From the global pandemic to the rising cost of consumer goods due to inflation, the past couple of years have not been easy on the wallet. Most people have been negatively affected by the current economic climate, and it’s taking a toll on mental health.
According to a 2022 poll by the American Psychological Association (APA), 65% of respondents identified money as a significant source of stress. Financial stress can lead to migraines, insomnia, depression, anxiety, unhealthy eating habits, and more.
While many causes of financial stress can be attributed to external factors, there are ways to mitigate it and improve your financial security. Here are five strategies to help you manage financial stress and take control of your money and future.
1. Identify your main sources of financial stress.
Often, financial stress and anxiety lead to financial avoidance. If you are stressed about money, you may find it difficult to examine your finances. You may avoid checking your bank accounts, struggle to stick to a budget, and put off any responsibilities that involve money. Unfortunately, ignoring your finances typically leads to more issues, resulting in more stress. To regain control, however, you must confront your problems head-on.
The first step toward financial responsibility is figuring out the primary sources of financial stress. Whether it is credit card debt, insufficient income, or upcoming bill payments, identifying the causes of your stress will help you determine your next move.
Write a list of your biggest financial challenges, but keep it short to avoid feeling overwhelmed. Then, go over your list every three to six months or as your financial situation changes.
2. Create a realistic monthly budget and track your spending.
A budget is an effective tool for understanding and gaining control of your finances. It helps you in deciding when and how to spend your hard-earned money. Having a spending plan ensures you cover your immediate expenses while contributing to your savings goals.
Planning and sticking to a budget can be challenging at the start, but once you know what to do, you can cut down the time you spend on budgeting and, as a result, cut down the time you spend worrying about money.
Create a budget that fits your monthly income. Write down all your expenses, from rent and utilities to food and groceries, and set up automatic payments for recurring bills. Use a spending tracker or money management tool to monitor your progress, gain insight into your spending habits, and discover new ways to curb unnecessary spending.
3. Save money whenever and wherever you can.
Saving money provides a financial safety net for life’s uncertainties, giving you a sense of security and peace of mind. While building this habit is not easy, anyone can achieve financial freedom with hard work and discipline. Even incarcerated individuals practice money-saving habits to take care of their financial obligations despite being behind bars.
Set up a designated savings account to lower the likelihood of using your savings funds to cover daily expenses. Consider automating your monthly savings contributions if you have a fixed income. Automating your contributions is a fantastic way to ensure you save and invest without giving in to the temptation to use the money for unnecessary expenses.
4. Set up an emergency fund.
An emergency fund is a savings account designed to cover unanticipated expenses and financial emergencies such as car and home repairs, job loss, unemployment, or illness and treatment. Although a car repair can be costly and stressful, knowing you can use your emergency fund to pay for it alleviates a lot of the stress.
Building an emergency fund may seem daunting at first, particularly if you struggle to make ends meet every month. To start, you can set aside a small amount each month, whether it’s $10, $20, or $100. You could also try selling any unused items you have lying around the house to make more money. Prioritize saving for three to six months of living expenses before focusing on long-term savings goals.
5. Be strategic about reducing your debt.
Credit card debt is a major source of financial stress for many people. With a debt repayment plan, you can motivate yourself to make scheduled payments while feeling secure in the knowledge that you are moving closer to your financial goals.
There are two popular debt repayment strategies to help you pay off your debt efficiently: the avalanche method and the snowball method. The avalanche method prioritizes paying off the cards with the highest interest rates, saving you the most money on interest and allowing you to become debt-free as quickly as possible. The snowball method, on the other hand, prioritizes paying off your smallest debts first. It is helpful if you have balances on multiple credit cards and want to build motivation by settling smaller debts fast before tackling larger ones.
Both debt repayment strategies can help you regain financial independence. Ultimately, the best approach is the one you’re most likely to stick with until you’re completely debt-free.
While it may be impossible to solve your financial troubles overnight, you can begin planning for success today. Ease your financial stress and anxiety by tackling each challenge one at a time so you don’t overwhelm yourself.
However, if you feel your financial burden has become too heavy to bear, it is crucial you share your concerns with others. Reaching out to a trusted friend or loved one can help you relieve stress, obtain a fresh perspective on how to get your money problems under control, and stay optimistic about your finances.