You won’t find it in any medical journals, but studies show that about 20% of the population suffers from it. It is damaging to their family lives and their overall well-being. While it creates stress, its ramifications can create far more stress. It is called Financial Phobia.
You may recognize some of the symptoms in people you know and love. You may suffer from it yourself. Here are a few of the symptoms:
- The inability to deal with changes in your financial situation
- Trusting or relying on the wrong people
- Total neglect of financial affairs (such as not looking at statements, not knowing where your money is located, etc.). This can lead to someone taking advantage of you without you realizing it in time to save your savings.
- The symptoms can be physical. According to a study in the UK, nearly half of those that suffer from financial phobia experience a racing heart beat at the thought of dealing with their money, 15% feel frozen or immobilized, 12% feel ill and 11% feel dizzy.
Who are the prime candidates? Women and younger people tend to be the most susceptible, but everyone is at risk. Financial phobia is like a disease – it can strike anyone of any economic and educational status, of any age. It is nothing to be ashamed of. You are in good company. But that doesn’t mean you should continue to suffer. The time is now to get your financial life in order.
How should you deal with financial phobia? I believe that one of the main causes of financial phobia is that many financial institutions and advisors present financial information in overly complicated terms. Unfortunately, sometimes deliberately. It doesn’t have to be that way. It is not rocket science. The key is to educate yourself about investments, bank accounts, taxes, insurance and retirement funds. Yes, this can be overwhelming. It can be even more overwhelming for those with dual citizenship that have to deal with more than one tax regime. That said, you don’t need to go out and get a MBA. Educate yourself gradually until you build your confidence. Here are some tips on how to do that:
- Start by preparing an inventory of your bank accounts, loan accounts, investment accounts, retirement funds and insurance policies. Prepare a list of these and share them with a trusted family member in case you should become incapacitated – or worse.
- Learn the basics about stocks and bonds – their risks and rewards. Learn how you can build investment portfolios though mutual funds and ETFs.
- Learn about what you are entitled to with your retirement plans. Determine whether you have a defined benefit plan (more commonly found with government employees), where you know exactly what you will receive upon retirement, or a defined contribution plan, where you and your employer (if you are a salaried worker) make regular contributions to your retirement fund, and your retirement benefits depend on the performance of the underlying investments.
- Learn what government benefits you are entitled to. How much will you get from Bituach Leumi in retirement or in case of disability? If you are a dual citizen, what retirement benefits that you are entitled to from government institutions such as Social Security in the United States?
- If you are a US citizen, are you in compliance with tax laws such as FATCA?
- Are you adequately covered for insurance? Your need to have adequate coverage to protect your loved ones. Or you may have too much coverage and are wasting money on unnecessary insurance premiums. Have you ever figured out how much money your family would need if you were to become incapacitated or were to die unexpectedly? Obviously it is not a pleasant thought, but it is something that everyone has to deal with.
Still feel daunted by the task? You don’t have to be alone in this process. An independent financial advisor can help. But it works best if you have already done some homework. As with many other fears, the best way to defeat financial phobia is to acknowledge your fear and educate yourself so that it just doesn‘t seem so scary any more.
