Many Americans are in debt and live paycheck to paycheck.
The basic living expenses are trending upward but wages are increasing at a much slower rate. It’s no wonder why money is a common problem for most people today.
According to a MarketWatch article, money is the biggest source of stress for Americans and it is seeping into our work lives. Based on this same article, many of the stress that comes from money may be impacting your health both physically and mentally.
So, how can we improve our well-being by forming a better relationship with our personal finances?
Here are 6 ways to reduce financial stress, so that you can live a more relaxed and healthy lifestyle.
1. Avoid keeping up with the Joneses by practicing gratitude
We often see our friends and peers who seem to be doing very well in life. Out of the blue, we see that they have the biggest house on the block (like HGTV style) and drive the most expensive cars.
We subconsciously think we need to be like them, or even better. So we head out and spend most of our money, or even getting ourselves into debt, just so we can buy those same lavish goods that we can’t afford.
At the end of the day, these material goods are causing us to become financially stressed because we are under the pressure of wanting more and more.
When is “more” ever enough?
The first step to fixing this is practicing gratitude and being happy with what you have. There are so many people who are less fortunate with no access to food, water, healthcare, education, Internet, etc. and would die to be in your shoes!
Instead of carrying a load of debt to keep up with the Joneses, you could be living within your means and saving a percentage of your paycheck for an emergency fund or retirement.
By doing this, your piggy bank will be happier and thank you for appreciating what you already have.
2. Pay yourself first
According to Fidelity, you should aim to save at least 15% of your annual pre-tax income for retirement.
Reducing financial stress and planning for retirement means that you’ll need to start saving now by paying yourself first.
Of course, every individual is different and the savings rate you set will depend on many factors such as your age, when you plan to retire, how much you’ve already saved, and what type of lifestyle you desire in your retirement years.
3. Create a budget and track your income and spending
Learn how to create a budget by tracking your spending. Along with that, understand your spending behavior.
In this step, you’ll want to track all your cash inflows which include any income and your outflows which are your expenses. While analyzing your expenses, try to find areas you can cut back on that won’t reduce your happiness.
For example, your daily Starbucks may make you happy and you decide to keep this expense, but what about those monthly subscriptions like Spotify that you forgot about and barely use?
By creating a budget and understanding where your money goes, you will be able to pay yourself first.
Overall, becoming more organized by creating a budget can help you avoid overspending and financial stress.
4. Make extra money to increase financial stability
Many people are financially stressed because they live above their means by keeping up with the Joneses.
However, some live above their means, not because they are keeping up with the Joneses, but because they just don’t earn enough to begin with.
Either way, finding ways to increase your income or making extra money can substantially improve your financial situation and reduce stress.
Earning more gives you more financial flexibility in many ways such as being able to save more, invest more for retirement, or fund the dream vacation you’ve always wanted.
After all, we all want to be able to afford a nice getaway so that we could relax and come back to work fully recharged, right?
5. Find the right side gig or job that will make you happy
Making extra money for the sake of earning more may not reduce financial stress if it’s something you don’t enjoy.
A quick tip when it comes to earning more is to find the right side gig, job, or business idea that will spark your interest and make you happy.
Being able to earn extra money and enjoy what you do is a win-win. Not only will this reduce financial stress, but it may also make you become a happier person.
Side gigs are all the rave today and creative ideas include starting a YouTube channel, selling on eBay, becoming an AirBNB host or flipping furniture for extra money.
There are tons of fun ideas for you to try when you do a simple search on the Internet.
6. Learn how to build wealth and manage your money
Another way to cope with financial stress is to learn more about personal finance and how to build wealth from nothing.
Before you start building wealth, it is recommended to get rid of all your debts. It’s no doubt that debt causes a lot of stress and problems for families, so be sure you learn how to pay off your debt before you save and invest for your future.
Slashing your debt and having a healthy savings account can help you sleep better at night.
Being rich and having all the money in the world does not always equate to happiness.
However, preparing for any financial disaster and building a healthy relationship with your money can help reduce financial stress and improve your lifestyle and well-being.
When you learn how to take control of your money (i.e. not have money control you or your life), you won’t be desperately waiting for the next paycheck to cover your bills. You also won’t lose sleep over a mountain of debt on your shoulders.
As a recap to reducing financial stress, keeping up with the Joneses may not make you happy in the long run. The first step to becoming happy is to be thankful for what you have and practice gratitude. Money doesn’t buy all happiness.
The next step to reducing your financial stress is to learn how to pay yourself first and create a well-organized budgeting plan. This will allow you to analyze your spending behavior and see what expenses you can cut.
At the same time, find ways to increase your income or earn extra money. When you’re looking for creative ways to make extra money, be sure it’s something that makes you happy and you enjoy doing.
Following a solid financial plan and accumulating wealth over the years will allow for a healthy retirement that is stress-free. By the time you know it, you’ll be smiling your way to financial independence.