Whether It Causes You to Overspend or Underspend, Fear Should Not Drive Financial Decisions

People generally have a lot of anxiety around money. More than two-thirds of Americans say they are afraid of running out of money during retirement.¹ And among those about to reach retirement age, that fear jumps to nearly 80%.

It’s not hard to see why.

The majority of people are not saving enough to maintain their lifestyle in retirement. And they have not sought professional financial help to remedy this expected shortfall. Add to this the rapidly rising cost of living (especially in key areas like housing and healthcare), and it’s no wonder Americans are worried about running out of money.

On the other hand, folks grapple with both the fear of missing out (FOMO) and the fear of not keeping up with the Joneses. These two anxieties can motivate people to spend more than they can afford, piling up debt and making it difficult to save.

Fear Is Not a Healthy Motivator
Whether it causes you to overspend or underspend, fear should not be driving your financial decisions.

First of all, the most prudent way to handle your money is by using an intentional plan that consistently manages your income, spending, and saving. Your roadmap should stay consistent regardless of how you’re feeling. Over the long-term, sticking to a plan is designed to give you the best chance for success.

Secondly, living to avoid a feared outcome—financial or otherwise—is unnecessarily stressful. It’s much healthier and more sustainable to be motivated by a positive goal.

And if we’re being honest about the harmful effects of financial anxiety, we should address the fear of enjoying the fruits of your labor. Financial columnist Maurie Backman writes about retirees who are wealthy, but who live like they’re about to run out of money. And so they’ve put off spending on things that would otherwise make their life more enjoyable.²

Backman explains why: “After 30 or 40 years of being disciplined, budgeting carefully, and watching retirement account balances grow, many retirees struggle mentally to flip the switch. And that includes seniors with millions of dollars banked.”

Your money should be serving you, not the other way around. That’s why your trusted advisor is concerned with more than just the total balance of your investment accounts.

He or she wants to know about your big dreams for life during retirement, and especially how you plan to make the next chapter truly fulfilling. Then they will design your plan to provide you with the income to make those dreams a reality, and the flexibility to adapt when circumstances change.

When you take the fear out of financial decision making, you’re likely to have better financial health and greater peace of mind.

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