The 13 biggest financial fears of Americans

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Facing Down Your Financial Fears

No one ever said that managing your finances and saving for retirement was easy. If it was, we'd all be retired with a house on the beach by now.

Instead, Americans are in a seemingly constant state of worry about their finances and financial well-being, at least according to Northwestern Mutual's Planning and Progress Study 2016.

Northwestern Mutual's study, which is split into four sections that look at the various aspects of financial preparedness and concerns, spent an entire segment looking at what financial aspects are the most concerning to the American public.

Americans' 13 biggest financial fears

Based on interviews of 2,646 U.S. adults, the study reported that 85% of the respondents felt some form of financial anxiety. Roughly two-thirds of the people surveyed admitted that their financial anxiety was negatively affecting their health; 70% said it adversely impacted their home life; and just over half (51%) of those surveyed said their financial anxiety negatively impacted their social life.

Even worse, 36% of Americans report increasing levels of financial anxiety over the past three years, compared to just 14% who've suggested their financial anxiety has gone down over the same time period. Furthermore, more than a quarter of respondents noted that they worried about their finances on a daily basis.

But the big question is this: What exactly are Americans worried about when it comes to their finances? According to the report, these are Americans' biggest financial fears based on the survey responses. (Note that survey respondents were allowed to choose more than one financial fear.)

  1. Having an unplanned emergency (38%)
  2. Having unplanned medical expenses due to illness (34%)
  3. Having insufficient savings to retire (32%)
  4. Outliving my retirement savings (21%)
  5. Becoming a financial burden (20%)
  6. An inability to afford healthcare (18%)
  7. Losing my job (17%)
  8. Identity theft/theft (16%)
  9. Extended unemployment (15%)
  10. Death/loss of primary breadwinner (14%)
  11. Having poor credit (12%)
  12. Having to claim bankruptcy (6%)
  13. Becoming a victim of a financial scam (6%)

As Northwestern Mutual aptly surmises, "[W]hat seems to keep people up at night more than anything else is the unexpected."

An even greater number of respondents (typically 74% - 84%) also suggested that having financial certainty would improve their health, their home life, and their social life.

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Dog-sitting, babysitting, or house-sitting

These jobs are always in high demand, and the best part: you can name your price and create your own schedule! Post an ad on craigslist, or use your friends' and family's connections to get your name out there. 

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Rent out your space 

List your apartment on Airbnb or another rental site, and make some easy cash by staying at a friends and renting out your place for the weekend.

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Share your space

Just as you can rent out your full apartment or house, you can also post a free room (or even just your couch!) on sites like Craigslist or Airbnb. This way you can split your living expenses -- and maybe even make a new friend!

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Sell your body parts

Now here's a weird one: Donate your hair, breast milk, or even plasma for a profit. According to Grifols, if you're healthy and weigh above 110 pounds, you can earn up to $200 a month donating your plasma to life-saving medicine. 

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Sign up to participate in medical tests and clinical trials. 

Universities constantly need volunteers to test new medicines and treatments -- and because the pool of willing participants is limited, there is typically a large compensation for being a guinea pig. 

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Participate in a focus group

Companies and organizations will pay you to join a focus group. These can be conducted in person, online, or via phone. You will most likely be reimbursed in cash or gift cards -- plus, you often get to test out fun new products! 

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Take online surveys

Similar to focus groups, you can get paid to give your time and insights on an online questionairre. Plus, you can do this from the comfort of your couch. 

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Bank on your sperm

Although we don't necessarily recommend this option, there is a very high demand for healthy sperm donors. Keep in mind some of the obvious drawbacks, but sperm donation is non-invasive and highly compensated. 

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Crowdfund your dreams

Crowdfunding allows you to raise monetary contributions from a large group of people who want to support your venture. Post your project or idea on a crowdfund site, like GoFundMe.com, and see the cash pile up.

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Become a tutor

If you're qualified, post an ad online or on a community board to tutor children on their school courses or for the upcoming SATs.

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Get a part-time job

Capitalize your free time (on the weekends or after work hours) by working a part-time job. A bartender, waiter, or Uber driver are all great options for an additional source of income -- and great tips! 

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Resell tickets

Take this suggestion at your own risk: If you're staying within legal limits, buy tickets low and sell high as an effective way to source additional money. (Just make sure to check your state and local laws first!)

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Rentafriend.com

You can sell anything on the internet these days... including your companionship! Get paid to go on a platonic outing for a few hours and enjoy your afternoon with a new friend. 

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Rent out your parking spot

Make sure to check with your landlord first, but if you have the option to park your own car further away, lend or share your parking space or driveway for the hour, day, or even month! 

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Keep a coin jar 

This one takes patience before a big pay out, but keep a spare jar or drawer for loose change that you usually toss anyway. It will keep it all in one place -- and those quarters do add up! 

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Make something to sell 

If you have a knack for arts & crafts, create jewelry or other handmade gifts to sell on sites filled with other thrifty vendors like Etsy

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Sell items online

This effective strategy requires low effort with a high return. Post photos of your used or non-used items on sites like eBay or Craigslist, and let the bidding begin! 

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Have a yard sale

Sell clutter you've been meaning to get rid of right in your front yard. This simple tactic is convenient, and guarantees a wad of cash right to your pocket.  

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Return past purchases

This tip may seem obvious, but is often overlooked: Take your recently-purchased items that are laying around back to the store for either store credit or a full refund. 

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Recycle scrap metal and cans

Collect cans and scrap metal out your own garbage, basement, and street and bring to your local recycler to exchange your findings for money.  

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Three ways Americans can cure financial anxiety

So what needs fixing? I'd suggest there are three primary factors that should be addressed.

