Personal loan website, AmOne.com, recently surveyed consumers about their biggest financial fears and asked how optimistic people are about resolving their money challenges. The scariest issues for survey respondents with financial worries are:
· Too little money for retirement (51%)
· Excessive debt (30%)
· Paying off their student loans (7%)
· Affording college for their children (7%)
· Saving to buy a home (5%)
AmOne expert, Gina Pogol, shows how optimistic consumers are about overcoming various money problems and reviews potential solutions for those struggling with each of the top worries.
“Forty-one percent of survey respondents were pessimistic about their ability to successfully navigate financial challenges, while 38% were optimistic,” observes Pogol, managing editor for AmOne.com, a QuinStreet website. “In reality, most financial fears have solutions and it is often important to address problems as early as possible.”
I had a chance to interview Gina Pogol. Here's what she had to say:
The biggest reason that saving for retirement is so fraught many is that they know they are unprepared, and they are running out of time. While debt is the most immediate concern for younger respondents, retirement becomes a bigger concern as people age because their window is closing. Many, many people shy away from taking on retirement planning because they suspect the news is not good and they can’t face it.
The Federal Reserve says that 25% of Americans have zero retirement savings. Even at age 60, 13% have nothing saved. While many experts say that you need to save enough to provide at least 70% of your pre-retirement income to be comfortable. Imagining trying to live on the average Social Security check ($1,461 a month according to AARP) probably keeps many up at night.
Similarly, worrying about debt is counterproductive. I have worked with consumers in trouble with debt for 25 years, and I can tell you that no one wants to face debt. It’s uncomfortable, and like retirement fear it causes this anxiety that cripples people. The anxiety about debt makes it harder for them to face it. And real debt addicts deal with anxiety by chasing the temporary high that comes with spending. So they spiral.
The best way to improve your lot in the face of this anxiety and pessimism is to face your problem. Note that many who have no savings also have too much debt, so these issues can go hand in hand.
First, determine how bad it is. What’s your starting point in terms of savings and/or debt? How many years do you have before you plan to retire? How much debt do you currently have?
Look at your income and spending. Create a realistic budget and then see if it’s possible to solve your problem. Can you clear unsecured debt in five years or fewer? How much could you possibly save in the years before you retire? What needs to change in order for you to reach your goal?
Can you do a DIY solution with a debt consolidation loan and an automatic payroll deduction for retirement savings? If not, enlist professional help.
If debt is that main problem, contact a reputable non-profit credit counselor for budgeting help and perhaps a debt management plan. If your debt is too much to clear in a realistic timeframe even with a debt management plan, many experts recommend considering bankruptcy.
Make a list of every way you can find to save money and determine how much you can put away in the time you have before your scheduled retirement. How close can you get to your goal? One thing to keep in mind is that you may not need 70% of your current income to be comfortable if your home will be mortgage-free when you retire. Many spend one-third of their pre-tax income on their mortgage payment. So without a mortgage, you may be comfortable on 50% of your current income or even less.
List creative ways to reduce the amount you’ll need in retire.
· Is there something you enjoy that you could do part-time for extra money, either as a second job now or a part-time job after retirement?
· Can you downsize, move to a cheaper home and add to your savings?
· What about a reverse mortgage on your home?
· What can you sell to increase your savings or pay off debts?
· What about combining resources with family members or a close friend in the same boat? Many retirees get roommates to provide company and reduce expenses.
· If you are very adventurous, look into other countries where costs of living are very cheap. I have a place in Mexico and many of my friends there are retired and live very comfortably on $1000 a month or less. Others work online and find their wages go much further overseas.
The point I really want to make is that focusing on solutions and being creative gets you out of the hopeless pessimism mode and into creativity and optimism and problem-solving. Those are good things. And getting help from a pro can ease your mind because most problems have solutions. Once you face them.
The complete survey analysis is available here: https://www.amone.com/blog/
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