Updated on 08.24.15

Confronting Your Worst Money Fears

Worried woman

These financial fears keep Americans up at night. Fortunately, we can prepare for many of them. Photo: Joe Penna

A tornado sweeps through your town and leaves nothing but death and destruction in its wake. An electrical fire burns your house and everything in it to the ground.

A hacker steals your identity and runs up tens of thousands of dollars in debt before you realize what’s happened. Or, a distracted driver gets into a severe, life-changing accident that involves not only your car, but you.

These are the things Americans worry most about, according to a survey conducted by Travelers Insurance from July 21-28, 2014. Here are some more interesting details on the results of the survey.

Travelers Consumer Risk Index

The Travelers Consumer Risk Index provides a glimpse into the mind of the average American by digging deeper to find their biggest fears. Unfortunately, what the survey found is that, in our ever-changing world, Americans are feeling less and less secure.

In fact, a full 60% of respondents believe that the world we live in is becoming a scarier, riskier place, with people expressing the most concern about personal identity theft, severe weather leading to personal and financial loss, and getting into a wreck with a distracted driver. However, there is good news: More and more Americans report being proactive about managing those risks.

For example, 85% of respondents report conducting safety checks on their cars, 82% have installed smoke detectors in their home, and 64% report having a stockpile of food and water that could get them through an extreme weather event or food shortage. That’s a good thing, right?

Most Fears Involve Financial Loss

Even though the Travelers Consumer Risk Index didn’t necessarily set out to prove that Americans are concerned with financial losses, that’s exactly what it did. Severe weather, distracted driving, and identity theft are all issues that can lead to financial devastation in addition to other consequences such as personal injury, job loss, or property loss.

What this goes to show is that, like it or not, financial worries keep Americans up at night. And the fear of losing one’s home, car, or livelihood is right up there with most people’s greatest fear: losing a family member.

According to the findings from Traveler’s, most people aren’t busy sweating the small stuff. Instead, they worry most about the big things in life that can go wrong – the unfortunate tragedies that you see on the news at night. Their worst nightmares coming true.

Focusing Solely on Financial Fears

Another recent survey that focused solely on financial fears broke down Americans’ money worries even further. When asked about their biggest financial fear specifically, Americans, both male and female, were all over the map. Here’s what the Country Financial Security Index discovered:

  • 28% worried most about their ability to retire comfortably
  • 18% worried about being able to afford health care
  • 11% feared not being able to afford their rent or house payment
  • 10% feared job loss
  • 6% feared going into (or never getting out of) credit card debt
  • 5% worried about college costs

The two biggest worries, retirement and healthcare, shouldn’t come as much of a surprise. The recent passage of the Patient Protection and Affordable Care Act, also known as Obamacare, brought some positive changes to the way health insurance is bought and sold, but it didn’t necessarily make it any more affordable. In fact, a growing body of research shows that health insurance premiums have increased quite a bit for both individuals and groups since the passage of the health care law.

And retirement is an issue that rightfully scares most people who are paying the least bit of attention. According to a recent study from Bankrate, a striking number of Americans are not saving for retirement at all, and the ones who are don’t seem to be saving nearly enough.

Scary finding alert: 36% of adults say they haven’t started saving for retirement yet, including more than a quarter of respondents ages 50 to 64. The Bankrate study concludes that many people are just waiting for the “right time” to start saving. But at age 50 and up, you’ve got to wonder what exactly they are waiting for.

With figures like these a reality all across the country, it’s no wonder that Americans are worried about whether or not they’ll be able to retire.

My Own Financial Fears

When it comes to my own financial fears, a number of things manage to keep me up at night. For example, I’m self-employed, which means that I have little to no help when it comes to retirement savings. I’m maxing out an SEP IRA and a Roth IRA each year, but worry that it won’t be enough.

And don’t get me started on college costs. I’ve got two daughters, ages 3 and 5. We were smart enough to open 529 College Savings Plans for them when they were just babies, and we have been responsible enough to contribute monthly ever since. But, will it be enough?

I worry that it won’t, and that my daughters will have to take out huge loans for school, or worse, not be able to pursue the career path they desire. As a mother, there’s nothing worse than feeling like you might be failing your children at this very moment, and that your “best effort” may not even be enough.

And much like the respondents of the Traveler’s survey, I, too, worry that severe weather will sweep through and destroy everything I’ve worked for my whole life. I guess that’s what happens when you live in the Midwest; you see it happen to neighboring towns and communities so many times that you figure it will have to be you some day. Even worse, when it comes to severe weather, there is literally nothing you can do to prevent it and precious few ways to minimize your risks.

