Halloween: Time to Face Your Financial Fears

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Demons -- like taxes, budgeting, estate planning and investing -- are far scarier if you hide from them. Exorcise them with these tips.

It’s nearly Halloween, so let’s talk about something really scary: Many of us have the habit of leaving our finances to chance — we hide from financial issues that scare us — but all that does is leave us open to spooky surprises.

It certainly helps account for the fact that 85 percent of U.S. adults felt some form of financial anxiety, according to the recently released Planning and Progress Study 2016 by Northwestern Mutual.

“[W]hat seems to keep people up at night more than anything else is the unexpected,” according to the report detailed by CNN Money.

Granted, you may suffer some anxiety about finances even if you make good decisions and rely on good sources. After all, nothing is absolutely certain. But, as with spooky monsters under our beds, finances can do less harm when you shine a light on them.

So, follow the advice of financial gurus and face these common financial fears head on.

Risk

Yes, there is risk of losing money on stock market investments, but then, if you avoid risk altogether, you also avoid the potential returns of the market that are pretty hard to replicate anywhere else. A report in Forbes noted that fear often keeps otherwise savvy professionals, such as millennials, from investing. A recent Harris Poll that found 80 percent of millennials don’t invest at all, the report said. Although 41 percent of respondents said they don’t invest due to lack of money, that may be because they don’t realize they can start out with small investments. About 38 percent of respondents thought they needed at least $1,000 to invest.

Solution: Educate yourself. It is possible to get started with a small amount of money in order to learn your way around the various kinds of investments. Check out this primer on how to invest by MoneyTalksNews founder Stacy Johnson, which explains how to address risks by diversifying, using mutual funds and investing for the long term. Another thing: You can start small. Automatic investment plans, and online firms that cater to small investors, for instance, allow you to start investing even if you only have a small amount of money — say $50 or $100.

“I’ve been buying both individual stocks and mutual funds for 35 years. I don’t remember the trepidation I must have felt at first. But one thing’s for sure: The more I’ve learned, the fewer mistakes I’ve made and the less fear I’ve felt,” Johnson wrote. “Use money you won’t need for a while, get smart and get started.”

Debt

Being wary of debt is smart. But being so afraid you freeze isn’t. And it’s important to understand the difference between good debt and bad debt. Good debt is that which you eventually pay back or that results in a purchase that appreciates in value. One of the most common “good debts” is a mortgage for a home. In the right circumstances, fixed-rate mortgages allow you to pay off the house and usually receive more back than you paid. Bad debt is incurred when you splurge on luxuries such as clothes, vacations, edibles or even cars. It piles up when you are living beyond your means, typically by using credit cards too freely and not paying them off.

Solution: If you’ve been in denial about your mounting debt, it’s time to tackle it. The way to get started, as outlined in this step-by-step approach, is to get all your debts down on a spreadsheet, so you can begin get a plan in place. If you need help, you can seek out a professional who specializes in helping debt-laden individuals consolidate credit card payments and create a workable payment plan.

Budgeting

Not tracking your expenses is like driving with your eyes closed. Clearly, what you don’t know about your finances can hurt you. Kevin Gallegos, vice president of Phoenix Operations for Freedom Financial Network, told Business Insider many people avoid budgeting because they erroneously think it’s overly complicated or restrictive.

Solution: “The best strategy for this fear is something called graded exposure,” Simon Rego, director of psychology training at Montefiore Medical Center/Albert Einstein College of Medicine in New York City, told Business Insider. “This means you gradually, systematically and repeatedly face your fear.” That works by setting a budget for a day, then a week, and then gradually increasing the length. Among our top tips for sticking to a budget is to start with a goal you’re working towards; that makes spending cuts easier. Track your expenses with free budget software such as PowerWallet, Mint or GnuCash. If you need outside help, the National Foundation for Credit Counseling and the Financial Counseling Association of America offer tips and other services on a sliding fee scale.

Estate planning

It’s understandable that many of us put off making arrangements for our assets, because creating a will and handling disposition of our stuff, including our bodies, reminds us of our mortality — a common source of fear. But think of it this way: If you put your affairs in good order, you won’t have to fear that your children or other heirs will be struggling to figure it out — and cursing you — after you’re gone.

Solution: There are eight documents that you should put in place, starting with a Last Will and Testament. That is the only way to ensure you control what your spouse, children and other dependents (even pets!) receive in the event of your death. You can also specify funeral arrangements. You can create your own will, but it’s never a bad idea to enlist an attorney’s help. Other key documents include a Revocable Living Trust and a Durable Power of Attorney to cover circumstances in which you are unable to manage your own affairs.

Taxes

Everyone has heard the horror stories of people miscalculating their taxes (or ignoring them) and ending up with a budget-busting bill.

Solution: Lay the groundwork now, so you don’t have to scramble during the last-minute spring rush. Moves that you can make now — such as donating unused household goods to Goodwill, selling off money-losing stocks and contributing to your retirement accounts — can save you thousands when it comes time to file in April. If your taxes are relatively simple, now would be a good time to familiarize yourself with online tax software, such as Turbotax, so you can file without paying a tax preparer.

If you want someone else to tackle your taxes, get that help in place now. Ask family and friends for suggestions of qualified CPAs. Then interview two or three now. That way you’ll be prepared when the New Year rings in. You can find CPAs in your area at the American Institute of CPAs. If you can’t afford help, but need it, you may be able to get free help: Check here to explore those options.

What financial fears are lurking in the back of your mind? What can you do to confront them? Share with us in comments below or on our Facebook page.

Stacy Johnson

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