Let’s be honest, if you’re reading this column and have a pulse, you’re probably stressed about money. I know. I know. Not another “how to” article. “It’s easy, just follow these six steps!”
By now you know the steps. Quit spending. Save more. Blah, blah, blah. In one ear and out the other.
Studies have shown that nearly 3/4 of adults list personal finances as their No. 1 source of stress. On the surface you’d think, “Well I guess the 25% of non-worried adults are rich!” Maybe that’s true for some, but for most people in the “25% crowd,” I suspect other factors are at play. Let’s dig deeper.
Gabriel Alan Gordon
As a financial adviser with almost 20 years of professional experience and a real-life family, I believe the key to financial security is buried deep in our psychology. So how do we confront our money anxiety and reduce or eliminate it?
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I’ll be the first to say that having more money is usually not the answer. In fact, you could argue that having more money or a high income leads to even higher levels of stress. While I’m certainly not advocating for mediocrity, I think it’s important to be self-aware of our inherent desire for more of everything; more house, more car … more money. Once you’re convinced that having more is not the answer, you can move on and take control.
Control. That’s the secret to unlocking financial security. Sounds easy. But it’s not. If the pandemic has taught us anything, it’s that we have little control over external forces. So what can we control?
The easiest thing to control, and a good place to start, is purely informational. The more information you have about your personal finances, the more control you can exert. In the simplest of terms, you need to know what comes in every month and what goes out. The dreaded budget. Remember the “25% crowd?” They didn’t get there by being blind or even somewhat aware of their cash flow. I believe these folks are obsessive about their budgets. Please, for your own sanity, sit down and add up what you spend each month and compare it to your income. Trust me, the process is empowering, and it won’t take more than an hour.
Armed with a written statement of your real-life expenditures and income, now you’re ready to approach the feeling of financial security. You can begin to ask and answer questions such as “Can I afford this?” or “Can I retire?” Not happy with what you see? Do something about it.
I get it, it’s not easy to change our spending habits, and obtaining a higher income doesn’t happen overnight. If you have $100 left over each month, set a goal to raise it to $200. Six months later, make it $300. It’s not the act of saving that’ll help you sleep better at night; it’s the feeling of confidence and willpower that comes along with changing our habits. Eventually, after months of monitoring and honing your budget, you’ll likely have developed the psychological wherewithal to not only make smart financial decisions, but establish an efficient routine of holding yourself accountable.
We have more authority over our financial well-being than we realize. Control what you can control and roll with the punches. Of course there will be setbacks. Your AC will go out. The stock market will fluctuate. Inflation may persist. We can’t control any of this. But if you’re diligent in your planning and obsessive about your budget, the setbacks will feel less devastating than they would otherwise. You’ll know what levers to pull to offset those near-term shocks, and once you’ve navigated those rough seas successfully, you just may find something very special: financial security.
Gabriel Alan Gordon is senior vice president - investment officer at Wells Fargo Advisors.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
Investment and Insurance Products are:
•Not Insured by the FDIC or Any Federal Government Agency
•Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
•Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested