Financial stress is unpleasant to endure, and it can be a detriment to your quality of life. In fact, the longer you suffer financial anxiety, eventually, it can wear down your health and even cause you to make worse financial decisions, which in turn, will only create even poor financial wellness, which will then make you tenser. But worrying about your money doesn’t have to be a burden that you carry indefinitely. Here are six practical ways to mitigate your financial stress.
A financial advisor could help you create a financial plan to get on a stress-free path to managing your money.
1. Analyze Your Finances
Frequently we fear the unknown. You may know that your finances look bleak at the moment, but have you forecasted how the next few weeks or months will go? Maybe you have, and that’s why you’re financially stressed. Look to see if the funds in your savings account can shore up any financial gaps that you may need to fill.
To truly understand your finances, however, you’ll want to put some time aside to look at the big picture and conduct what many financial advisors call an FNA, or financial needs analysis. Ideally, you’ll want to compile your net worth, which means adding up your income and assets and looking at your expenses and liabilities, such as your debts. You should also write down your short and long-term goals and look at the big picture. That is, see if you seem to be on track to achieving your financial goals, and if not, what you need to change in your finances to be successful.
It is possible that you’ll analyze your finances and feel worse, but even knowing things are as grim as you believed can ultimately improve your mood. Because now that you truly understand how bad things are, you can work on forging a plan to improve your finances.
2. Create a Plan to Improve Your Financial Picture
Building a financial plan to make more money or pay off more debt, or to do both, may not immediately put you at ease. After all, you don’t know if the plan will work. But having a strategy in place to improve your money situation should make you feel better pretty quickly – and if it’s a good plan, simultaneously improve your finances.
And so how can you create a good financial plan? You’ll want to tinker with several issues.
- Timing. What parts of the month do you have the least money? Can you change some of the dates that you make payments for monthly bills? Are you forgetting to pay some bills? In that case, you should consider automating some bills so that they’re automatically withdrawn from your bank account. Building a financial picture can involve setting a schedule for your bills efficiently every month.
- Cutting expenses. It may be that you’re simply spending too much. If getting a side job isn’t feasible and asking for a raise isn’t in the cards, it may be time to rely on some old cost-cutting standbys, such as start downloading and collecting coupons before going to the supermarket. You also might want to comparison shop for insurance (such as health and car) and see if you find good insurance but with smaller premiums. Refinancing loans can also be a good way to reduce expenses, though with interest rates climbing lately, that may not work out too well right now. Finally, there may be something in your monthly budget that you simply don’t need to spend money on, like a gym membership you keep meaning to use but never do.
- Find a way to pay off debt. You may also want to take a closer look at your credit cards. Could you transfer credit card debt to a credit card that offers a 0% intro APR for a year or longer? If you can, you could take your time paying off the debt. If that doesn’t work, you could also call your credit card company to work out a payment arrangement that fits your schedule and finances.
- Work on saving more money. If you don’t have much extra cash, the suggestion that you save more can be off-putting. But if you’re able to cut expenses and pay off debt, ideally, any excess revenue should be steered into an emergency fund, a savings account and, of course, retirement accounts — to help you in the future. The reason people often find themselves low on cash is because, in the past, they weren’t putting enough away for future and often unexpected expenses.
If you feel that you aren’t very knowledgeable with money matters, you may want to create a plan with a partner or a financial advisor or a credit counselor.
3. Ask For Help
Along with creating a financial plan, you may need to request assistance from creditors. If your financial stress is due to having to make late payments, for instance, it may be best to ask for an extension.
But generally speaking, utility companies, hospitals, mortgage, auto and student loan lenders often will work with customers to keep them on the right financial track. If you tell the people who are in a position to help that you need help, they may offer solutions for you that you didn’t know existed.
4. Game Out Worst-Case Scenarios
This might sound like the last thing you should do, but it’s really a helpful strategy. When you plan out the worst-case scenario financially, you’re giving yourself time and expectations that are realistic. It allows you to plan ahead in case the worst event occurs.
You may find that if you look at what the most realistic worst outcome is if, for instance, you can’t pay certain bills on time. You may realize that the worst outcome is not quite as bad as you feared.
It also reduces stress and the risk of a surprise if things don’t go your way. Analyzing a worst-case scenario financially gives you the opportunity to be prepared.
5. Set a Budget
There is long-term financial stress and short-term financial stress. And a good, realistic budget often can help with both.
For instance, if you’re feeling financial stress about your long-term future because you haven’t saved enough for retirement, setting a budget – or improving your budget – could allow you to put more money toward retirement. (Using a free budget calculator can be a smart way to create a budget.)
If you haven’t set up a 401(k), an individual retirement account, such as a Roth IRA or a traditional IRA, or any retirement accounts, and that distresses you, a well-crafted budget may determine that you have money to open up a retirement account. Having done that, your financial stress may start to ease.
On the other hand, if you’re anxious in the short term because you feel like you’re living paycheck to paycheck, setting up a budget and following it carefully could eventually ease your financial stress.
6. Find a Way to Earn More Money
Easier said than done, but maybe it’s time to ask your employer for a raise. If you typically get a large tax refund after filing your taxes, it may also be a good idea to discuss with your employer adjusting your W-4 form and having less tax taken out of your paycheck. Or you may want to consider starting a side business. Or hold a yard sale.
The Bottom Line
Financial stress is inevitable. Everybody experiences it at some point. But it isn’t healthy to live with it indefinitely. You should do what you can to minimize it. But it can also work in your favor. If you start to feel financial stress, that may be a sign that something is wrong with your finances. And it’s time to fix whatever problem you have. Of course, it’s also possible that you’re too careful with your money, and that you never use it to treat yourself, and that is causing financial stress. If that’s the problem, the solution is both easy and fun. Go buy yourself a gift.
Retirement Planning Tips
- Working on a financial plan with a financial advisor is key to reaching and maintaining your retirement goals. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- SmartAsset’s free 401(k) calculator can help you estimate how much your retirement savings can grow over time.
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