Why Money Brings Up Such Powerful Emotions
Tips to Tame the Fear and Anxiety You May Feel About Your Finances
The following content has been adapted from Chapter 24 of Momma’s Secret Recipe for Retirement Success, by Dan Ahmad & Jim Files.
For many people, money is scary. It produces anxiety and many other powerful emotions, too. Oftentimes, the root of fear or anxiety is that you don’t truly understand your finances. You may even blame yourself for your “lack of financial intelligence.” However, we believe that for the overwhelming majority of retirees, the confusion and lack of understanding have nothing to do with personal shortcomings. If you feel confused and don’t understand your money, it’s because you don’t have an actual plan in writing.
Common Areas of Confusion
If you are the typical retiree or pre-retiree, you likely have confusion about some or all of the following:
- The investments you own and why you own them?
- The statements you receive other than to check if the value went up or down?
- Why you didn’t make as much money as you thought you should have?
- Why do you lose so much money?
- Why it seems like your account values finally get back to even and then you lose more money?
- How do income taxes work?
- How you will generate the income you need throughout retirement from your assets?
- When you should start using your assets for income?
- How much do you pay in direct and indirect (hidden) fees?
- How much income you can safely take out of your assets?
- How to guarantee your income won’t run out for as long as you live?
- How much income tax you will pay on your IRA distributions?
- How to protect all of your past and current gains from future stock market losses?
- How much risk you are taking and how much you could lose in the next stock market crash?
- That bonds will lose value when interest rates go up?
- The probability your money will last for as long as you live?
- The difference between asset accumulation and income distribution/ asset preservation?
- How much you can potentially leave to your beneficiaries?
In our experience, very few retirees can honestly say they understand the majority of these bullet points. We have found one of the hardest things for people to admit is that they really do not understand their money. It can cause a lot of shame and hold people back from asking for help to better understand their finances. So many of them keep doing the exact same things they have done with their money for many years even though now retired they know they need to make changes.
If you feel this way – confused, ashamed, embarrassed – you’re not alone. Bankers, lawyers, accountants, engineers, teachers, administrators, CFO’s, CEOs, executives, salespeople, contractors, realtors, and people from almost every profession don’t understand their money and may feel like it is their fault. They may feel like they are in the minority because they think everyone else does understand their money. Even people who have an advisor may not understand their money, and because of this, they feel even more embarrassed because they have been working with an advisor for 5, 10, 15, even 20+ years and they still don’t understand their money, and they still worry about their money.
You may think everyone else understands their money. You may think everyone else is making the right decisions about their money. You may think everyone else is making a lot of money. You may think everyone else isn’t losing a lot of money. You may think everyone else isn’t worrying about running out of money. You may think everyone else is in better financial shape than you. And you are probably dead wrong. We believe the majority of the people we meet with, people who have saved $1,000,000 to $7,000,000 or more of assets are often in far better shape than their friends, neighbors, co-workers, and relatives. These types of people have succeeded, it’s just that no one has told them so, and no one has ever built them a comprehensive written retirement income plan to prove it to them.
There are so many emotions associated with our money, it is overwhelming. Society, friends, relatives, the media, even our own parents judge our success, status, and power by our money. And because of this, for some reason, everyone believes they should just somehow know “what they are supposed to do with their money.” They believe they were supposed to be born with the ability to understand their money and with the capabilities of making the right decisions with their money straight out of the womb like we are all supposed to have some kind of “money gene.” And then if we don’t understand our money and realize we don’t have that “money gene,” we think everyone else has, we will feel inferior, insecure, and not normal.
SEE ALSO: The Two Stages of Money in Retirement
To help you start the process of understanding your money and your plan, we are going to tell you three big secrets about your money:
- No one has a “money gene” because it doesn’t exist. You will either fail by not planning properly or succeed by planning properly. Genetics has nothing to do with your financial security during retirement – having the right plan does.
- The reason you think you don’t understand your plan, or you are confused about your plan isn’t because you don’t understand your money. You don’t understand your money and you are confused because you don’t actually have a comprehensive written plan. You don’t have anything in writing except for statements, and those are just report cards for how your assets have performed in the past. So how could you understand your money?
- The only way you will eliminate your confusion and fully understand your money for the first time in your life is by creating a comprehensive written retirement income plan.
What You Can Do to Feel More Financially Confident
We feel strongly that you will significantly benefit from demanding that any actions you take to plan for your retirement are part of a written plan. This makes your financial advisor more accountable to you, eliminates many of the mysteries surrounding your money, and improves your communication and overall relationship with your advisor.
If every aspect of your plan is put in writing, you will have a lot higher probability that your plan will be successful and your goals will be met. The assets you have now are supposed to last you for the rest of your life.
Proper planning is necessary for your success. The first step to proper planning is demanding you have a comprehensive written retirement income plan. If you work with an advisor, demand the advisor provides you with one. If your spouse does the planning for you, demand that your spouse provides you with a plan in writing. Either way, just make sure you get it – doing so will make your money less scary and confusing!
For more retirement planning guidance, grab a copy of Momma’s Secret Recipe for Retirement Success, available on Amazon.