*Janet is a disciplined person. She earns a good salary and is careful not to spend too much. She has some debt, and while it’s not an excessive amount, it is enough to bug her. On top of that, she’s not sure if she’s going to have enough for the long run. Every time she spends money, she wonders, “Can I really afford this? Should I be buying this?

“Doris, I worry about money all the time. It makes it hard to enjoy anything that I buy. How can I stop worrying so much? I just want peace of mind. What can I do?”

Several of the women I interviewed as part of my research project shared feelings that are similar to Janet’s. Financial worry appears to be a frequent visitor in women’s lives if the results of my project are any indication. The worries become all the more pressing when women retire, particularly if they’re on their own like Janet.

So what can we do to tame the unproductive worry-loop that, at moments, runs freely in our brains? In my experience, it often boils down to two key steps: First, define the concern with facts; and second, take effective action to address any challenges, where possible.

Know your numbers

Worry feeds off uncertainty. It’s easy to get stuck in a pattern of stress when you don’t have some basics facts at hand. The first step in addressing financial worries is to ask yourself, “Is there anything real behind my concerns or is this a matter of groundless fear running the show?” The only way to answer that question is to know your numbers.

But what, exactly, does that mean? Which numbers are you supposed to know? In short, it means tracking the money coming in and going out on a monthly basis, figuring out what’s left, and asking a few questions about the future.

Here’s a quick breakdown of critical numbers you need to know:

• Income now: How much money comes in on a monthly basis, after deductions? Is it a fixed amount or does it vary? Can you increase the amount, if necessary, by working additional hours or by growing your business output? If you’re an entrepreneur and your income fluctuates, you might consider doing what the bank does in evaluating your income for the purpose of mortgage qualification: Take the average of the past two years’ of income. If your situation makes that impractical, then use a conservative estimate of your monthly income. Err on the low side to get a sense of the worst case scenario. In Janet’s case, she has a fixed salary with no other sources of income. She knows exactly how much money is coming in every month until she retires at age 65.
• Income at retirement: Do you have a pension and if so, how much will you receive on a monthly basis? If there is no pension, how much income can you generate from your investments, taking into consideration any ongoing contributions? For help calculating how much you’ll have at retirement, use this retirement income calculator provided by the government. For comparison, plug in your numbers in this calculator, provided by the School of Public Policy at the University of Calgary. Between these two tools, you’ll have a rough idea of where you’re at.
• Monthly essential expenses: How much do you spend on necessary, monthly expenditures? This includes your rent or mortgage, taxes, insurance, utilities, food (stuff you make at home, not meals out – those are discretionary), medical costs, day care, and so on. The items in this category are the ones you cannot live without. If you don’t know these numbers, track them for at least three months and use the average spend. You can either go old-school and write the expenses down in a notebook, create your own spreadsheet, or use one of the many available online, like these from Mint. While you’re tracking your numbers, keep all your receipts, especially if you’re paying cash for purchases. It’s amazing how quickly money can “vanish” when you’re not paying attention.
• Next track your discretionary spending for that same period of three months. Every dime. These are all the items and expenditures that you choose to buy but that are not at all necessary. Think cable, other subscriptions, meals out, alcohol (I know, I know, but still – not necessary), most clothing purchases, etc. When you track several months, you’ll even out momentary splurges and get a sense of the bigger picture with respect to your spending. If, like me, your kids participate in a number of camps throughout the year (i.e. fun but not essential) and those costs add up, then tally up the total cost for the year and average it out per month. Sure, you might pay for most of them in the fall or spring, but this will give you a good idea of the annual impact of those costs. By the way, summer camps that double as child care may well be an essential expense depending on your situation.

Once you’ve got a handle on how much money is coming into your household and how much remains by the end of the month, you’ll have a clearer picture of where you’re at right now.

• How much is left over at the end of the month?
• Does that amount represent what’s left after you’ve contributed to your savings and your investments?
• Do you have an emergency fund in place – that is, money stashed away in a savings account equal to at least three months’ of money to live on in case of emergency? (I personally encourage six months’ worth of savings. Been there, experienced that.) This is money you can use if the furnace conks out on Christmas day and you have to pay holiday rates to get a technician in to replace the thing.

If you’re not happy about the amount left over currently, you might want to reconsider your discretionary spending. For a great approach on how to prioritize spending, I recommend a values-based approach, outlined in The Copper Jar System: Your Blueprint for Financial Fitness, by Paul LaBarge and Alan MacDonald.

The what ifs

In my book Protect Your Purse, I discuss a number of “what if” scenarios that should be considered in order to protect yourself financially, but for right now we’re going to set those aside. Yes, it’s worth thinking about the impact of potential illness down the road, for example, but if you make the process too complicated out of the gate, you won’t do it.

You’re striving for good enough for now, not perfection. The key to taming stress is knowledge and action, not analysis paralysis.

Effective action

In their book The Confidence Code, authors Katty Kay and Claire Shipman demonstrate that the best way to get over a lack of confidence is to take action. Getting on with it and trying, even in the face of failure, beats inaction any day. And so it is with financial stress.

By working out your numbers in the process outlined above, you know how much money you have coming in on a monthly basis and how much you have left for discretionary spending. One of two things may happen as you do this: You might discover that you are going to be just fine at retirement and that you are indeed on track to meet your needs. That means that funds left over after all of your essentials are covered every month are for you to enjoy as you choose, guilt-free.

Here’s a suggestion for the left-over money: Create a fee-free chequing account called Fun Fund and tell yourself that you get to spend the contents however you choose without any remorse, guilt, or worry. You’ve covered your expenses, now go enjoy the fruits of your labour.

But what if in this process you discover that you’re not OK for retirement? Isn’t that going to create more stress? Perhaps temporarily, yes, but the reality is that putting off that discovery is only going to increase the level of fear down the road. As one woman in my research project put it, “I wish I had looked at this twenty years ago. Now I’m facing running out of money in less than ten years and I’m terrified. I don’t know what to do.”

If you do come to the realization that you need to increase your savings and investments, now is the best time to address that by reconsidering discretionary spending, growing your income, or both.

To date, I’ve walked a number of women through this process and the result is always the same: First, they realize that it’s really not that hard; and second, they feel so much better when they have a clear picture of what’s going on. If any issues pop up, they address them one at a time. The more action they take, the better they feel and the closer they get to that all-important goal of achieving peace of mind. And – also critical – the more they can fully enjoy the money they have to spend because they are not second-guessing themselves.

Don’t settle for stress.

For a more sophisticated approach to evaluating your readiness for retirement, consult a financial planner who is for-fee only (i.e. no vested interest in any products they recommend) and a fiduciary. The latter is a designation that ensures they are working in your best interest, not their own.