Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
December 20, 2023
Worrying about the future, especially when it comes to finances, is a common human experience. However, understanding how worry operates and learning strategies to mitigate its impact can significantly improve one’s mental well-being and boost your financial outcomes. Let’s investigate how worry tricks the mind into a cycle of increased anxiety and explore evidence-based approaches to worry less about your financial future.
Worry is triggered by the anticipation of future negative events. There may be “reason” to think bad things will happen, but worry is an emotion that is a reaction to the hypothetical, not reality.
While worry can serve a protective function by helping individuals prepare for challenges, it can be problematic when it transforms into chronic, excessive anxiety.
Worrying is a natural response to uncertainty, but when left unchecked, it can become a self-perpetuating cycle. Numerous research studies have shown that worry does not alleviate worry, it exacerbates it. A study published in Science Direct compared worrying to relaxation techniques and the result is that worry increases stress. And, research published in the Journal of Abnormal Psychology, excessive worry is a hallmark of generalized anxiety disorder (GAD). The brain’s attempt to solve problems and uncertainties can lead to a repetitive loop of worry, making it difficult for individuals to disengage from anxious thoughts.
Financial worries, in particular, can be exacerbated by a cognitive bias known as “catastrophizing.” This is the tendency to imagine the worst possible outcomes, even when they are unlikely. A study published in the Journal of Cognitive Psychotherapy found that catastrophizing is linked to increased anxiety and negative emotional responses.
Worrying about money matters may seem like a logical response to financial concerns, but research suggests that it can have detrimental effects on decision-making. A study published in the Journal of Experimental Psychology: General revealed that individuals under financial stress tend to make riskier decisions, potentially exacerbating their financial troubles.
Furthermore, chronic worry can lead to physical and mental health issues, impacting overall well-being. According to a study in the Journal of Psychosomatic Research, persistent worrying is associated with increased levels of cortisol, the stress hormone, which can contribute to a variety of health problems, including cardiovascular issues and compromised immune function.
While meditation, exercise, a healthy diet, and strong social connections are all proven methods of overcoming stress, the best course of action if dealing with financial anxiety is to develop a financial plan.
Financial planning is crucial for overcoming anxiety about a secure future for several reasons. It provides a structured approach to managing finances, instills a sense of control, and helps individuals make informed decisions about their financial well-being.
Here are key reasons why financial planning is essential in alleviating anxiety about the future:
Financial planning empowers individuals by giving them a sense of control over their financial destiny. When you actively engage in planning, you are more likely to feel in charge of their financial situation, reducing the uncertainty that often fuels anxiety.
Financial planning involves setting clear and realistic financial goals. Establishing specific objectives, whether short-term or long-term, helps individuals prioritize their financial activities.
This clarity contributes to a sense of purpose and direction, mitigating anxiety associated with uncertainty.
Creating a budget is a fundamental aspect of financial planning. By tracking income and expenses, you gain insight into your financial habits and identify areas where adjustments can be made. Knowing that there is a plan in place to manage finances on a month to month basis can alleviate anxiety about unexpected financial challenges.
And, if you have debt, developing a plan to managing and reducing them can be reassuring. You can see a path forward for financial stability.
The first step to a financial plan involves building an emergency fund, which serves as a financial safety net in times of unexpected expenses or income disruptions. Knowing that there are funds set aside for emergencies provides a buffer against financial stress and anxiety.
Financial planning involves considering investment strategies that align with individual goals and risk tolerance. Constructing a diversified investment portfolio helps build wealth over time, contributing to a more secure financial future and reducing anxiety about retirement or other long-term financial needs.
When you can understand why, how much, and how you should be invested, you are more likely to actually save and invest adequately and feel secure about what you are doing.
Planning for retirement is a significant component of financial planning. Knowing that there is a strategy in place to fund retirement years can alleviate anxiety about financial security in the later stages of life.
You’ll feel even better if you have tried various “what ifs” and make sure that your plan can withstand different possible events. Explore 20 eye-opening scenarios to try with the NewRetirement Planner.
You don’t know what is going to go wrong in the future. However, you are reasonably assured that things are unlikely to go according to plan.
Financial planning includes evaluating and securing appropriate insurance coverage. Whether it’s health, life, or disability insurance, having adequate coverage provides a layer of financial protection, reducing anxiety about potential unexpected events.
Emotions around taxes are complicated. There is a sense of obligation to contribute to our community. However, it is also stressful, especially if you feel that you are paying more than your fair share.
Planning for tax efficiency is a powerful way to reduce financial stress, especially if you have significant income or wealth.
Try these 25 retirement tax planning tips.
Understanding the tricks that worry plays on the mind is essential for breaking free from the cycle of anxiety, especially in the context of financial concerns. By incorporating evidence-based strategies such as mindfulness, financial planning, cognitive-behavioral therapy, social support, and problem-solving, individuals can take proactive steps to worry less about their financial future and enhance their overall well-being.
Financial planning is a proactive and practical approach to managing one’s financial life. By addressing key aspects such as budgeting, emergency preparedness, debt management, investments, and retirement planning, individuals can build a foundation of financial security that alleviates anxiety and contributes to a more confident and stable future.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Money mindfulness is a powerful trick to reducing financial stress and improving your day to day and long term financial outcomes. Learn how.
Don’t worry, be happy… Here are 11 real steps you can take that will enable you to experience less financial stress.
When most people think about financial and retirement planning, feelings of stress, worry, and anxiety rise in our throats. This stress — while unpleasant — exists for good reason. Stress serves a purpose. Less than 50% of people have a written retirement plan. The majority of people simply don’t have enough saved for this time…
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2024 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.