Finances are often a cause of great stress. In fact, 73% of people are stressed about their finances, making it the number one cause of stress overall. This said, there are several ways to help manage and reduce financial stress in your life. Here are four ways to help reduce financial stress, and help you live a healthier future with your money.
Track and Budget Your Spending
Despite it being recommended for people to budget their spending, according to a survey by Mint, “65 percent of Americans said they don’t know how much they spent last month.” While using a digital app such as Mint is an option for budgeting, a majority of people prefer to use a
pen and paper.
Start by calculating your total monthly income; any source of income received on a monthly basis, whether it comes from a salary or a side hustle, should be included. Once you get an understanding of your monthly income, get a rough estimate of your monthly expenses such as car payments, rent, food, and entertainment. This allows you to see the difference between the two and gives you an idea of the surplus or deficit in your spending.
Use this to plan out your future moving forward. Depending on your financial timeline, you could be looking at saving for a new car, buying a home, or planning for your soon-to-be retirement.
Reduce Financial Stress by Expecting the Unexpected
As cliche as this may be, it’s still a vital part of reducing your financial stress. From something unexpected, such as a sudden need for home repairs to medical bills, these unforeseen expenses can be financially devastating for those not prepared.
Creating an emergency fund is a great way to help keep track of the money you have for unforeseen expenses. Oftentimes, it’s recommended that you create a separate bank account specifically for covering these unexpected bills. The dual bonus of this idea is having the ability to keep better track of the fund while also reducing the temptation to dip into that account before
Prioritize Your Debt (Most of the Time)
While debt is often frowned upon by people, if used properly, it can be a great financial asset. There are “good” and “bad” types of debt, but the main concern is to never get in too far over your head.
If you’re looking to make larger purchases or actions, even down the road, it’s important to make sure you have a good credit score to buy a house, or to take out student loans. For those who are currently paying back their student loans, creating a student loan payment plan is important to help keep you on track and rid yourself of those pesky financial burdens.
Debt is often one of the first things you should be paying down in order to relieve financial stress, as it accrues interest on the principle, which you have to pay. Once you’ve completed your budget, you can find out how much per month you’re willing to contribute toward your debt payments.
You can also use a debt calculator to find out how long it’ll take for you to pay off your debt depending on factors such as timeline, interest rate and payments!
There are a few exceptions to this, as sometimes your debt has a low enough interest rate that you would be better off paying the minimum amount per month, and investing your money earning 8 – 10% in the market. Debt is highly individualized, but it’s important to make sure
you’re choosing the right plan of action for yourself.
Set Up Automatic Payments and Savings to Reduce Financial Stress
Pretty much everyone these days has a debit or credit card, but without using cold hard cash, it can be easy to get carried away with spending habits. With a credit card that has a high enough limit, you’re able to spend more than you actually have, which can lead to more debt. It’s important to treat every purchase you make with a credit card as if you were using cash.
When you look at your balance, don’t just pay the minimum amount each month, do everything in your power to pay it all off.
One of the easiest ways to make sure you do this each month is to set up a recurring payment option. Almost every single provider has this option and will allow you to automate your monthly payments by either choosing a set amount you want to pay each month or simply the “full balance,” which is highly recommended.
Similarly, many employers offer the ability to take a specific sum out of your paycheck and have it automatically deposited into a savings account. Many banks or credit unions also offer this as an option, and it can be a great way to help you save money without having to take any actual action each time!
The financial world might be filled with a lot of fine print and jargon, but even without in-depth knowledge you can take steps to help simplify and control your finances. While your credit score won’t magically increase, over time taking some of these actions can help level out some of your financial worries, and help put you on the right path towards a sound financial future.