There is a lot of good news in today’s economic numbers but you couldn't tell by talking to the average person. According to a survey by the American Psychological Association, money stress continues to weigh heavily upon the shoulders of the average person.
“Regardless of the economic climate, money and finances have remained the top stressor since our survey began in 2007. Furthermore, this year’s survey shows that stress related to financial issues could have a significant impact on Americans’ health and well-being,” says APA CEO and Executive Vice President Norman B. Anderson, PhD, as quoted in a recent APA press release.
The survey quizzed 3,068 adults and discovered at least 72% of adults felt stress about money sometime in the last month with 22% reporting that stress was extreme. The number of stressed people was about the same in high and lower income groups, although those making under $50,000 a year reported higher overall levels of financial stress.
The stress Americans feel about finances is not merely a theoretical exercise; that stress has real life-changing impacts. Nearly 1 in 5 have avoided going to the doctor or seeking medical care due financial stress and more than a third say money causes problems in their relationship.
The Steps To Financial Boredom
Instead of telling people to strive for financial independence, which has no real definition and tends to be a moving target, my suggestion is to strive for financial boredom. You can achieve financial boredom at any income level by following a simple, time-tested formula that can be found in even the oldest investment guides. This is not a get-rich-quick scheme. It is in fact just the opposite; it’s a plan to get rich slowly.
Start With An Emergency Fund
Nothing can bring stress to your financial life like not being able to deal with an emergency. Central A/C units seem engineered to go out just before weather gets warm. Your car can fail, as can your body. Some financial advisers suggest a $1,000 in cash savings, but these days $3,000 is more realistic. A credit card is not an emergency fund. Speaking of credit cards...
Bury Those Credit Cards
I get that there are always a savvy few who seem to have a talent for working credit card reward programs for maximum advantage. But there’s a reason credit card companies offer those lucrative rewards and that’s because they know a certain percentage of cardholders will get in a bind and end up carrying over a balance. Do that just once and find all the gain from reward points wiped away like a phantom. Debt is the great killer of financial serenity and there is no such thing as “good” debt. Some debt may be necessary but there's nothing good about it.
Buy Less House Than You Can Afford
Your real estate agent is not your friend and much of the advice they hand out is either self-serving or just plain wrong. Typically the biggest single expense families face is their home and, based on my personal experience in real estate, most people are buying way more home than they need. A big house in a trendy neighborhood is a financial anchor that will drag down your finances for decades and rob you of the gain that could have been had investing that extra money for a return.
Balance Your Investments
You may not get rich overnight buying low-fee market index mutual funds or ETFs but you’ll at least track with the market and you’ll sleep better at night. A well diversified portfolio has stocks, bonds, cash and hard assets like quality gold and silver bullion in fixed percentages. It’s important to fix the percentages because that feeds into rebalancing. When you rebalance your portfolio you sell winners and buy more of the losers in order to restore those fixed percentages to balance. Rebalancing, practiced by few but lauded by many, forces the most basic fundamental in investing: buy low, sell high.
Don’t Mess With It
Once you have a balanced portfolio and a regular schedule of rebalancing once or twice a year, then don’t mess with it. The winds of the market will blow fair one day and foul the next. That dreary parade of gloom and doom that we call financial news will have a new prognosticator of woe on a daily basis. There will be many hyping the next great thing. Ignore it all. Stick with your plan.
By striving for financial boredom you will put your finances on a slower but steadier path and you’ll sleep better at night.