Let’s be honest: there are a lot of opportunities to get into financial trouble these days. But some situations are a lot more economically frightening and spooky than others.
Since Halloween takes place this week, and people are thinking about scary stuff, it’s worth pausing for a moment to consider how you might handle several real-life challenges that could scare you out of your wits.
Here are 3 of the most-spooky financial situations you can ever face – along with some tips about how to deal with these frightening monsters
Spooky Financial Situation #1: Your spouse dies or leaves you
The loss of a spouse is almost always a shocker. Sometimes a husband or wife passes away unexpectedly; other times they simply throw in the towel on a marriage. Either way, the spouse left behind gets thrown for a loop – temporarily, if not for many years – and then that spouse has to adjust emotionally and financially.
On the economic side, the funeral costs alone are enough to frighten you. The tab for burying a loved one can easily run $8,000 or more. (Did someone close to you die and there’s no money? Here’s what to do when you can’t afford a funeral).
Even the thought of losing a spouse can be a scary economic prospect for some people – especially older folks. And it’s easy to see why. Research shows that within five years of a spouse’s death, 40% of widows fall into poverty due to lost pension, Social Security or other income.
Financial Fix #1: You obviously can’t control whether a spouse dies from illness or disease. But you can encourage your mate to cut out high risk behaviors like smoking, drug use or excessive drinking. You can also nudge him or her into adopting a more healthy lifestyle, like eating better and getting more exercise.
As for keeping your marriage intact, and trying to avoid a marital breakup, start by improving your communication. It truly is the foundation of a good relationship. Don’t neglect to talk about money matters either, since 70% of all people who divorce cite financial strife as one of the reasons for the breakup.
If you’re having trouble discussing financial affairs with your significant other, use these 5 tips for financial intimacy in your relationship.
Spooky Financial Situation #2: Your job gets axed unexpectedly
A layoff is never fun. I know all about it. Been there, done that, got the T-Shirt. Not only do you go through head-trips about “why me?” But at some point you also start to worry about money. Namely, not having enough money – or, at least, the sudden absence of a steady paycheck. It’s scary – especially when you have kids to feed or need to keep a roof over our head.
Financial Fix #2: There are two reasonable ways to plan for a potential job layoff: one is a career fix; the other is a personal finance solution.
For starters, always keep your skills up-to-date. You should strive to engage in professional development and on-the-job training whenever possible. In fact, many employers will pay for this, so why not take advantage of this employment perk? You should also be a constant networker – in and outside of your workplace. Again, none of us has any control over whether or not a boss comes to us one day with a pink slip. But you can be better prepared for that possibility by keeping yourself fresh and relevant in your chosen career.
On the personal finance side, always make sure you have an adequate cash cushion to deal with an emergency such as a job termination. Ideally, you should have at least three months’ worth of expenses set aside for such a scenario. Don’t have anywhere near that sitting in the bank? It’s not the end of the world. Just start building your emergency nest egg little by little. A job loss is a lot less scary to face when you have a financial cushion to tide you over until you land your next gig.
Spooky Financial Situation #3: You get to retirement and you are dead broke
It can be petrifying to reach retirement – whether that’s age 62, 65 or older – and you have to admit to yourself that you have absolutely no savings, or only very paltry savings.
Unfortunately, this happens all the time in America. As a nation of consumers, we’re much better at spending money than we are at saving and investing it. At some point, however, procrastination and a failure to save both have a nasty way of catching up with retirees – right when they should be enjoying their Golden Years.
Why is poverty so scary in retirement? I can think of a ton of reasons.
You tend to get sick more often in old age. You may or may not have family and friends around with the resources (or the ability and willingness) to help you if you’re sick and destitute. Plus, it can be hard to make ends meet as a senior citizen because you’re have limited funds and/or you’re on a fixed income, but the price of everything just keeps going up.
Financial Fix #3: To ward off the frightening prospect of being broke in old age, do something about your circumstances now. Don’t just talk about it. Take action! Start contributing to your 401(k) plan at work – or up your contribution. Reduce debt, such as credit card bills. Aggressively pay down your mortgage – or pay it off completely prior to retirement if possible. Also, plan for the unexpected. What if you’re forced to retire early? That happens to about 50% of people. Could you make ends meet? What about escalating healthcare costs, the volatile stock market, or other things that could ruin your retirement. Meet with a financial planner and create a “Plan B” to deal with unforeseen circumstances.
For some individuals, you may have to delay retirement, work longer or perhaps work part-time, particularly if your Social Security check (which now averages about $1,300 a month) isn’t enough to sustain you.
All of these economic scenarios are no doubt scary situations. But by planning ahead, you can put these economic boogey men back in the grave, while you continue to have greater personal well-being, and a less financially scary life.