With each new year comes the opportunity for new beginnings with your job, career, relationships, hobbies, health, and even money. If you’re tired of being weighed down by financial stress and anxiety with bills, saving, spending, and debt, what better time than now to develop a proactive plan for finding peace?
What is Financial Stress?
“The Science Team at Happy Money, led by Chief Science Officer Dr. J. Galen Buckwalter, have identified a disorder affecting 23% of all Americans that they’re calling Acute Financial Stress (AFS) — when stressful financial situations cause negative impacts on your thoughts, feelings and behaviors that match the diagnostic criteria psychologist use to identify people with PTSD,” Payoff.com mentions.
Financial stress often starts very small and innocent – a single missed payment or an irresponsible splurge on a purchase you can’t afford. But before you know it, financial stress starts to snowball and compound.
It’s one thing to be a vigilant of your financial situation, but it becomes dangerous when you start to experience emotional, psychological, and physical symptoms of stress and anxiety. If you’re experiencing financial stress, you need to do something about it.
Tips for Reducing and Eliminating Financial Stress
We all experience financial stress in different ways. To some, it’s merely an inconvenience. To others, it’s a serious threat to physical and mental health. But regardless of where you land on the spectrum, here are some tips you can use to reduce financial stress and find peace of mind.
1. Identify Your Triggers
As is the case with any stress, it’s important to begin by identifying the causes of your stress. With financial stress, common triggers include lack of income, inability to save, high levels of debt, constant contact from debt collectors, retirement, or spending.
Depending on your personality and personal circumstances, the triggers you deal with may be different than the next person. Do your best to identify yours so that you can develop a tailored approach.
2. Create a Budget
The “B” word – budgeting, that is – is at the heart of smart personal finance. If you’re going to get a grip on your situation and reduce stress, you need a budget. It’s best if you develop both an annual budget and a monthly budget.
“Begin by gathering your paystubs from the past 12 months and adding up all your net income sources,” RISE advises. “Your net income is your income minus taxes and deductions. If you have a full-time job, you may have only one income. If you freelance or have multiple income sources—say you drive for Lyft but also maintain an Etsy store—make sure to include all of them. Income can also include things like child support, social security, and interest and dividends earned from investments.”
Next, gather credit card and bank statements, bills, and receipts from the past year. You’ll use this to estimate your annual expenses. Based on this information, you can determine a rough estimate for how much money you’ll earn and spend this year – allowing you to create a budget.
Finally, based on the annual budget, you can break everything down into 12 monthly budgets (which may be revised throughout the year to account for changing needs).
3. Build Up an Emergency Fund
Few things are more stressful than living paycheck to paycheck. But until you save up enough money to have cash in the bank, this is exactly what you’ll be doing. A well-stocked emergency fund will eliminate this point of anxiety.
An emergency fund should consist of enough money to cover three to six months of your basic living expenses. It’ll take some time to reach this goal, but begin setting aside some cash from each paycheck and you’ll eventually get there.
4. Eliminate Debt
Debt is nothing more than a tax on your poor financial state. While there’s a time and place for certain kinds of debt – such as a modest mortgage – car loans, credit card debt, and student loans need to be paid off as quickly as possible. Be sure to make room for these payments in your budget.
Putting it All Together
Financial stress is unhealthy and unnecessary. By stepping up and being more proactive with how you earn, manage, spend, save, and invest money, you can limit the stress and anxiety you experience in this area. What are you waiting for? Now’s the time to act.