carefully to be sure that we have the greatest chance to add value to their financial lives and their portfolio. Our clients tend to be high achieving professionals/business owners with an interest in building solid financial habits that will lead them to a life they will enjoy.

Sleeping well is essential to good solid decisions and enjoying life. If you find yourself losing sleep over your finances or getting overly anxious, give us a call or drop us an email. It is our mission to educate and help you build a stress reduced financial life while maximizing your wealth. Let’s continue to remain in touch and let us know if we can help you with any financial issue.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com