How to Deal with Financial Fears

Most people have something to worry about when it comes to their family’s financial security, whether it’s job loss, retirement savings, or simply keeping a roof over their heads. Unfortunately, there’s not much we can do to alleviate the toll these fears take on our lives, other than preparing for the worst in any way possible.

Preparing for Natural Disaster, Fire, and Auto Accidents

Fortunately, certain kinds of insurance can lessen the financial impact of many of the disasters we fear most. In fact, carrying an adequate amount of coverage for your home and automobile and purchasing a solid life insurance policy might be enough to help you sleep at night.

According to Patrick Gee, vice president of claims at Travelers, this year’s Travelers Consumer Risk Index showed that 76% of respondents feel very confident about the insurance protection on their car, while 69% feel very confident about the insurance on their home or the place they live.

However, as Gee pointed out, last year’s index showed that very few respondents actually understood their policies and coverage, which means that there is plenty of room for improvement in that respect. After all, you may think you have coverage that makes sense for your situation, but you may be in for a terrible surprise later on if you don’t fully understand your policies in their entirety.

Preventing Identity Theft

Identity theft is another financial fear that we might actually be able to prevent. According to Gee, consumers who take the following steps will lessen their chances of being an identity theft victim:

  • Carry only the essentials: Leave the unnecessary credit cards and critical documents in a discrete, burglar-proof location in your home.
  • Beware of scams: Do not fall for scams intended to pull at your heart strings. Do not disclose personal information, such as credit card or bank account details, if you receive an unsolicited request.
  • Don’t throw away, destroy: Shred old bills and financial statements rather than just placing them in the trash or recycling bin.
  • Make security a priority: Make sure to store purses and wallets in a safe place, never print account information on envelopes of outgoing mail, and be careful about sharing personal information on social media.
  • Keep tabs on your credit report: Check your credit report once a year for free from each of the major national credit reporting agencies by visiting www.annualcreditreport.com.

Travelers offers a variety of cyber-risk prevention tips and tools tailored to the specific needs of businesses.

Saving for Retirement

Gone are the days of pensions and work-sponsored retirement plans. For the most part, we’re all on our own. But that doesn’t mean it’s hopeless. If your employer offers a 401(k) plan, that’s the perfect place to start. Decide on a percentage of your income you can live without and let your employer deduct it from your paycheck before those funds ever see the light of day (or Uncle Sam’s sticky fingers).

And if your employer offers a match up to a certain percentage of your contributions, make sure to take advantage of it — all of it. You’ll not only save your own money, but you’ll reap a steady stream of free money toward your retirement as well.

Learning to live on less is another great way to free up more money that can be saved for the future. Look for ways to reduce your expenses that can add to your bottom line.

For example, could you be spending less on your base expenses such as cable television, food, or transportation? Could you refinance your home into a mortgage with a shorter timeline or lower payment? Would you be willing to cut down on some of the things you splurge on frequently?

Finding ways to cut your spending is one way to find money for retirement that wasn’t there before — as long as you sock it away and don’t spend it on something else instead. And of course, the more you can cut now, and the longer you can keep it up, the better off you’ll be after you leave the workforce.

Also check out these retirement savings posts for more ideas:

Saving for College

Worrying about the rising cost of college tuition does absolutely nothing, but using that fear as motivation to create an actionable plan can make a world of difference. In other words, the only way to prepare for high college costs is to save for them. And the sooner you start, the better.

Opening a 529 account — a tax-advantaged investment account specifically designed for college expenses — is one of the easiest ways to start saving for college. And depending on where you live, doing so might come with certain additional tax incentives as well.

For example, my state (Indiana) offers a 20% tax credit on the first $5,000 we contribute during any given year, meaning that we get an automatic $1,000 in cash for the first $5,000 we stash away.

Contributing monthly is also a great way to let your college savings account grow over time. And if you’re afraid you’ll forget, you can always make the savings automatic by having a certain amount of money deducted from your bank account each month. “Setting it and forgetting it” can not only make the process as painless as possible, it’s an easy way to know you’re tackling one of your financial fears.

Prepare, Save, and Hope for the Best

The fact that our worst money fears could come true is enough to keep some of us up at night, but it shouldn’t keep us from taking action to lessen the impact of any disaster that strikes.

The fact is, there are many steps that all of us can take to minimize any damages and set ourselves up for success. The key is learning to recognize where our own actions might make a difference in the future, and taking appropriate steps to prepare ourselves as much as we can.

My mother always told me to “prepare for the worst, but hope for the best.” And now that I’m 35 with two kids, I realize that is really all anyone can do.

What are your worst money fears?  Do you have a plan in place to lessen the impact if disaster strikes? Tell us in the comments section.

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