Regardless of your income level, you’re probably affected by financial stress. Whether you’re trying to get out of debt, protect your investments or save up enough to retire or send your kids to college, money often causes anxiety.
In fact, nearly 23 percent of millennials say financial anxiety makes them physically ill weekly or monthly, according to research from Northwestern Mutual. More than half say they experience high to moderate anxiety about losing their jobs, and another 24 percent say financial anxiety affects their relationship with a spouse or partner hourly, daily, or weekly.
“Money isn’t easy,” says Doug Hughes, partner and lead consultant at Comprehensive Financial Consultants, based in Bloomington, Indiana. “Financial stress comes from a feeling of falling behind and continuing doubts that personal financial goals will not be met.”
For example, if you are 45 years old, want to retire at 67, and get paid bi-weekly, you have 572 paychecks “to pay off your mortgage, put your children through college, save for your retirement, and enjoy life,” Hughes says. “This creates stress.”
For many people, financial goals seem out of reach, the job market may feel unstable, and the stock market seems unpredictable. In addition, many people go into debt to create lifestyles they can’t afford, “committing future paychecks to pay for their current lifestyles,” Hughes says.
Finances are uncertain, which can understandably cause anxiety. But nobody has to live like that. Take some strategic steps to create a more secure financial situation, and you’ll likely bid farewell to those worries.
Build an Emergency Fund
Work to save up three to six months’ worth of cash reserves, even if you have to start by saving $20 a week or less.
“I can’t even begin to tell you how stressful it could be if you don’t have any cash set aside for expenses,” says Byron Ellis, a certified financial planner and managing director at United Capital in The Woodlands, Texas. “What if you need new tires for your car? If you have an adequate cash buffer, you can go on with life as usual and take care of it because you have the cash available, (which) will automatically reduce your stress.”
Spend Less Than You Make
“This is the biggest stressor out there,” Ellis says. “Many people continue to spend more than what they make, and as a result, their cash reduces to zero and their credit card debt goes up, which automatically puts them in a 24/7 stress-inducing environment.”
To avoid the stress of never having enough money and going into debt to keep bills paid, create a simple budget and stick to it. While it can be difficult to resist overspending in our consumerist society, stay focused on how a stress-free life will be much more satisfying than the cute pair of shoes, weekend trip, or whatever else you want that isn’t in the budget.
Become a Saver
Even after you’ve built up an emergency fund, make saving a way of life. Ellis recommends working up to saving 10 percent to 20 percent of your income.
“The trick is to make savings a mandatory ‘bill,’” says Joe Toms, president of Freedom Financial Network’s Freedom Financial Asset Management business unit in San Mateo, California. “Some financial institutions let you arrange automatic withdrawals from your checking account to a savings account. Also, check with your employer for automatic deposits into your savings accounts. Record this expense like a bill every month to painlessly accumulate savings. If necessary, start with a small amount like $25 or $50 per month and increase it whenever possible.”
Create a Financial Plan
A simple monthly budget is essential for building a stress-free financial life, but to continue warding off money anxiety, you need a longer term plan. Start by “looking at your current situation (and) analyze the cash flow that comes in… and the cash flow leaving,” says Ben Barzideh, wealth advisor at Piershale Financial Group in Crystal Lake, Illinois. “Then build in some goals for the future and fill in your assets and some growth assumptions. The plan will be a blueprint for how much you will need to live comfortably now and into retirement.”
Start by developing a five-year plan, recommends Jim Wiley, CEO and chief investment strategist at Wiley Group in Conshohocken, Pennsylvania. “Figure out exactly what you want out of life for the next five years, whether that’s a career change, saving for college, or whatever,” Wiley says. “Most people never stop to think about the financial tradeoffs they need to make to accomplish the things they really want to achieve. Give yourself the gift of your own attention, and then you won’t be reacting, you’ll be navigating — living an intentional life based on thoughtful decisions and plans.”
If you delay opening bills because you don’t want to deal with them, you’re not helping ease your financial anxiety. Rather than avoiding bad news, open all mail (including bills) upon arrival, Toms advises.
Pay bills immediately or create a simple system — such as a desktop folder, online calendar, or app — to make sure you pay each one on time. And check your bank account balances daily to keep track of how much you’re spending, how much you’re saving, and whether you need to tweak your monthly budget.
Eliminate Debt — Especially Credit Card Debt
Aside from payday loans, credit card debt is the most expensive debt for consumers, Toms says. “With interest rates rising, the cost of carrying credit card debt is only increasing,” he adds.
If you’re carrying credit card debt, it’s likely a source of financial stress — so commit to paying it off. For many people, a personal loan is a viable option. “These loans typically have fixed interest rates [that are] less than most credit card rates and terms, so costs are fixed, meaning they will not go up if market interest rates rise,” Toms says. You will also benefit from set time frames and payment schedules that help enforce repayment discipline.
This approach “is less costly than making minimum payments on a credit card,” Toms adds. “As long as you make the required monthly payments, you will pay off the loan within a specified period of time.”
Seek Additional Funds
When you have specific goals in mind, more money may be necessary. If that’s the case, think about how to bring in more cash.
You can free up money by cutting out nonessentials or buying less expensive items. “Is it necessary to buy bottles of water when you can just get it out of the tap?” Wiley asks. “Think about the money you spend buying flowers to plant in the spring. Maybe you could forego those flowers and put an extra $150 in your kid’s college account or toward another goal. If you’re purchasing a new couch, think about getting one that’s less expensive and be satisfied with the financial tradeoff because the money you would have spent on a pricier couch can go toward another goal.”
In addition to cutting back, you can create more income by getting a higher paying job, adding a side gig or second job, or starting your own business.