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How to Deal with Financial Anxiety

The other night I lay wide awake in bed tossing and turning.  The thoughts poured through my head.  What if we hit a downturn?  What if I lost my job?  Is my emergency fund enough?  I lost quite a bit of sleep because my head wouldn’t turn off.  But was my financial anxiety rational?  Are my risks properly mitigated?

My History of Financial Anxiety

I have occasionally experienced anxiety about finances throughout my life.  In fact, some of my motivation to become financially independent was because of that anxiety. Don’t get me wrong, I have a generally positive can-do attitude.   I wouldn’t be where I am today without that. However, I also tend to over think risk mitigation sometimes to the level of anxiety.

This attitude is probably largely an aspect of childhood with parents that were not the best with money. I have sworn I will not let my kids experience a concern with the availability of money.  Now, I will still teach them how to properly utilize money and will not spoil them rotten.  However, this does mean I don’t want them to know like I did that my family lived paycheck to paycheck.  I want to spare them the feeling of us having no savings for something like college or a job loss.

Our Financial Future is Secure

Fast forward 20 years, and we arrive where I am now.  We for all practical purposes have assets that can support the 4% rule.  I am in a job that would be deemed mission critical to the company.  On top of that my work contract stipulates a payout of nearly 5 months of severance and my RSUs.  Add this to our 5 months of emergency funds and we are probably too conservative, not too risky.

Despite Financial Security, Anxiety Persists

And yet here I was a few weeks ago stressing.  Mind you I wasn’t stressing about the future of the stock market.  To be honest the noise of stock market volatility has never gotten to me.   When it comes to our portfolio I view it’s usage so far in the future that I don’t even sweat it.   No, the only noise that ever causes me anxiety is the fear of job pullbacks.  Having been through layoffs in the past, its also a scar I’ve personally seen inflicted on others.

Our Expected Drastic Change in Income Given a Recession

So what would be the impact on us with a recession?  Well in a major recession one of two things could happen.  My company would pull back or my company would disappear.  If my company pulled back they would likely do what they did in 2008 first and cut pay by 10% across the board. 

A Pay Cut, a Business Decline, and a Bonus Cut, In My Case 50% of Pay is At Risk

10% doesn’t sound like much until you realize I also receive 30% of my pay from bonuses.  These include stock bonuses, individual performance bonuses, and even profit sharing.  The reality is if the 10% cut was encountered these would be gone as well.   Add to this that my wife’s biggest customer is also my employer (different division).  In theory, we could have a 50% haircut in household income overnight even if I was not let go.  That is not even a worse case.

Severance Packages are Not Guaranteed

If my company were to be acquired or go under itself, or be close to it, I could lose my job.  In some extreme scenarios, they couldn’t even pay my severance.  Unlikely given my company is highly profitable, but these are the unreasonable scenarios the inner workings of my mind explore sometimes late at night.

Irrational Anxiety can Still Persist with Financial Independence

And that is the point really.  It is an irrational fear.  After my last such bout of insomnia, my wife had only one thing to say, “Snap Out of It.  We have nothing to worry about”.    You know she’s right.

Honestly, this type of anxiety is not a frequent thing for me.  However, I have experienced such anxiety before.  It tends to follow large job changes and probably has some ties with my recent imposter syndrome phase.    That being said I also realize this same type of anxiety is common for people when dealing with their finances.  Many have these experiences more frequent than my own.  Yes, even those as secure or even more secure than myself can experience these fears.

One More Year Syndrome and Financial Anxiety

Want evidence?  Well, you can’t read a personal finance blog from someone near retirement without tripping over someone mentioning the one more year syndrome.  It’s the same thing.  You’ve got the game beat, and yet you still occasionally find yourself worrying if you have all possible scenarios covered.

You Can’t Mitigate all Financial Pitfalls, Just the Likely Ones

To be honest, if you think about it long enough you will find some scenario you can’t cover.  If you recall from our post a while back you cover risks based on their impact multiplied by their probability.   That means you don’t necessarily have contingencies in place for extremely improbable scenarios.    No one does.

Once you have the major basis of risk management covered, there is not much else worth enacting.  If you have a will, life insurance, liability insurance, auto/home insurance, disability insurance, health insurance, an emergency fund, and a decent nest egg then you are more prepared then 99% of the population and will be able to cover 99% of all scenarios.  Anything beyond that is just a waste of your time.

Keeping Financial Anxiety At Bay

The key then is how to keep that anxiety in check once you’ve covered your basis.  Usually, I do this quite well when not just starting a new job.  I do the following:

  1. Ensure proper reasonable risk management steps are in place.  I mentioned the big ones above.
  2. Focus on what we have.  Have gratitude and remember to take a step back and enjoy the now.  Anxiety and planning for the future too much can ruin today.
  3. Discuss such anxiety with others, like my wife in my case, for a reality check.

I know my anxiety will pass as I get more comfortable in my job.  I know this because I’ve been down this road before when I last had a major job change in 2012.  What I don’t know is whether said anxiety will return when it is time to retire.  Preparing for that time means continuing to work to improve the management of my own emotions.  

For those working towards early retirement, have you given some thought to whether you will experience financial anxiety at the change?  For those that have retired, did you experience said anxiety?  If so how did you manage it?


  1. xrayvsn
    xrayvsn February 27, 2019

    I know I will definitely deal with one more year syndrome as I get closer and closer to when I want to stop working. You are right that you cannot plan for every contingency. Even if you plan on working forever there is something out of the blue that can derail your plans.

    I don’t have much financial anxiety and I think part of it is because I have established some nice passive income streams that help diversify the risk (of course I’m sure there is a scenario that all streams could still be knocked out but the more you have the smaller that chance is).

    • Steveark
      Steveark February 28, 2019

      Never worry about stuff you can’t control. I mean why would you do that? I left a great job when it was time and have not worried a single hour in the last retired three years about it. You make decisions and take action. If you don’t like the results, change course. But what good does worrying do, its kind of silly when you think about it. But maybe that’s just me, I’m sure some people have anxiety that they can’t control. But I have not experienced that in my life.

      • FullTimeFinance
        FullTimeFinance March 1, 2019

        Conceptually and logically I agree. But I have to say sometimes the reptilian brain takes precedence when it comes to these matters.

    • FullTimeFinance
      FullTimeFinance March 1, 2019

      Passive income streams can certainly help to keep the anxiety at bay. Nothing helps mitigate a risk quite like a plan.

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