The 5 Spookiest Financial Boogeymen -- and How to Avoid Them

In a recent survey, Wallethub uncovered the top five financial fears among consumers today. Here's how to face each of those fears and conquer them for good.

5. Poor credit

Whether you're currently suffering from a low credit score or fear having one in the future, it's important to understand how credit scores work. Here are the five primary factors that determine your FICO score (from most important to least):

  • Payment history: 35% of your score
  • Credit utilization (meaning how much of your total available credit you're using): 30% of your score
  • Length of credit history: 15% of your score
  • New credit: 10%
  • Credit mix (how many different types of credit products you have): 10%

Since payment history and credit utilization together make up 65% of your FICO score, these are the two factors that you should focus on improving. Being on time with all your payments and getting your credit utilization under 10% can work wonders on any FICO score.

4. Fraud

As the recent Equifax hack illustrates, fraud can happen to anyone at any time. However, taking a few precautions can greatly reduce your risk of being targeted. After all, why would a fraudster go after someone who's a tough nut to crack when there are so many easy marks who don't bother to protect themselves?

You can prevent fraud by taking simple steps like not posting private information on social media or the internet (remember, this includes your birth date); leaving your Social Security card at home instead of carrying it in your wallet; ditto for your ATM pin; shredding all documents containing sensitive information; using strong passwords online, and using different passwords for different sites; and so on. Checking your free credit report every three months is also an excellent precaution, because it will allow you to catch any fraudulent activity before the scammer can do too much damage. It's also best to review your credit card statements every month to check for signs of suspicious activity. And if you do spot any oddities, don't hesitate to slap a fraud alert on your account -- or even a credit freeze if the situation is dire enough to warrant such a step.

3. Job loss

Once upon a time, most workers could count on staying with the same employer their entire working lives (and would usually get a nice pension as a sendoff). Today, employees stay with employers for a median of 4.2 years, according to a 2016 Bureau of Labor Statistics news release. Assuming these theoretical median employees had careers spanning 45 years, they'd have worked for at least 10 different employers.

If you're looking for true job security, one option might be to become your own boss by starting a small business. Technology has made it easier than ever to work from home, meaning that many self-employed workers no longer need to invest in commercial office space to get started. The BLS reports that in 2015, 15 million people were self-employed -- that's just over 10% of the entire labor force. Of course, running your own business comes with its own set of risks, but at least you know you'll have a good boss.

2. Not having enough retirement savings

The average American is right to be concerned about their retirement savings (or lack thereof). The GOBankingRates 2017 retirement survey found that 34% of respondents had no retirement savings whatsoever, and another 21% had less than $10,000 saved. That's nowhere near enough money to finance retirement, given that most retirees are dependent on savings for the bulk of their income.

Luckily, it's never too late to turn things around. If you've waited until you're less than a decade from retirement to start saving, you'll need to really work at it to scrape together enough money, and you'll probably have to make some sacrifices as well. The easiest way to improve this kind of situation is to delay your retirement by a few years. Not only does that give you more time to save, but it also gives your retirement savings more time to produce returns, rather than be withdrawn to cover your expenses.

You may also need to make some heavy-duty expense cuts to free up enough income. Play around with this retirement calculator to see how much you'll need to save in order to generate sufficient retirement income, and then get to it.

1. Unplanned emergency

Americans don't just stink at saving for retirement; we stink at saving money in general. Another GOBankingRates survey earlier this year found that 39% of respondents have exactly $0 stored in a savings account, while another 18% have less than $1,000 saved. That's definitely not enough to cover most emergencies, forcing these non-savers to go into debt to pay for the expense. And given the extraordinarily high interest rates most credit cards charge, this kind of debt can be incredibly difficult to pay off in a timely fashion.

You may not be able to prevent an emergency, but you can at least keep one from crippling you financially by having a well-funded emergency savings account. For most people, having the equivalent of six months' worth of expenses tucked away in a savings account is an excellent goal. Big families, and those with erratic income, may want to save as much as a year's worth of expenses. An emergency savings fund can also help out with the other big financial fears, especially an unexpected job loss; getting laid off suddenly is a lot less frightening when you know you have enough money to survive for the next year, even without a new job.

The idea of saving an entire year's worth of expenses may sound impossible -- and it probably would be impossible to save this much instantly. However, if you consistently save a little every month, you'll find the going much easier. And if a crisis happens before you hit your goal, you'll at least have some money tucked away to finance it. Having even a few thousand dollars tucked away in your savings account will provide you with an excellent security blanket, no matter what crises come your way.

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