Understand the Basics to Overcome Financial Anxiety
Financial anxiety is a widespread problem within our culture, experienced at every income level. It’s a feeling (potentially an obsessive feeling) of worry, unease, or nervousness related to finances. When boiled down, it is due to some degree of lack of trust in God’s ultimate provision—which, if we are honest with ourselves, we all experience at times.
Often, financial education can help us have less financial anxiety. However, until we completely surrender our well-being and finances to our Lord, we will never be completely free from financial anxiety. In fact, some of the most educated financial minds experience financial anxiety. Often it is a desire to have more money, at all costs and no matter the number in one’s bank account. Someone with millions of dollars can still be anxious about finances.
Let’s begin with some education. God asks us to be prudent about our finances and to care for the people he has entrusted to us, and financial knowledge helps us make the best use of his financial blessings. Let’s talk a bit about saving, investing, compounding, and being prepared for the unknown. God always provides—sometimes in extraordinary ways but more often in ordinary ways.
He is providing for your future right now; are you letting him work in this way?
Saving
Has God provided you a paycheck? Are you saving some of it? Check out my article on budgeting with God to understand how much you should be saving; the bottom line is that saving should come before unnecessary purchases. We should give first, provide for our necessary expenses, save, and then spend on our “wants.” This approach to budgeting takes discipline, but as you build up your savings, you are helping God provide for your future.
Your first saving goal is your emergency fund, which should contain about three to six months of your necessary expenses. The way you view this account is important; while it will make you feel a bit more secure in case you lose your job or have an unexpected house or car repair, remember that God is taking care of you, too.
Your next saving goal should be for anything you are hoping to spend money on in the next five years. Maybe it is a bigger home for your family, a pilgrimage, a baby, or something else God has placed on your heart. Begin making plans early so you don’t find yourself in debt or stressed about major purchases.
Investing and Compounding
Now that you are working hard on saving, the next step is investing.
I believe God wants us to invest and to be prudent in those investments. In the parable of the talents (Matthew 25:14-30), the master praises the servants who invest his money and make a return and chastises the servant who buries the money.
Any money that you are saving for something that will happen five or more years in the future should be invested prudently, with the help and advice of a professional (unless you are comfortable managing it yourself). One of the reasons is compounding: When you allow your money to grow untouched for a period of time, the interest you earn will allow you to earn more each year, because your base is higher. Let’s look at an example:
In year 1, $100 earns a 10% return and becomes $110. All the money remains in the account and continues to earn a return.
In year 2, $110 earns a 10% return and becomes $121.
In year 3, $121 earns a 10% return and becomes $133.10.
In year 4, $133.10 earns a 10% return and becomes $146.41.
In year 5, $146.41 earns a 10% return and becomes $161.05.
If you continue, in 10 years, your initial $100 will become $259.37.
When we invest intelligently, we allow the money God has given us to grow into more money, creating the opportunity to do more in the future. Who knows what plans God has for you in 10, 20, or 30 years? God does—and because he does, he will allow this money to become what it needs to be for those plans to come to fruition with your surrender to him.
It’s important to understand that there is an inherent risk in investing. There is a chance you will lose some of your principal (the money you started with) when you invest; there is no guarantee you will make more money. However, if you invest prudently for the long run with money you will not need in the short run, you should end up with more money than you started with.
In the greatest downturns, prudent investors have always come out stronger on the other side. No one knows exactly when the other side is, though, which means you need patience. Unless you need the money, don’t pull it out of the market. We cannot predict the future, and missing a few of the best market days in a year will result in a lower balance than if you ride out the storm.
Investing is something that should not be taken lightly. Seeking professional advice is usually a good idea.
Being Prepared for the Unknown
It’s also important to financially plan for the unknown. There are four ways to handle a potential risk: avoid it, reduce it, transfer it, or accept it. Every person and family is different; therefore, risk should be handled differently as well.
Typically, we use insurance to transfer a risk to a company. For a young family, it often makes sense to have life insurance to provide for your family in the event of an untimely death. We also often have insurance on our homes and cars. Some people need additional insurance products.
Insurance is a responsible way to protect and provide for the people we love. Each individual and family must discern the type, amount, and extent of the insurance coverage. Let God speak into this process and guide your family in the right direction. It is also helpful to seek the advice of a trusted financial professional to fully understand each type of insurance.
Find a Professional Partner
This article barely scratches the surface of financial knowledge. It is unrealistic to expect to be an expert in all areas of finance, but having basic knowledge so you are able to act prudently should relieve some stress.
After you inform yourself on the basics, consider hiring a professional to help you sort out the details. This article goes through the details of what to consider when you hire a financial professional. God will put the right person in your life, so pray about who he might be asking you to partner with.
Finding the right partner—someone you trust who knows and respects your values—will also alleviate financial anxiety. At the same time, be sure to keep an eye on what is happening with your money, and ask for a second opinion if something seems off.
Surrender It All to God
You have done your due diligence: You’ve educated yourself; put into place saving, investing, and risk management techniques; and worked with a professional as necessary to dig into the details. You are being prudent and faithful as God asks.
Now, it is time for the hardest step: surrender your financial situation to God, and allow him to work however he sees fit. Consider giving him the first hour you are awake of the first Saturday of every month to revisit your finances with him. Ask him how it is going, check on where you are, and determine if there are any changes you should try to make for the next month. Most importantly, in the end, make an act of surrender. Allow God to be in complete control and take care of you in the way only he, as your father and creator, knows how.
Erica Mathews is a financial counselor with Financial Counseling Associates, Inc in Colorado. She completed her course work for the CERTIFIED FINANCIAL PLANNER™ certification at the College for Financial Planning and is 6 months of experience away from completing her certification. She is passionate about helping families build their wealth so they can live out the calls God has places on their hearts. She lives in Colorado with her husband and four kids. They love everything outdoors including gardening, hiking, biking and simply exploring nature. If you would like to reach out to Erica, her email is erica@fca-inc.com.