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Why You Should Be Worried

Recent economic troubles have people worried about their financial futures. And surprisingly, those concerns are across the income spectrum -- whether your annual income is $20,000 or $200,000, money troubles are likely on your mind.

A Gallup poll conducted earlier this month showed that one out of every three people was worried about money. A higher percentage of those earning $24,000 or less -- 45% -- had concerns about their financial condition. But don't think that money troubles go away once you reach higher income levels. More than a quarter of those polled who make more than $90,000 were troubled by their finances.

Interestingly, most of this worry isn't about a possible job loss. Just 8% of those surveyed have concerns about their jobs. Yet this may change. Yahoo! (Nasdaq: YHOO  ) is considering major layoffs. Sprint Nextel (NYSE: S  ) recently announced another round of job cuts, and smaller companies such as LeapFrog (NYSE: LF  ) and Midway Games (NYSE: MWY  ) are also starting staff reductions.

Money isn't enough
When you're plagued by money problems, it's tempting to think that a few extra dollars would be enough to solve everything. But it's not that simple. Many people become accustomed to spending most or all of their income, regardless of how much they earn. As a result, it can be harder for someone who's relatively well-off to adjust to a smaller income than it would be for someone who never had a taste of the good life.

Earning more might solve some of your financial problems, but it doesn't take long before you find yourself falling into the same spending patterns and encountering the same troubles. When you are accustomed to a particular standard of living, it's that much harder to give up. Until you address that core issue, you're right to worry.

Change your mind-set
To stop worrying about money, you have to change the way you think about money. Your paycheck isn't something to use up immediately -- there's a hidden fortune inside waiting for you.

Rather than spend every penny right away, think about other things you can do with it that will help you feel financially secure:

  • Get out of debt. There's nothing more uncomfortable than having a huge cloud of debt over you. Giving up some current spending to make extra payments toward credit cards or other loans will get you closer to declaring independence from debt.
  • Start investing. You work hard for your money, so make your money work for you. Get your foot in the door with a stock mutual fund. Once you're comfortable with how the markets work, think about buying individual stocks. Several Foolish writers recently named their best stocks for 2008, which include well-known companies such as McDonald's (NYSE: MCD  ) and Johnson & Johnson (NYSE: JNJ  ) .
  • Save for retirement. The more you earn now, the harder it is to imagine how you'll survive after you stop working. Diverting a sizable portion of your income to your retirement will not only get you used to living on less but also will give you the nest egg you need to support yourself as you age. And with many employers helping their workers through matching contributions to 401(k) plans, you can't afford to not participate.

So if you're worried about money, use your discomfort as a motivation to do something about it. The biggest obstacle to creating a successful financial plan is not taking the first step. And by thinking about your money in a new way, you've taken that step toward worry-free finances.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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