Seven ways to manage your financial stress

VaselineAugust 23, 2024

0 6 minutes read

Seven ways to manage your financial stress

Financial stress is not a new concept. From high levels of debt to living paycheck to paycheck and not having retirement plans handy, financial problems have become one of, if not the, most notorious. THE most notoriously, the cause of increased stress levels worldwide.

Since financial stress is a leading cause of physical and mental health problems, finding ways to manage financial stress is important now more than ever. If you’re not sure where and how to start, don’t worry. The fact that you are reading this right now is already a good start.

In this article, we’ll discuss the impact of financial stress, how to manage stressful financial situations, and ways you can deal with your financial situation.

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Financial stress and its impact

According to a 2023 CNBC survey of 4,000 US participants, 74% indicated they were stressed about their personal finances, and 61% said they were “living paycheck to paycheck.”

In a 2024 Bankrate survey, 65 percent of participants said financial problems caused by economic factors negatively impacted their mental health—the top cause being “having difficulty meeting day-to-day expenses.”

The impact of financial stress is evident in every survey and study. One after another, we hear news of rising inflation, rising housing costs, and rising costs of basic commodities, driving up the prices of almost everything else.

Albert Kim, vice president of talent at Checkr, says, “People’s wages can no longer keep up with how fast daily costs are rising, leaving a vicious cycle of physical and mental illness caused by financial stress.”

So many economic and personal factors can contribute to a person experiencing financial stress. If you’re managing your financial stress and taking control of your money, here are eight things you can do, courtesy of successful business professionals.

1. Recognize the problem.

The only way to solve a problem is to admit it exist.

Believe it or not, one of the main reasons people are drowning in more debt is because we:

Don’t admit to bad spending habits
We fail to realize that financial stress is caused by an incomplete picture of our financial situation

Jesse Hanson, content manager at Online Solitaire and World of Card Games, says, “When you know how it starts, you’ll know how to end it. Just like the strategies you use to win a game, managing financial stress starts with recognizing that it’s there it is a problem and the cause of that problem, even if it is your own personal bad habits.”

2. Create a budget.

Once you’ve figured out the problem, it’s time to create a plan to solve it. The first step to becoming a financial expert and managing financial stress is creating a budget.

There are many online tools and apps that can help you create a personal budget plan, but if those don’t work for you, you can simply do it in a spreadsheet. This is the information that must be included:

List all your cash ins and outs
List all necessary expenses such as debt repayment (including your mortgage if you have one), rent, transport, food and other bills
Set an appropriate amount to save after meeting your needs
Allocate whatever is left for your desires – don’t forget to reward yourself accordingly

You can also track your spending through apps or your spreadsheet to find out where you’re spending more than you thought you were, like streaming subscriptions or daily Starbucks coffees.

For savings, if you have children, consider contributing to a 529 plan. Also, consider participating in your employer’s retirement savings plan, such as a 401(k).

3. Consolidate your debt.

One of the major reasons people experience financial stress is looming debt. According to MarketWatch, Americans have reached record levels of household debt in 2024, amounting to $17.3 trillion. A study from The Kaplan Group also showed unprecedented levels of debt for Americans, rising to 81.5% in just 20 years, with car loans, mortgages and student loans at record highs.

Grant Aldrich, founder of Preppy, says, “Frankly, most rising levels of debt are caused by debt itself. How? To pay off debt, some people choose to go into another debt – this is called debt consolidation. When not managed properly, this ends up turning into more debt.”

To avoid this happening to you, consider these steps:

List all your existing debts and their interest rates
Pay off as much as you can, either starting with the debt with the highest interest rate or the debt you can pay off the fastest – the less debt you have, the less interest you’ll pay
When consolidating your debt, buy the option that offers the lowest interest rate and fees
Make sure you make timely payments on your debt consolidation

“Missing consolidation payments is a money trap – it’s like borrowing and spending money to pay off money you owe, while also spending More money for unclaimed payments. Once you start missing consolidation repayments, you get charged (late fees that get added to your debt), defeating the whole purpose of debt consolidation,” says Cache Merrill, Founder/CTO/CEO at Zibtek.

4. Prioritize your spending.

Most of the time, financial stress is caused by reckless spending. When you give in to ‘you only live once’ (YOLO) pressure and buy expensive things you might not need, like splurging on the latest iPhone, it’s the perfect recipe for financial disaster.

To prioritize spending, ask yourself:

Do I need it or just want it?
why do i want it Will my daily life be negatively affected if I don’t have it?
Can I afford it today?
Do I have money in the budget for this?

Reyansh Mestry, Head of Marketing at TopSource Worldwide, says, “Most of the time, the easiest way to free yourself from the shackles of irresponsible spending is to differentiate between what you need and what you just want. If you need to, go ahead. if you want and can pay cash, go ahead. if you i want but I can’t afford it today, hit the brakes and turn around.”

5. Find additional sources of income.

Sometimes cutting expenses isn’t enough, especially when the prices of essential products rise. Then you may need to explore additional sources of income, such as a side hustle. Some options:

Consider asking for a raise
Explore part-time remote freelancing roles like virtual assistant or content creation
Be a guardian
Do something you’re good at and sell it
Offer your services (hair and makeup, teach a language, give piano lessons, etc.)

Kyran Schmidt, co-founder of Outverse, says: “With the advancement of technology, remote working and artificial intelligence in the modern age, there are now endless opportunities for people to generate additional income from the comfort of their own homes. For example, despite the fact that many companies and startups are using AI and AI chatbots for customer support, human assistance remains indispensable – and the opportunities in this industry are enormous.”

6. Create an emergency fund.

Many people become financially burdened not because of bad spending habits, but because of financial emergencies, such as unexpected car or home repairs, an illness in the family, or an accident. This is why establishing an emergency fund should be a priority.

According to Roman Zrazhevskiy, founder and CEO of MIRA Safety, there is no hard and fast rule for deciding how much should go into your emergency fund, but consider rounding up your required monthly expenses and multiplying by six or 12 months. as a safety net.”

To start building your emergency fund, consider setting up automatic payments from your bank account to your emergency fund account and setting a goal.

7. Seek financial advice or guidance.

Consider consulting financial advisors or financial advisors to get help managing your finances and the stress they cause in your daily life. These professionals are experts in helping people like you get their finances and spending habits right.

Conclusion

Trying to manage financial stress is not an easy process. Getting your financial health in order takes a lot of time and effort, as well as lifestyle changes, adjustments, sacrifices and reprioritization.

While it won’t exactly be a walk in the park, managing financial stress properly won’t seem impossible once you identify your problem areas, make active efforts to rebalance your priorities, and recognize when you need outside help.

This article was written by and represents the views of our contributing advisor, not the Kiplinger editorial staff. You can check advisor records with help dry or with FINRA.

VaselineAugust 23, 2024

0 6 minutes read

Vaseline

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Surekha Trivedi sells 753 shares of Veralto Co. (NYSE:VLTO).