6 Ways to Manage Financial Stress
Money stresses people out. It is—and always has been—a common source of anxiety for many. Today, as Americans face inflation and a higher cost of living, many are feeling even more stressed than usual.
When stress is constant, it can negatively impact your physical and mental health. Fortunately, money stress is manageable and there are steps you can take to lower your anxiety and improve your daily life.
Financial anxiety often brings financial avoidance. If you’re stressed about money, you may find it difficult to look at your finances. You may avoid checking your bank accounts, have trouble sticking to a budget, or put off any tasks related to money. Unfortunately, ignoring your finances often leads to more issues, resulting in more stress. You can regain control, however, by facing your problems head on.
The first step you can take to manage your stress is to figure out the sources of financial stress in your life. Step back and take an honest look at your finances. What’s making you anxious? What specific issues are causing your stress? Make a list of your biggest money stressors. Determining the root of your stress will help you move forward and find solutions.
Create a Budget
The easiest way to lower your stress and get your finances in order is to make a budget. A budget is a plan for your money, and it serves as a guide to help you stay on track with your spending. When you have a plan, know how much money you have, and know where your money is going, you’ll feel more in control of your financial situation.
There are many apps and online tools to help you create a budget, or you can use a spreadsheet document. To start your budget, follow these tips:
- Calculate your monthly net income, the amount you take home every month after taxes.
- Next, list all your monthly expenses. Include everything from your rent or mortgage payment to groceries and dining out.
- Calculate the difference between your income and expenses and make sure you’re not spending more than you make.
Once you better understand your spending habits, you can look for ways to shift some of your money to the areas triggering your financial anxiety.
Make the Most of Your Income
After you’ve created your budget, it’s time to examine your spending so you can identify areas where you can save. To make the best use of your money, consider the following tips:
- Look at your budget and/or other financial documents like bank statements to understand your spending patterns.
- Categorize your expenses into needs and wants, and then look for ways to reduce your wants list.
- Review your recurring expenses. Look for any duplicate expenses. Are you paying for similar streaming services? Similarly, are there memberships or subscriptions you hardly use? Consider canceling these services.
Build Your Emergency Fund
Life is full of surprises. Regardless of how careful you are with your money, an unforeseen expense can hit your wallet hard. Having money set aside for emergencies can significantly ease your financial stress. If money is tight and building an emergency fund feels daunting, start small. Setting aside a small amount for emergencies will help you in the long run. Over time, you can build a more robust emergency fund. When you have enough money to save more, aim to have three to six months’ worth of living expenses in your fund.
- Before you start contributing toward other savings goals, prioritize building your emergency fund.
- Use your budget to calculate how much you can put toward your emergency fund after your expenses are covered.
- Use your budget to calculate what three to six months’ worth of living expenses looks like for you.
Work on Reducing Credit Card Debt
Credit card debt is often a major source of financial stress. It can be easier to get out of debt if you have a plan to follow. There are a few popular strategies you can use for managing your debt.
The snowball method focuses on paying off your smallest debts first. This method may be useful if you feel overwhelmed by your debt, need help finding motivation, or if your debts have similar interest rates. Here’s how it works:
- Arrange your credit card debts according to their balances, from smallest to largest.
- Pay the minimum payment on every debt.
- Allocate any extra money to pay off your smallest debt.
- Once the smallest debt is paid off, move on to the next smallest debt.
- Continue the process until you’ve paid off all your debts.
The avalanche method prioritizes paying off your debts with higher interest rates. Here’s how it works:
- Arrange your credit card debts according to their interest rates, from highest to lowest.
- Pay the minimum payment on every debt.
- Allocate extra money to pay off your debt with the highest interest rate.
- After you pay off the debt with the highest rate, move on to the debt with the next highest rate.
- Continue the process until you’ve paid off all your debt.
Ultimately, the best strategy is the one you’re most likely to stick with until your debt is paid off.
Seek Additional Help
Sometimes managing your finances can feel too overwhelming to deal with on your own. Luckily, there are people who can help you. A financial advisor can provide guidance and tools to help you reach your financial goals and manage your money.
If you need help paying off debt, consider seeking help from a credit counselor. The Federal Trade Commission and National Foundation for Credit Counseling offer advice for choosing reputable counselors among other resources. Lastly, friends and families may be able to offer their support. All in all, remember there is no shame in reaching out for help if you’re struggling or need extra assistance.