There is no doubt that money is a stressful topic. Even if you’re in a good financial situation, there is a seemingly never-ending list of money-related questions to ask yourself: Do I have enough to make all my payments? Am I putting enough toward retirement? Should I be saving more or paying off debt?
Here are a few tips to get yourself in a good financial position and reduce some of that money-related stress.
Stay On Top of Your Finances
If you’re feeling stressed about money, it might be tempting to try to clear it from your mind. But dealing with your finances is not the time to bury your head in the sand. A bill won’t pay itself just because it was left unopened, ignoring your financial statements won’t put more money in the bank. In the end, not knowing your exact financial situation will cause far more stress.
Create a Safety Net
Nobody likes to think about emergency needs like unexpected car repairs or an unforeseen medical bill. But they happen to all of us and they can very easily put a major strain on finances. Having a rainy day fund will ensure that the financial side of these events won’t be a concern.
A great way to start a financial safety net is by creating a separate savings account. You can then have a slice of each paycheck deposited directly into the account without even thinking about. Don’t be afraid to start small and build on your savings as you can.
Chip Away at Debt
Being in debt probably ranks at the top of the list of most stressful financial situations. But creating a solid plan to rid yourself of this burden can make things much easier.
First, figure out exactly how much you owe. Make a list of all your debts (credit cards, student loans, mortgages, etc.), how much you owe on each, and the respective interest rates. Once you have all these in one place, you can prioritize which should be paid off first. It usually makes the most sense to try to pay off the loans with the highest interest rates first as those will be accumulating the most debt the longer they stay on the books.
Consider a Consolidated Loan
Consolidating your debt into a single loan can help ease stress in two ways:
- It simplifies your life. Instead of having to make multiple monthly payments to different lenders, you make one easy payment and you’re done.
- More importantly, consolidating your loans could save you money. This all depends on the interest rate you’re able to secure. If you have good credit and a steady income, or can secure a co-signer in such a situation, you could qualify for low rates.
Even if you can’t secure a lower rate, refinancing allows you to change the terms of your payment plan in your favor. For example, you could lower your monthly payments by extending the length of your loan. This may cost you more in the long-run, but if you’re stressed about short-term money woes, this could be just the trick.
Talk to Your Creditors
If you’re having trouble paying your bills, reach out to your creditors to let them know the situation. Ask if they can provide any leniency, such as waiving late fees or providing forbearance. It is in a lender’s best interest to make sure you can pay back your debt, so they could be willing to work with you. It won’t always work but it can’t hurt to ask.
Find Extra Sources of Income
Creating a new source of income is surely easier said than done. That doesn’t mean it’s impossible. Brainstorm ways to earn more income. Consider a side job or a freelance gig that can be done in your free time. It doesn’t even need to be in the same line of work as your main career. You can turn your hobbies into money-making endeavors like selling homemade crafts, teaching piano, etc.
But don’t stop there. If finding a new job isn’t feasible (or just adds more stress), be creative. How about selling any belongings you no longer use?
Create – and Stick to – a Budget
Any task is easier to successfully complete if you have a plan. Think of a budget as a financial plan for your short- and long-term future. If you know precisely how much you can afford on discretionary spending, and stay within that amount, you’ll know that you are staying on track. This will eliminate a great deal of stress.
To make things even easier, there are a host of savings apps that can track your spending and make creating a budget a breeze.
Cut Your Spending
Part of creating a budget is deciding where to allocate your money. This is when you need to have a serious talk with your yourself about your spending. What do you need and what can you live without?
It can be tempting to limit this conversation to discretionary spending. If cutting out smaller items solves your financial problems, do it. But if you’re in need of more radical changes, don’t be afraid to look at major expenses. For example, refinancing your car loan can reduce your monthly payments and keep more money in your bank account.
Finances can be a tricky subject. There’s no shame in asking for help. A financial advisor can help decide what your goals should be and create a plan for reaching them. You can then rest assured that you’re on the right track no matter how untenable your money situation feels.
Many advisors offer free consultations. This is a perfect, no-pressure opportunity to understand how a professional can help ease your financial stress.
A positive mindset won’t magically make debt disappear or your bank account grow. But it can go a long toward easing your mind if you’re stressed about money. Think about the areas where you’re doing well, not just where you’re struggling. You might be worried about your lack of savings and forgetting about the debt you paid off, which will put you in a good position going forward.
It’s easy to focus solely on the negative but it’s important to take an objective, big-picture look at finances. You might just be in a better place than you thought.