Here's a money paradox to ponder: If you never worry about money, you probably should, but if you always worry about money, you probably have nothing to worry about.
Most of us can use a little fretting now and then. It keeps our minds sharp, our goals focused, and our savings accounts healthy. But some people worry way too much, even when there's plenty of money in the bank. Do you:
- save enough to meet your goals, but still feel that it's not enough?
- lack specific savings goals and just try to save everything you can?
- get so anxious thinking about retirement or paying for college that you can't evaluate whether you've saved enough?
- avoid all debt, even a mortgage, because you don't want to owe anyone money, ever?
- fight with your spouse, family, or others because they never save as much as you want?
- fret over every getting every dollar possible in the bank, but ignore the returns you're getting on your savings or investments?
- find yourself checking your bank or investment balances daily?
- help yourself every time you encounter a "take a penny, leave a penny" dish next to a cash register?
- arrange your spare change every night by the date minted?
You might answer yes to a few of these questions and still have a perfectly healthy level of money paranoia. If you see yourself acting more obsessively than you'd care to admit (except while lying on a therapist's couch, with the protection of doctor-patient confidentiality), it's time to relax a little.
Make a plan
If you want to feel more confident about your financial situation, you can start by defining your savings goals very specifically. You'll want some money in the bank for a rainy day, of course. Think about how much you'd need to save so that you can sleep well at night. Write up a plan and start setting aside money for that goal.
Do the same for your other major goals, including college funds and retirement. When you start getting worried that you aren't saving enough, go back and look at your plan again. (You wrote it down, right?) Tweak the plan when necessary, but also remind yourself that you did think through the plan when you created it. Because retirement will probably be your biggest financial goal, check out the Fool's Rule Your Retirement newsletter service for a ton of helpful planning advice.
Protect your savings
Once you start putting money in the bank, make sure you're protecting it from the ravages of time, inflation, and bad investment decisions. There are plenty of savings accounts, such as those from E*Trade (NASDAQ:ETFC) Bank, EmigrantDirect, HSBC (NYSE:HBC) Direct, and ING (NYSE:ING) Direct, that pay around 5% interest.
Whatever money you'll need for an emergency, put it someplace safe. Any money that you won't need for five to seven years, look to the stock market. You will subject your money to some risk in the market, but you didn't work hard saving all of that cash so that it can sit around and watch television all day. Put it to work for you.
A simple equity index fund will do the trick. Or, if you're attracted to the solid reputation of blue-chip companies, find out which company Fools chose as the best picks for 2007. Their Foolish analyses will help you pick among everything from technology powerhouses such as Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) to consumer giants Coca-Cola (NYSE:KO) and McDonald's (NYSE:MCD).
Then rest easily, knowing that you're saving enough and investing it Foolishly.
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