How to attack money stress and find financial freedom
If money stresses you out, you aren’t alone.
In fact, research from Northwestern Mutual shows that money is the primary source of stress for 44 percent of Americans. That’s nearly double the amount who blame personal relationships (25 percent) and triple the number who identify work (18 percent) as their biggest stressor.
But it doesn’t have to be like this. With the right approach to spending, saving, and investing, you can establish confidence in your finances and discover the freedom that comes from being in control of your finances.
6 Tips for Squashing Financial Stress
Financial stress starts off as a small gnawing feeling in your stomach, but can quickly transform into something worse. It’s been known to lead to depression, anxiety, migraines, ulcers, digestive issues, high blood pressure, heart attacks, and disrupted sleep – just to name a few side effects. Don’t let it get to this point!
Here are some ways you can squash financial stress right away:
You can’t do anything until you sit down and get clear on exactly what your current financial situation looks like. This means:
- Reviewing your paycheck to verify earnings and withholdings
- Making a spreadsheet of all financial accounts and assets
- Gathering all information about outstanding bills and debt
- Reviewing any other important financial information
Depending on how disorganized your finances are, it could take a couple of weeks to track down all of this information. Be thorough and don’t overlook anything.
Develop a Spending Plan
The next step is to tell your money where to go. This involves creating a spending plan.
A spending plan – or a budget, as many people call it – precisely lists off income and expenses. This ensures you never spend more than you make in any given month. It also allows you to direct your money to the expense categories that matter most.
A spending plan is great, but it won’t do you any good if you don’t cultivate the discipline required to actually follow through with it.
If you’re serious about staying on track, you should set up parameters that force you to stay in your lane. To prevent overspending, try using prepaid debit cards. The advantage of these cards is that you only spend money you have. Plus, you can set a limit ahead of time – which means you won’t deplete your bank account. Once you’ve spent everything on the card, you can no longer use it.
Pay Down Bad Debt
As part of your spending plan, you should prioritize paying down bad debt. This includes things like student loans, car loans, credit cards, medical bills, home equity loans, payday loans, personal loans, and IRS debt. (Your mortgage, small business debt, and a few other types of loans are more acceptable.)
Build Up an Emergency Fund
Nothing stresses a household out quite like living paycheck to paycheck. The best way to avoid this problem is to build up an emergency fund.
“An emergency fund is a readily available source of assets to help one navigate financial dilemmas such as the loss of a job, a debilitating illness, or a major repair to your home or car,” Investopedia explains. “The purpose of the fund is to improve financial security by creating a safety net of cash or other highly liquid assets that can be used to meet emergency expenses, as well as reduce the need to draw from high-interest debt options, such as credit cards or unsecured loans—or undermine your future security by tapping retirement funds.”
Most financial advisors suggest having at least three to six months’ worth of expenses tucked away in an emergency fund. Depending on your income, it could take you a while to build up this amount of money. Be patient and try to pile up cash each month.
Increase Your Income
The final piece of advice is to increase your income. Whether it’s seeking out promotions at work or adding side jobs, a larger income gives you more financial flexibility. The key, however, is to keep your expenses relatively stable. All extra cash should go towards saving and investing.
Take Charge of Your Money
There’s no reason you should be irresponsible with your money. Whether you have a few dollars to your name, or you’re an out of control millionaire, it’s imperative that you take charge of your money once and for all. In doing so, you’ll discover the freedom that comes from financial stability and peace of mind.