Simple investment allocation principle to reduce Anxiety

This post is meant for people with anxiety, and these are the only people whom I would recommend this strategy for. As with any financial opinion you see on this blog, it is simply my opinion. Before making any financial decisions you should seek out as much information as possible to make an informed decision. All that said, as individuals with anxiety, even discussing money can be agonizing. What do you do then if you are functioning with anxiety, working and investing?

You need some way to help navigate investment allocations. What are those exactly? An allocation is exactly as it reads, how much you are allocating to a specific asset class, like cash, stocks, bonds. Rather than go in blind or with no knowledge at all you want to have at least some strategy. Again, you should be doing some research on your own to help educate you on finance but often we don’t have the energy to do this.

There is a simple method to determine allocations, and mitigate risk. Again, this is meant for people with Anxiety not seasoned comfortable investors. It is the rule of 100. The assumption in the rule is that the maximum age you are likely to live to is 100. You take your current age (let’s say you are 45) and subtract that from 100, that number 55 (or 55%) is what you should be invested into equities (which are stocks and include mutual funds that invest in company stocks). This would leave 45% of your assets into more conservative investments (bonds, CDs, Treasury’s, Cash). The older you get the less investment into higher risk investments and more into lower risk.

Enough
The Finance Industry bombards you with fear

This particular strategy is very simple and is actually pretty effective. One of the myths of the finance industry is that you have to have targeted funds managed by professionals to “guide” you through your life. Of course that’s the sales pitch, it’s an industry, be a little cynical here, they are selling you something…. With this technique you manage your risk based on anticipated age of death. Morbid? Yes, but we have to use something and once you’re dead, it doesn’t really matter.

100 is kind of a max, if you live to triple digits’ bravo and it’s reasonable to assume as technology improves life spans will as well. The “100” number can be substituted with any number you want, 80 is a good number. Now this strategy is considered conservative, fiscally I always advise people to be conservative first until knowledge is obtained, experience is obtained and more granular decisions made from the accumulation of both. That said, this blog hopes to serve those with anxiety. Money and investing is a huge source of anxiety but both are required for our long term prosperity.

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Do this to ensure your financial success in 2021

2020 is over its time to move on from it and get back on track and become more disciplined. We are in January, and it’s likely that you will have a credit card bills coming in from the holidays. Did you overspend? You aren’t alone if you did, many people who were at home found it easy to shop online and spend. Even if you didn’t overspend below is how you can ensure financial success in 2021.

Step 1: List all your debt’s smallest to largest. (total owed)

Step 2: Next to each debt, if you know it, list the minimum payment for each.

Step 3: Next to each Minimum payment, list the type of debt. (credit card, Auto loan, house payment.

Step 4: next to each debt, if you know it, list the minimum payment for each.

You should now have a matrix of 4 columns, if you did it in Excel even better, paper is fine too. You now have a list of the all the items that are crippling you financially and holding you back from obtaining wealth and freedom. It’s at this point you should take a break from this task. To this point it likely took you from 15-30 minutes to organize but emotionally you might be exhausted.

Now we start on ensuring your financial success in 2021.

Come back to your list when you are ready, but no longer than a week. (you should work on this for at least ½ hour a week, you can do that). Add the column of minimum payments, this is how much you are spending a month on debt. This is IN ADDITION TO your rent, food, utilities, travel. Calculating those are a separate exercise. For now, stick to the total number in column “minimum payment”.

Total DebtMinimum PaymentType of DebtInterest Rate
1$128,000.00($1,500.00)Mortgage4.25%
2$97,000.00$0.00Student loans8.00%
3$17,500.00($585.00)Car Payments5.50%
4$2,500.00($50.00)Discover21.00%
5$800.00($25.00)Master Card17.50%
6$750.00($25.00)Visa18.00%
Total Debt($2,185.00)
Total Fixed($1,815.00)
Grand Total($4,000.00)
Income$4,250.00
Net$250.00
A simple spreadsheet is enough

For my example it is $2185.00. Now add to this your other fixed expenses for the month. Rent, food, utilities all the things you have to have to live, not the things you want. Let’s say that number is $1815, add those two together = $4,000.00 below the 4000.00 put your monthly take home pay.

Your half hour is up, take a break and come back when you are emotionally ready. You now have the blue print to ensure you financial success in 2021. If your monthly take home pay is less than your total expenses your pay has to increase or your expenses have to decrease. You can increase your take home pay by working more, reducing your retirement contributions as an example. Expenses can be reduced by moving to a cheaper apt, less food as an example.

We now start the methodical work of eliminating debt smallest to largest. In my example I have a surplus of $250.00 per month. I am going to take that surplus and ADD IT TO the minimum payment of the smallest debt, my $750.00 visa. In 3 months that card should be paid off. At that point I would then have a surplus of $275.00 a month, which I ADD TO the minimum payment of the next smallest debt the $800 master card which would be $300.00 a month payment. In 3 months that should be paid off.

You rinse repeat for every debt. Eliminating credit cards along the way (you only need one) and revisiting this matrix for ½ hour a week, every week through 2021. You will begin eliminating debt and increasing your net surplus every month. THAT is financial success. You have more money every month to live on, imagine when there is no debt? You have a surplus of 2K plus a month?

Vacations, retirement, new clothes, vehicle upgrades are all on the table at that point. The key to ensuring your financial success in 2021 is becoming debt free ASAP. Then instead of working to send your money to someone else, you get to keep it. ½ hour a week is all it takes. Focus on it, make it a ritual and really invest in your personal economy.

Any questions along the way ask and if I can I will help you.  

