Financial stress can affect your psychological health. Many people with money problems develop depression, anxiety and excessive worries, leading to debilitating pressure that impacts their quality of life and relationships. This roundup of seven tips on managing financial stress can help you navigate money challenges effectively.
1. Find the Source of Money Stress
First, you must be aware of your financial situation and make a plan to resolve it. Find the root cause of your trouble. Are you living paycheck to paycheck because of debts? Is it because you lost your job? Roughly 90% of Americans confirmed money impacts their stress levels.
Several factors come into play in this pressure. Piling debts, zero savings, losing jobs and rising health care expenses are known catalysts for financial distress. In the past 10 years, the average out-of-pocket hospital expenses have increased by about 71%, equivalent to $6,015 out-of-pocket costs each year. Besides health care, there’s also inflation and rising costs of basic needs. The first step is identifying the underlying cause and creating a blueprint solution for the issue.
2. Create a Budget
Money problems are among the top reasons couples argue due to the difference in spending and saving habits. One might be more inclined to save, while the other likes to spend. Sit down with your partner to discuss finances and create a budget plan.
Financially secure people have a budget roadmap they follow all the time. Review your finances and consider these few points when creating a financial plan.
- Cut expenses if you’re spending more than you earn.
- Check for refinancing options for existing loans.
- Pay your expenses in cash or debit cards — not credit cards.
Many people find the 50/30/20 budget rule an excellent budgeting method, providing a simple baseline for dividing your paycheck into three parts. You allocate 50% for needs, 30% for wants and 20% for savings and debt repayments. With a budget, you can cap your expenses, improve your financial outlook and manage financial stress.
3. Avoid Relieving Stress by Spending
When stressed, do you dine out, shop or pamper yourself at a spa? Although rewarding yourself is justifiable, finding a coping mechanism that doesn’t burn your cash is in your best financial interest.
Unless you have set aside dollars for these indulgences, stick to free stress relievers, such as reading a book, watching a movie at home or enjoying a warm bath. It’s counterproductive to spend on restaurant meals or stunning gel nails when you get financially stressed in the end. Learn how to deal with financial stress the right way.
4. Build a Contingency Fund
Stashing away at least three to six months’ worth of living expenses can offer peace of mind. If you’re laid off from your job or need to replace a broken burner, you have money to pay for future expenses without taking on debts and paying interest.
Open a separate bank account for your contingency funds. Next, determine how much you need every 30 days for living expenses and multiply it by six months. Create a timeline of when you can reach this savings goal and commit a portion every paycheck until you build three to six months’ worth of financial buffer.
5. Increase Your Income
An easy tip for managing financial stress is to maximize your earning potential by taking a part-time job, creating a sideline business or working overtime. Try applying for freelance gigs if you have a skill or service you can monetize. You can also sell something online.
It’s easy to earn money nowadays, so you’ll find several options to boost your income. By elevating your monthly cash flow, you’ll have a few hundred bucks extra to pay down debts or add to your savings.
6. Automate Your Finances
Late bill payments that accumulate interest are a huge source of financial stress. While missing your card payment due date for a day doesn’t affect your credit score, you’ll have to pay a penalty of up to $41 if you fail to settle your balance before 5 p.m. of the due date. Scheduling reminders for payment due dates may help, but it can still slip your mind if you’re busy.
A good strategy for managing financial stress is to set up your finances on automatic debit to address late payment issues. You can also use this feature for savings. It’s easy to track your finances by authorizing the bank to auto-deduct bills and savings from your account.
7. Seek Help From a Finance Professional
While it’s everyone’s responsibility to manage their money, it takes financial skills to budget, encode and balance the figures in your spreadsheet tracker. It’s OK to admit you need help.
Financial advisors are trained and experienced with money management. They can assist you and give ideas on what areas to work on to improve your relationship with money. In addition, they can create the best plan to achieve your goal, whether to zero down your debt, build an emergency fund or find a good investment. By asking for help, you can get expert advice, make better financial decisions and save yourself from future stress.
Learn How To Deal With Financial Stress
Managing your finances is a skill everyone must learn to improve their financial situation and stave off psychological stress caused by debts, interests due to late payments and the lack of funds during emergencies.
By creating a budget, building savings for unanticipated expenses and working with a financial professional, you can better understand where you stand regarding your financial situation and know the next best steps to take to secure your future.
Beth is the Managing Editor and content manager at Body+Mind. She shares knowledge on a variety of topics related to nutrition, healthy living, and anything food-related. In her spare time, Beth enjoys trying out new fitness trends and recipes.