We’re all birds of a feather when it comes to financial stress, but how do you choose to feather your nest?
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By Kelley Holland
I always keep cash on hand for emergencies.
Cash is short because I just bought a hot stock. But when it delivers, I’ll have plenty for repairs.
No idea! I don’t remember the last time I checked my savings account balance.
Live with the scrapes. A more serious accident could happen anytime, and I need to be prepared.
Someone sideswipes your parked car and leaves without a note. The repairs will be at least $500. What do you do?
At least enough to obtain the maximum matching contribution from my employer, and as much as possible above that.
Who needs a 401(k)? I’m going to stock-pick my way to retirement wealth.
What is a 401(k)?
As much as I can handle – I worry about old-age poverty.
How much are you contributing to a 401(k) salary-investment retirement plan?
I knew what the bill would be, and I have the money ready.
I heard about a short-term investment move that should give me more than enough to cover it in just a couple of weeks.
I can’t even look at it.
I’ll pay as much as I can – I worry about living with credit card debt.
Your credit card bill just arrived, and it’s a big one. How do you respond?
The payments are high, but I’m on track.
I’ve been watching overseas markets, and I see some investment opportunities that should give me enough to pay it all off.
I try hard to ignore my debt, because I can’t pay it anyway.
Significant. I lose sleep over it, and I worry about never being able to pay it off.
What impact does debt have on your
quality of life?
My basic gym membership keeps me happy.
My self-care is time on my favorite stock-trading website.
Well, there’s my yoga, and my Spin class, and my monthly massage …
I can’t spend money on luxuries!
Is self-care a regular expense for you,
or a rare treat?
I’ve been saving in my 401(k), and I’ve calculated how much I will need.
One of my new investments is going to hit big. I can feel it!
I really have no idea.
I’ll never retire. It’s just too risky financially.
How confident are you that you can have
the retirement you want?
I have a financial plan and a budget, so I rarely lose sleep over money issues.
I don’t lose sleep worrying, but I’ve had some very late nights on trading websites.
I try never to think about my finances. It’s less stressful that way.
I worry about money all the time!
How often do you lose sleep over the state
of your finances?
YOUR FINANCIAL PERSONALITY IS:
Those strong feelings can have a significant impact on Chicken Littles’ wellness. In 2017, insomnia due to financial worries hit levels not seen since the Great Recession, according to CreditCards.com.
Fears of financial disaster can be legitimate. Some 40 percent of Americans are unprepared to handle even a $400 emergency, according to Federal Reserve data, and debt carried on credit cards hit $844 billion in the third quarter of 2018.
But financial fears also can have their own negative impact on Chicken
Finances are scary for Chicken Littles, and they tend to respond by hoarding what they have.
Littles’ finances. Worried about a potential disaster, they are often reluctant to invest their money or spend on anything but absolute necessities.
Prudence is a good thing, but too much anxiety can keep you from putting your money to work so it can grow — and it can keep you from enjoying life. It’s also healthy to include some self-care in your world.
One way that Chicken Littles can bring down their financial anxiety is by arming themselves with facts.
“The more you feel in control of your money, the more you feel in control of the rest of your life,” says Nancy Molitor, a clinical assistant professor of psychiatry and behavioral sciences at the Feinberg School of Medicine at Northwestern University in Evanston, Illinois.
Spend some time gathering information about lower-risk investing, and you may find that it feels less scary than you imagined. Here’s one data point to consider: The stock market has risen in every decade but two since 1930.
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That may provide short-term relief; but over time, it can hurt your investment returns, credit score, and more.
The result? Even more stress.
For example, Ostriches often find the whole idea of saving for retirement to be daunting. So they never get around to signing up for the company 401(k) plan.
Ostriches typically find money matters to be intimidating, overwhelming, or both, and they respond by ignoring their finances.
Plenty of people contribute less than they could: In 2016, only 10 percent of people saving in a 401(k) contributed the maximum the law allows, according to Vanguard.
That choice may feel less stressful in the moment. But over time, worries about not having a secure retirement will build up. Not only that, it becomes harder and harder to catch up on retirement savings.
“The more you avoid the feared object, the harder it becomes to break it down and change your behavior,” says Nancy Molitor, a clinical assistant professor of psychiatry and behavioral sciences at the Feinberg School of Medicine at Northwestern University in Evanston, Illinois.
More than one-third of workers are not too confident or not at all confident that they will have enough money to live comfortably in retirement, according to a study by the Employee Benefit Research Institute.
Try taking small steps to engage more with your finances. Commit to half an hour a week of financial tasks, whether that is paying bills, reviewing health insurance, or pulling together bank statements. Before long you’ll feel a lot more in charge.
Unfortunately, Woodpeckers’ enthusiasm does not always translate to investment success.
A review of research into individual investors’ trading activity and their investment returns found clear evidence that, over time, individual investors earn relatively poor returns.
Woodpeckers are usually avid investors – so much so that they spend more than their fair share of time scouring markets and looking for moneymaking opportunities.
“Many individual investors seem to have a desire to trade actively coupled with perverse security selection ability!” write the review’s authors, Brad M. Barber of the Graduate School of Management at the University of California in Davis and Terrance Odean of the Haas School of Business at the University of California in Berkeley.
In a similar vein, other studies have shown that if you invest for the long haul and avoid trading on gut feelings, you will earn more over time. Woodpeckers can consider channeling their interest in financial matters into areas where it is beneficial. Invest your time in researching, say, online savings accounts that pay slightly higher interest, credit cards with attractive cash-back benefits, or frequent-flier programs that let you rack up lots of miles.
That way, you can put a little more money in your pocket with limited risk.
Nesters keep their financial records organized and have a methodical, balanced plan to save for their future.
Ideally, nesters also have enough extra cash to give themselves the little extras that make life sweet, like a gym membership or a hobby.
Nesters may or may not be wealthy, but they are typically comfortable with what they have, and they feel in balance with their financial life.
In fact, financial well-being does not have to mean wealth.
Nesting birds are doing just what their name implies – feathering their nest and planning for tomorrow.
The federal Consumer Financial Protection Bureau defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life.”
People who achieve financial well-being are “at peace, if you will, with their financial affairs and their current state of managing their finances,” says Nancy Molitor, a clinical assistant professor of psychiatry and behavioral sciences at the Feinberg School of Medicine at Northwestern University in Evanston, Illinois.
“They don’t owe more money than they can pay off, and they also have some money that’s liquid for emergencies, not living paycheck to paycheck.”
If you are a nester, don’t forget to reward yourself for sticking to your plan now and then. It reinforces the appeal of your healthy habits, and also boosts your quality of life.