The “scarcity mentality” is a funny thing. Thinking there’s a limited supply of something can turn us into grasping, fearful creatures, anxious to get our share.
When it comes to money, these fears may affect you no matter what your financial state. If you struggle to make ends meet, you may fear not having enough money. If you have enough to pay your bills, you may worry about having enough for the future. If you have plenty of money, you may fear losing it all—that your investments will plummet, or that you will lose your job.
Women, in particular, have fears regarding money: We tend to worry about ending up homeless. In many cases, this fear is irrational, as fear so often can be.
But money is a tool, and to some extent, at least, we control how we use it. Even if we tend to spend impulsively, giving in to those urges is a choice. Why fear something you control?
Unless, that is, you don’t have control of your money. In which case, it’s time to change that paradigm.
If you’ve completed the exercises in my previous article on fear and money, you should have a pretty clear understanding of what your fears are and where they come from. Now, let’s work on eradicating those fears altogether so you can truly get control of your finances and focus on living your best life.
Here are seven strategies for conquering your money fears:
- Acknowledge your financial state. Make an honest assessment of your spending choices versus your income. Notice I said, “choices.” Whatever your money situation, it often comes down to choices you have made and continue to make. If you want to change your financial state, you’ll need to change what you have been doing.
- Organize your finances: Cash flow. Keep it as simple as possible. Put all your bills in one place—somewhere you will encounter them frequently but which is also secure-- and plan to pay them off as soon as you get them, instead of once a month. Make a list of what you spend, divided among essentials, or “must haves,” and discretionals, or “want to haves.”
- Organize your finances: What you have. Make a list of all your assets, including the value of your checking, savings, and retirement and investment accounts. Also include the value of any property, such as real estate, and large personal items including your car.
- Organize your finances: What you owe. What debts do you have? Do you have credit card payments to make, or student loans? What are the balances and terms on your car and mortgage? This part can be scary, but so important. Until you face your fears—and own up to what you owe—you won’t be able to change your situation.
- Have an emergency fund. To avoid spending your long-term savings such as retirement funds for emergencies, you need an emergency fund—ideally, three to six months worth of living expenses. Using long-term money to solve short-term problems is a common mistake.
- Be selective with insurance. Be sure to have liability insurance on the big items, such as your automobile, but skip it on the smaller stuff such as warranties for new appliances. If your refrigerator breaks down, use your emergency fund—and then replenish it as fast as you can.
- Pay yourself first. If your employer has a retirement plan, sign up for it, and contribute at least as much as your employer will match. Doing so is a proactive show of self-respect. Do the same for your savings account, adding the same amount every month. At first, your savings account can act as your emergency fund. Then, when you’ve got your three-to-six-months’ expenses set aside, you can transfer the balance to a separate account and begin building a fund to use for large purchases.
There’s no time like the present to conquer your money fears, and seize control of your destiny. If dealing with your finances makes you uncomfortable, good! Think of these as growing pains.
The scarcity mindset is a trap. Staying in your “safe zone,” where you pretend that money problems don’t exist, is like being in prison. Wouldn’t you rather be free?
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.