How to reduce financial anxiety in a single afternoon

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One of the biggest problems I face every day as a financial adviser is not at all what you might expect.

It’s not the stock market or the economy — rather, it’s figuring out how to reduce financial anxiety for my clients.

Some of them are anxious because they think the stock market can’t go any higher, or that the economy is about to tip into a massive decline.

They think these things in part because of what they read online, content which is largely designed to foster panic about money and the economy.

Here are a couple of simple facts: A 50/50 portfolio of stocks and bonds returned 9% in the 20 years ending in 2017.

A person who saved $8,200 a year and put it under the mattress now has $164,000. That’s just $8,200 x 20.

A person who owned stocks and bonds instead has a little over $500,000 and a secure retirement. That’s money management and compounding at work.

Yes, the United States seems to go into a recession every 10 years or so, but it doesn’t mean we’re about to enter the next one, this year or next.

The fact that recessions happen doesn’t mean the next decline will be long-lived, either. The average recession since World War II lasted 10 months, while expansions averaged 57 months.

The current expansion is 96 months but it’s only the third-longest in history.

Uncertainty

When I talk to clients, though, what I find is that their anxiety really has nothing to do with either of these near-term factors, which frankly are beyond anyone’s control.

Rather, their anxiety often is related to the distant future — how long they might live.

Surprisingly, a recent study by the life insurer Allianz suggested that most people are afraid of outliving their money, more so than dying itself. In the survey, 82% of married people in their late 40s who had children said running out of money in retirement was their primary fear.

Just 18% said death was a bigger concern.

For many people, that fear is fueled by uncertainty. We know dying happens, and that it’s natural. Many of us have said goodbye to parents or other close relatives and friends.

Like the economy and stocks, death is truly beyond our control.

The future is another problem altogether. People with a reasonable amount of savings fear that they will end up elderly and poor. Human nature being what it is, even wealthy people sometimes worry.

In control

The financial anxiety we feel is due to our own fundamental avoidance of thinking about money.

Coming to grips with the real numbers is not necessarily going to make you feel bummed out. In fact, I find that people who seek a financial adviser’s help come away feeling more in control and less worried, even after just one conversation.

It’s a dam breaking, and the tension washes away.

Read: Vanguard thinks its own employees should own this fund instead of the S&P 500. They’re right

They feel quick relief because people typically underestimate their own resources. They fail to consider that money in 401(k) accounts will compound — doubling every 10 years. They don’t have a sense of their current investments’ performance and costs. They don’t understand even the basics of Social Security and IRAs.

But much of the stress comes because they overestimate future expenses and underestimate the power of planning. It’s a conversation I have daily, and the transformation from concern and stress to relief and optimism is the best part of my job.

Learning how to reduce financial anxiety is not a matter of setting up a side hustle or winning the lottery. It’s about financial literacy, taking the reins of your own life and creating a solid plan based on facts.