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5 Examples of how to deal with financial anxiety

Anxiety sucks and 2020 has been a horrible year for anxiety, and yes it’s not going to get better anytime soon. One of the worst kinds of anxiety is financial anxiety. Worrying about your job, your income your debt… on and on. This is on top of civil disorder, Pandemics and later this year a U.S. presidential election.

Money is emotional. Money allows you to be able to live your life in the manner in which you want. Uncertainty in other areas of life weigh on your financial life. Many of us try and keep money and income in its own separate box in our lives but it is interconnected with everything. Making sure that you are dealing with any financial anxiety is critical to your complete mental health picture.

I found a good article here that deals with 5 scenarios pertaining to financial anxiety.

From the article: “That’s where Amanda Clayman, financial therapist and Prudential’s financial wellness advocate, comes in. Her mantra: With money, financial literacy isn’t enough—you have to understand the emotional side of your spending habits, stressors and more to truly make sense of (and stay calm about) your bottom line. During a pandemic, this is especially important, with money anxiety running extra high. We asked Clayman to treat us like one of her clients and share her best advice as it applies to the most common COVID-19-related financial fears.”

When everything is swirling around you, anxiety adds up fast

It’s a good article that honestly is pretty generic in the sense that most of the examples and answers you have probably seen before. Most of us have been in the anxiety life for years, so we have heard many of these answers before. The key here is putting anxiety in context of your finances. How you spend, and why you spend may (or may not) be directly linked to your personal anxiety.

The most important factor in your financial mental health is your income. Controlling you income allows you to manage your expenses more effectively. Secure sources of income create positive outcomes for your mental health. Now that’s a taller order in a pandemic environment I concede that but that might mean you need to create secondary income from side hustles where you control the outcome, not an employer.

In the end, we need to spend time on our personal finances. It’s imperative for our mental health. If something comes up, like losing a job or a lease is terminated that 15-30 minutes of attention to your finances a week might make the differences between a red line stress situation and a milder hit. There is no way to make yourself invulnerable to financials pressures, even multi-millionaires can lose it all.

Interested in other posts related to anxiety and your finances? Check out my post here.

Another financial tip for people with Anxiety

So if you have frequented this blog you know that from time to time I give financial tips for people with Anxiety. I have been working in finance for nearly 30 years now (yes I am ancient). This is by no means a financial blog, you should take any advice you see on my blog as my opinion only.

This will be a very quick post. Why? Because many articles/posts on financial advice are very long and unnecessary. Simply put, it doesn’t take several paragraphs or a short novel to impart financial advice. We are in uncertain times, the market still marches on. The underlying economic foundations, are still pretty strong. Supply and demand is still there it has been bottle necked for months, it will come back.

That said, the financial cycle has many ups and downs. Timing is critical when investing. What about when you have anxiety? How do you navigate this atmosphere? Protests, pandemics, Presidential Elections…. What do you do?

Answer: You don’t invest.

*Gasp* I know crazy talk right? The finance industry will always tell you to invest, its how they make money. IF you are unsure what to do, you pile up cash in your checking and savings account. It’s better to stockpile cash then move into a risk position when you are risk adverse. Basically, if you are not comfortable investing and it is giving you anxiety, you pile up cash, and you can invest later.

Now you will not get rich this way, but you certainly will not go broke either. “Ya but those accounts get ..5% interest” yes that’s true but there is nearly no chance of you losing your money. The last thing you want to do as someone with anxiety is enter into new endeavors that increase your anxiety. Take your time, educate yourself and when you are ready you can invest.

The market will be there when you’re ready. Hang in there you are doing great.

Interested in more finance tips for people with anxiety? Check out my post here

Quick tips for buying a car when you suffer from Anxiety

Hello readers another financial piece here. So, you need a new car, you have anxiety what do you do? First you must be honest with yourself about your anxiety and how it affects you. Negotiations aren’t something you might be good at, you might fear new places, you may not like germs and can’t fathom how to shake a car salesman hand.

Whatever the source of your anxiety is, we all need transportation. If you need a car here are 5 tips that are going to help you.

  1. Determine what car you want first, before anything else. Toyota and Honda’s are top of the line for reliability, low repair costs, and resale value. Do a little homework now and be educated when you execute the purchase.
  2. Limit the car purchase to vehicles that are half your income or less. So, if you make 40K a year, your vehicle AT PURCHASE should not cost more than 20K. If it is its likely you will have to finance, it and that becomes a broader more complex discussion.
  3. Pay cash, by private, if you can. Dealerships are designed to get you to finance and enter into a long-term contract. Avoid this at all costs unless you have no other options. Buy a used car, from a private person have a mechanic check it out, pay cash. Dealerships are money pits.
  4. Buy used. Why? Because its true what they say, cars depreciate the minute you drive off the lot. You simply can’t go back the next day and try and resell the vehicle to the dealership for your purchase price they won’t pay it. There are millions of good used cars on the market at fair prices. I drive a 2007 Toyota Solara Convertible, it starts every morning, no problems.
  5. Buy it and move on. One of the biggest issues in purchasing a new vehicle is the sense you might not have gotten the best deal, it wasn’t what you truly wanted. You buy it, own it. Your anxiety will spike if you dwell on the deal you made.

Cars are a needed asset to generate income. If you don’t need one kudos to you. Many of us live away from cities and need to commute. Here is an outstanding resource on the theories above. I subscribe to Dave Ramsey’s principals of finance (mostly).

This is a major purchase, and like me you have anxiety. You need to take extra care here, do research take your time and plan out the purchase. You can do this, and you can be extremely successful. You are doing awesome, one day at a time. Comment below if you need help or have questions on a car purchase, I will help you as best I can.