When I searched my previous blogs, surprisingly, I found the word anxiety in only one previous blog. It is not a reflection of how I have felt or how most of our clients seem to feel. If you are like me, at some stage during this pandemic, you have probably felt anxious about the future, specifically the financial future. Will I still be able to afford my next life-stage dreams, or will I have money to pay for an old age home? Worse still, will I have an income next year? All these thoughts floated around on most days just outside my conscious thinking, within easy reach when the news flow turned negative, ready to overwhelm me at the first sign of my mental guard dropping.
I find that planning helps, more specifically worst-case planning.
It starts with knowing the numbers. I have reviewed my own spending in detail during these months. Perhaps you’ve been lucky enough not to have to concern yourself with your budget, or perhaps you’ve ignored it, too scared to look at reality. Either way, anxiety may be the result of not knowing. In my experience, even super-wealthy people can feel anxious if they don’t know their reality. Knowing is the first practical step to tackling anxiety. Of course, anxiety sometimes has nothing to do with reality or numbers, but with beliefs and previous experiences. Those sources of anxiety are much more difficult to eradicate, but anxiety due to not knowing is unnecessary.
I calculated the bare minimum my family needed to survive on. Let’s call this the COVID budget or the needs number. We all learnt how little we needed during the first phases of lockdown. I imagine we could let go of the Netflix account and the food luxuries we consoled ourselves with during that time.
Knowing your needs number helps you to lower the current and potential demands on your resources. If you know what you need to earn to afford your needs as opposed to your wants, wishes or dreams, it can lower the anxiety about finding another job or replacing your current income stream or it could make it easier to find just one small additional income source.
Knowing your needs number reduces the anxiety about your savings for the future. Even if you cannot save towards your retirement now, you may find that you will still be able to afford your needs in retirement with what you have already saved. Even if your portfolio doesn’t grow substantially or even declines, it may still fund your needs.
This exercise helps me to focus on the minimum demand on me, not the maximum demand at a time when life, in general, is challenging. It helps me to chase away anxiety. When that vague feeling enters my conscious, I can show it my very real and detailed analysis and send it packing.
I hope it helps you too.
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// 21 August 2020