On the surface, financial stress might seem like the result of not having enough money, and something that could be lessened by coming up with more.
But that’s not necessarily the case. In fact, being highly successful tends to increase the complexity of your financial life, which could easily make financial planning a stressful, daunting process.
A professional who earns a large income in a high-stress career faces unusual challenges when it comes to finances, according to a recent article on Financial-Planning.com. While people in this situation earn enough to retire early if that’s their goal or a necessity, the article notes that “their high-pressure jobs can make them far too busy to focus on their long-term financial plan.”
Here are some common factors that make financial planning stressful for many people, whether they have high incomes or more modest means:
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Feeling out of control about finances
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Market fluctuations that affect investments and interest rates
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A slow economy and high unemployment rates
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Living beyond one’s means
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Uncertainty about cash inflow and outflow
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Encountering an unforeseen risk or issue, such as a health problem
These stresses lead some people to make emotional or impulsive decisions about money, creating additional stress and risk. While more money may help to alleviate these issues, how you manage that money and plan for the future has a much greater potential for reducing stress.
Here’s an example of how financial planning helps to reduce common financial stresses. A professional couple in their mid-50s — they’re real people, but let’s call them Brian and Kelly — was fast approaching retirement age and becoming concerned about having enough money to retire. As a result, they were experiencing many of the financial stresses mentioned earlier.
Brian had health concerns, for instance, and needed to go on disability until he reached full retirement age — an unforeseen issue. The couple’s single largest asset was that Brian had an interest in the family business for over 40 years, but the slow economy made the value of that asset less than certain.
Brian and Kelly decided to overcome their early inertia and take action. They met with a financial advisor, who began creating a personal financial plan for them, assessing the couple’s net worth and analyzing their cash flow and retirement goals and needs.
After the initial evaluation, Brian and Kelly had a good chance of attaining their dream lifestyle in retirement — but only if they could sell Brian’s interest in the family business. The financial advisor brought in a trusted law firm to help work out the terms of the buyout. Going into the sale, the couple knew their financial needs, which helped them in working with legal counsel to negotiate the terms.
The result was that Brian and Kelly were able to quickly resolve their financial stresses and achieve their dream lifestyle. They were able to realize all of the business value they needed in cash, while retaining a 100-percent interest in the commercial building itself. The rent they received each month from the building allowed them to supplement their income while saving further to meet their retirement goals.
3 Action Steps For Reducing Your Financial Stress
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Establish healthy routines: Check your cash inflows and expense outflows every week, and combine them with a schedule of your known recurring expenses.
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Align assets with specific financial goals: Identify and categorize each asset account, and assign it to a goal, such as “retirement savings” or “college savings.”
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Establish an emergency fund: This allows you to plan for the unexpected, so that an emergency doesn’t trigger a domino effect that puts your long-term goals in jeopardy.
Worried you’ll outlive your money? Request a free, 30-minute consultation with Richard Brothers and start planning for retirement.