1. Build an emergency fund and optimize your ability to save

As noted in Northwestern Mutual's study, unplanned expenses tend to be the primary cause of financial anxiety. If Americans are worried about unplanned emergencies and medical expenses, it suggests that they clearly don't have enough in their emergency funds. Step one would therefore be to build up an adequate emergency fund and optimize your ability to save.

What's the right amount of money to have in your emergency fund? Pundits suggest that you should be able to cover six months' worth of expenses should an emergency arise, yet a June survey from Bankrate showed that just 28% of respondents had this much set aside for emergencies. The implication is simple: People aren't properly budgeting their money.

Based on a 2013 poll from Gallup, just a third of American households were keeping a detailed monthly budget, which in effect means that two-thirds of American households have a poor understanding of their cash flow. If people don't understand where their money is being spent, they won't be able to create a plan to boost their potential to save. The good news for people today is that budgeting software can be found online, requiring you to do little more than enter your data to map out your savings plan.

The equally important component to keeping a budget is accountability. This is where I'd advocate following the S.M.A.R.T. strategy, which stands for Smart, Measurable, Attainable, Realistic, and Timely. In other words, you don't want your savings goals to be so vague that there's no way for you to measure your progress. Having specific savings goals, as well as a household or friends who share the same desire to budget as you do, should go a long way to keeping your ability to save on track.

2. Invest in the right assets and use the right tools​​​​​​

If we look at the anxieties above, we also see a common theme of Americans' being concerned about running out of money, or not being able to afford certain things, such as healthcare. This anxiety implies that these individuals have saved money and are investing it for the future, but that they either might not be saving optimally, or they could be invested in the wrong type of assets, or using the wrong investment tools. To put this concern to rest, Americans need to focus on the long term and use tax-advantaged retirement tools to their benefit.

Statistical data has shown time and again that investing in the stock market and holding high-quality stocks over the long run is your best source of wealth creation. Historically, the stock market has returned about 7% annually, inclusive of dividend reinvestment. That's handily above the historic rate of inflation, which results in real wealth creation.

As further proof, JPMorganChase recently released study data, provided by Lipper, showing the value of the buy-and-hold strategy. If an investor purchased the S&P 500's tracking index on Jan. 3, 1995, and held through Dec. 31, 2014, the investor would have netted a return of 555%. Mind you, this includes two major stock market corrections (the dot-com bubble and Great Recession). By comparison, missing more than 30 of the best trading days in this roughly 5,000-day period would result in all those gains evaporating.

Just as important as focusing on stocks is ensuring that you have tax-advantaged tools in your corner. Investing in a brokerage account is a great start, but taking advantage of tools that can grow your nest egg while deferring or eliminating your tax liability is a smart move.

For example, a Traditional IRA and employer-sponsored 401(k) can help reduce your current-year tax liability since they're funded with before-tax dollars. They also defer your taxes until you begin making withdrawals in retirement. Arguably, the Roth IRA is an even better choice since investment gains within a Roth are completely free of taxation for life. A Roth can also give the accountholder more financial flexibility since there are no minimum required distributions or age-based contribution requirements.

Being tax-savvy is an important component of making your money last longer after you retire.

3. Review your finances regularly

Lastly, the above anxieties suggest that even if Americans have a game plan to save and invest, they aren't using it or reviewing it nearly enough.

In the "Closing the Gap" section of Northwestern Mutual's report, we received confirmation that there's a disconnect between what people know they should do and what's actually being done. The study observes that 82% of respondents believe their financial plan should be reviewed at least once every six months. However, 62% of those surveyed noted that they don't have a financial advisor of any kind, so their financial plan is likely going years (or longer) without being reviewed. This is worrisome because people's financial needs can change over time, meaning that your savings, investing, and retirement plans often need some tweaking.

What can you do? One obvious choice is to consider hiring a financial advisor to review your financial plan and to bounce ideas off of. Remember, utilizing a financial advisor doesn't mean ceding control of your finances to someone else. You can remain an active and/or controlling participant in your retirement -- but it doesn't hurt to have someone independently assess your progress once or twice a year.

The other option is to consider relying on your family or friends as independent financial confidants. Keep in mind that you'll want someone knowledgeable to review your financial progress and offer suggestions, which is why a professional financial advisor may be preferable. The point is that you want to take the opportunity to review your finances regularly in order to avoid veering off track.

Americans' financial anxieties aren't going to disappear overnight, but with a little planning and some accountability, these anxieties could slowly disappear over time.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

RELATED: View 8 helpful tips to teach your kids about money:

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Play money-centered board games or games on apps, like Monopoly or Money Race.
It's an interactive and fun way for your kids to learn about basic financial practices without feeling like they're being lectured.

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Give them an allotted amount of cash to spend on lunch each week.
Your child will learn how to budget accordingly throughout the week, figuring out how to balance spending money on food some days vs bringing their own on other days (something that can be directly translated into the adult workplace).

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Have them write down or tell you their absolute dream toy.
Then, show them that it's possible to have that toy if they save x enough money for x amount of weeks.

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Give them an allowance.
 

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Stick to a set time and date each month for giving your child their allowance.
Practicing giving your children their allowance every other week or on certain dates of each month will help them prepare for set paydays in the working world--it will teach them to budget out and how to know when to save up in anticipation.

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Match your child's savings each month.
This will imitate a 401K and show your child ways in which saving can (literally) pay off.

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Have your kid organize their funds in to different jars to represent different accounts.
Examples could be "Saving", "Spending", "Charity", "Emergency", "College".

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Take your kids grocery shopping and explain certain choices you make with your purchases to them.
Your children will benefit from knowing what's best to purchase name brand vs. generic, why some snacks are better to buy in bulk, etc.

Photo credit: Getty
 

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