According to a survey by Northwestern Mutual, money is the leading cause of stress for 44% of Americans, as compared to personal relationships (25%) and work (18%), which round out the top three.
A separate survey conducted by Varo Money, Inc. found that 30% of Americans say that are “constantly” stressed about money.
With money-related stress impacting so many people, it’s important to understand what can be done to reduce that stress. Here are some tips that can help.
An emergency fund is savings that you have set aside for something unexpected. This money is not to be touched unless there is a true emergency. Most financial experts recommend having enough money in an emergency fund to cover your living expenses for about 6 months.
We don’t like to think about the situations that would make this emergency fund necessary, but the reality is, these things can happen at any time. Whether it is because of an unexpected job loss, sudden health issues, or family-related problems, having money set aside can make the difference between getting by and racking up huge amounts of debt.
One of the biggest money-related problems for many people is simply not knowing where their money is going. Tracking your expenses will show you exactly how you are spending money, and with a just a small amount of effort you can identify some areas where you can easily cut back.
In some cases, tracking expenses may even give you some comfort. It’s possible that you’re doing better with your money than you expect, but if you don’t know where your money is going, you won’t know that.
After you’ve tracked your expenses and you know exactly how much you are spending in different categories, you can create a monthly budget that will help you to live within your means.
If you are married or in a committed relationship, open communication is critical. Too many couples are stressed about money, so they simply avoid talking about it. Not talking about money will not make the stress go away, and it definitely won’t help to fix the root issues.
Both partners need to be open and willing to talk about goals, fears, and issues in daily life related to money. When you’re both on the same page, you’ll have a much greater chance for success.
Often times, simply talking about it will help you to feel better. Many experts suggest having a set time for weekly or monthly talks to go over financial issues together.
For couples and families, living on one income instead of two can go a long way towards reducing stress. That doesn’t mean that both partners will or will not be working, but even if both of you are working, it’s ideal if you only use one income to cover living expenses.
If you’re able to live on one income and save the other, you will be able to very quickly pay off debt and build up savings. You’ll also have greater flexibility for one of you to change jobs or quit, if needed.
It’s not easy, but there are some steps you can take towards living on a single income.
When it comes to money-related stress, most of the advice you’ll hear involves learning to manage your money better or saving a higher percentage of your income. Those things are great, but making more money is an effective option too.
You could possibly make more money at your current job by getting a raise or working overtime (if it’s available to you), but a growing trend is to start a side hustle. A side hustle is anything that makes you money outside of a job, and there are countless possibilities.
The gig economy has opened up ways to make money by working as a rideshare driver, making deliveries, walking dogs, and so many other ways. There are also many ways that you can turn a hobby into a source of income, which is an ideal option for many people.
You don’t have to make a huge amount of money with a side hustle in order for it to impact your finances. An extra $300 per month ($3,600 per year) would have a huge impact for many individuals and families, and that amount is very attainable.
If you’re struggling with money-related stress, try following these five tips to increase your comfort level.
Photo credit: Lukas