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3 financial fears & how to avoid them

by Guest on July 9, 2019
Business

When it comes to financial success – or failure – people can set tough benchmarks for themselves. Financial fears or success means different things to each of us. For a single parent, it can mean not having to worry about unexpected bills. Or for a young professional, it might mean reaching the C-suite.

No matter what financial success looks like for you, when it comes to personal money management, Mortage Choice estimates that close to one in two women are confident that they are on track to reach their financial goals.

However, bubbling beneath the surface, women have some very real concerns about financial failure even though many of these fears may not be founded on reality.

Not meeting self-imposed financial goals

43% of women believe that not reaching their own financial goals is a sign of fiscal failure. The good news is that this suggests women are not only setting financial goals for themselves, they also attach considerable importance to achieving them. The question is, are we setting clear money goals to work towards?

Why it’s unfounded:  73% of women have set formal money goals for themselves. Almost one in five have gone as far as documenting their financial aspirations.  That’s a smart move. Behavioural science tells us that articulating goals creates concrete aspirations to work towards. Formally writing goals down, and even sharing them with friends or family, increases the likelihood of achieving your aspirations.

What you can do to avoid missing your own financial goals:

  • Be realistic with your goals. Setting a benchmark that is genuinely achievable within a given timeframe can keep you motivated to achieve other goals.
  • Make your goals specific and avoid indeterminate goals like “I want to save more”. Instead, add a concrete target such as “I plan to save $100 each month”. This gives you a clear figure to work towards.
  • Take steps to achieve your goals. If your goal is to grow savings, make it happen by setting up an automatic transfer out of your everyday account, into a savings account. 

The looming fear: Bankruptcy

The single greatest financial fear shared by six out of ten women is being declared bankrupt.

Why it’s unfounded: Sure, the idea of becoming bankrupt is unsettling, especially as it carries a considerable social stigma.

However, bankruptcy is very much an act of last resort. There is a whole spectrum of actions that can be taken to salvage personal finances before bankruptcy needs to be considered. And the vast majority of people are a long way from this point.

What you can do to avoid bankruptcy:

  • Monitor your finances regularly – 89% of women do this already. It’s a simple way to identify early warning signs such as mounting debt.
  • Excessive use of debt is the leading cause of personal insolvency in Australia. Don’t take on more debt than necessary, especially debt that’s not backed by a valuable asset as is the case with credit card debt.
  • Consider taking out income protection insurance. Only one in five women have income protection insurance, yet loss of income is the second main cause of personal insolvency.

 

Losing your home 

Homeownership is a big deal for many people. The study found that almost one in two women own their home, with a further one in four saving for a place of their own. Just over 10% of women also own an investment property. Unsurprisingly, the possibility of being forced to sell their home and downsize or rent is what 44% of women feel to be a sign of financial failure. 

Why it’s unfounded:  Homeownership often goes hand in hand with a home loan, and only 7% of women report having difficulties meeting their debt repayments.

What you can do to avoid losing your home:

  • Avoid overcommitting yourself. Be realistic about how much you can afford to borrow – and pay – for a home of your own.
  • Take early action if you’re struggling to meet repayments. Speak with your lender or mortgage broker before you miss a payment. It’s often possible to negotiate a more manageable payment plan.
  • Be careful about acting as guarantor for someone else’s debt (including debts of an adult child). If they default on their repayments, the lender will turn to you to make good with the loan, and that can jeopardise your ability to pay off your own home.

Dispelling the myths & financial fears

There is no doubt that women can face gender-related financial challenges including lower rates of pay, a greater likelihood of working in part-time/casual roles and increased chance of taking extended periods of time off from the workforce.

However, as research highlights, women are taking plenty of sensible steps to bolster their own financial well-being. For many, drawing up a personal balance sheet could reveal that they are in far better fiscal shape than they realise, and are much closer to financial success than failure. Having a money mentor can help too. Speaking with a professionally qualified financial planner can help you stay on track for financial success and let you thumb your nose at those personal financial fears.

 

This is a guest post by Nicola Field – a senior finance writer from Mortgage Choice. Find out more about Financial Fitness research.

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3 financial fears & how to avoid them
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