When most people think about financial and retirement planning, feelings of stress, worry, and anxiety rise in our chests and throats.
Thinking about your financial future is stressful whether you:
- Are well prepared with millions in the bank
- Or, have not saved nearly enough and have no clue about managing your money
However, this stress – while unpleasant – exists for good reason, it serves a purpose. And, the really good news is that there are ways to use financial stress to your advantage. Get tips below!
1. Understand that Avoidance is an Evolutionary Reaction to Threats, but Not Effective for Financial Stress
Emotions, even negative emotions, have a purpose in our lives. Envy can help drive you toward goals. Anger can enable you to prevent exploitation. Stress, anxiety, and worry can help you exert caution and discipline.
Even though stress, anxiety, and worry can be positive, most of us have a negative – and not very productive – reaction to stress.
When we feel stress, our body is pumping chemicals into our bloodstream and those chemicals typically drive us to a fight or flight response:
- We fight to try to extinguish the perceived foe
- We flee to get away or hide from the threat (particularly common when it comes to money)
Fight or flight is an awesome defense against immediate threats. Our brains developed the fight or flight reaction to protect us from real dangers like snakes hiding in the grass, a leopard leaping at us from trees, and other wild dangers.
However, these reactions are usually completely inappropriate for long term threats like future financial peril. Hiding from your money issues does not protect you, it just makes things worse.
If you understand that your fight or flight reaction is an understandable but wholly inappropriate reaction, you will better overcome avoidance and anger.
2. Change Your Perception of Stress
University of Rochester psychologist Jeremy Jamieson has proven that the mere belief that stress can be useful can, in fact, improve your outcomes.
In one experiment, a group of students were preparing for an exam.
- Jamieson told one group that stress can help you rise to the occasion of the test
- He told the other group to just focus if they get stressed out
The group who were told that stress is enhancing did significantly better on that test and subsequent tests than the group that was told to focus.
Your mindset can actually impact how stress impacts you.
Stressed about finances? Remind yourself that the stress is there for a reason and let it help you deal with the issues. Stress is there to help you rise to the occasion and take action.
Kelly McGonigal is a psychologist and lecturer at Stanford University. In her Ted Talk, she teaches us that you can eliminate the harmful impact of stress.
One study from the University of Buffalo found that you can reduce or even eliminate the damaging aspect of stress by spending time helping loved ones, friends, or neighbors. “When you choose to connect with others under stress, you can create resilience,” McGonigal said.
If you are stressed about finances and retirement, try reaching out to friends and family to talk about it. Offer them your best tips and commiserate and problem solve.
NewRetirement Advisors: Interested in using a financial advisor? NewRetirement Advisors offers full access to a CERTIFIED FINANCIAL PLANNER™ for personalized advice and guidance. Try a free discovery session with a CFP® professional to discuss your needs.
4. Acknowledge Your Stress
Too often, we don’t actually acknowledge big long-term stressors like money issues or a looming retirement. Finances can be an abstract and convoluted concept.
However, your future financial security is probably gnawing at you.
If you can acknowledge and label any stress you feel, then your brain activity will actually shift and go to work dealing with it.
Researcher Matt Lieberman used brain scans to illustrate how recognizing stress can make you more reactive tackling problems.
In one study, participants were shown negative images. When they were asked to acknowledge and label the emotions they felt when viewing the picture, the activity in their brains moved from the emotional part of the brain to the prefrontal cortex – the area where we consciously think and plan.
5. Start Small
Tackling how to fund the rest of your life is a gargantuan undertaking. However, you can break it down into more manageable and achievable chunks. For example, maybe you want to save an additional $250,000 over the next 10 years for retirement. That sounds like a lot, but if you make that goal more immediate (like what you need to save each month) the goal becomes a lot more actionable and achievable.
Planning your entire financial life is indeed a massive task. And, when it comes to retirement, you are trying to account for the next 20–30 years of your life with various unknowns and a finite set of resources.
One way to deal with retirement planning stress is to start small.
You don’t need to tackle everything all at one time. You can break down the task into manageable chunks.
The NewRetirement Retirement Planner is ideal for this. The tool is the most detailed and personalized online. It saves your information and allows you to plan at your own pace.
- Start by documenting the broad outlines of your current finances. It’s easy – just answer the questions
- See where you stand now
- Add details, try different scenarios, and discover ways to strengthen your financial future
- The system tracks your key decisions, but you don’t have to decide everything all at once
- Your information is saved so you can continue to make updates and get answers over time
Financial stress can be helped with the habits that make you an overall healthier person. Eat well, exercise, meditate, seek intellectual and social stimulation, and maintain a regular schedule.
Self-efficacy is a psychological term to describe people’s internal beliefs about their ability to have an impact on events that affect their lives.
Your self-efficacy is your belief in your own effectiveness as a person, both generally in terms of managing your life, and specifically with regard to competently dealing with individual tasks. Your financial self efficacy is your ability to effectively manage your money.
Research has shown that feeling in control of your finances is an important buffer of negative stress.
Building and maintaining a comprehensive financial plan can deliver that sense of control you crave.