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How to cope with financial stress (dealing with financial stress)

Financial stress can build slowly or come on all of a sudden because of slow or sudden changes in your finances.

Managing money and everything else in your life is tricky at the best of times, but in 2020 we had a year that could be called sub-optimal and a few more harsh words, if being frank.

Money can play a significant role in your mental health, from a feeling of financial security to fear and anxiety when money is the source or multiplier of anxiety.

Whether 2021 will be any better is anyone’s guess, but there are a few things you can do now to ease your financial stress.

Read on to hear a few thoughts on dealing with financial stress and its symptoms and how you can start to reduce your money’s worries.

How to cope with financial stress

There are a lot of ways to cope with financial stress, and it depends on what is causing the stress in the first place.

If you’re struggling to make ends meet, your priority should be finding ways to save money and cut expenses. We’ll cover a few of these below.

If your financial stress is caused by debt, then you’ll need to focus on ways to pay off your debts as quickly as possible.

This may involve creating a budget and making sacrifices to put more money towards your monthly debts.

You may also consider consolidating your debts or speaking with a credit counsellor for additional help and advice.

No matter what is causing your financial stress, the steps below can help ease the burden.

How does money stress start?

Not being interested in money, whether for good or bad reasons, is a common starting point for going downhill.

Or on the flip side is over interested in money but not for what it can do for you in the long term but just for what it can buy you next on your wish list, i.e. how quickly you can spend it.

If you are not interested in money or what money can do for you, you probably won’t be tracking or managing it.

At best, this means you have no idea what’s going on at worst, you don’t know how fast you are sinking. If you are not interested in money, it might be that you have nothing to save up for?

No medium or long-term plans to work towards, just day-to-day need to spend your money on. This is maybe ok in the short term, but what about the long term?

Finding money confusing due to never being taught how to manage it, poor role models and constant media to buy now and pay later can lead you to make poor decisions with money.

Financial stress symptoms

If I ignore it, will it go away?

Ignoring the problem is also a typical basis of financial stress. Overlooking the letters, avoiding money conversations not wanting to know whats going on is a sure-fire way to your money

Your lack of attention to what money is coming in and going out can lead things slowly or swiftly spiralling out of control. Not keeping on top of spending and, even more importantly, overspending will get things out of control.

This lack of control may lead to borrowing money to pay for day-to-day things or even unnecessary luxuries. Living paycheque to paycheque Living paycheque to paycheque is a typical result of poor money management.

Only just making enough money each month will be incredibly stressful.

If you are unsure if your money will last until the end of the month, it makes your decision even more critical.

However, being stressed is not a good place to make decisions. If you only have enough to meet your immediate needs at the end of each month, you probably can’t start saving any money.

If you cannot save, reaching important goals will be even more challenging.

Financial stress symptoms

Ahhh why did I do that!

What does financial stress do to your body?

Financial anxiety can lead to many physical reactions.

If you are stressed about money, it will likely keep you awake at night.

Poor sleep is a cause of many illnesses, including increased stress, headaches, low immune system and would you believe it even more poor sleep.

The cumulative effect of poor sleep can lead to low emergency levels, lack of motivation, and difficulty making important decisions.

The lack of sleep and feeling of stress makes making good decisions around money even more tricky.

How can financial stress affect relationships?

The above stress symptoms can also affect your day-to-day relationships making and maintaining relationships even more difficult.

The more stressed you are about money added to poor sleep is likely to make you more irritable and short-tempered. This can increase the tension around the home and work relationships.

This can make your temper shorter and prone to arguments or withdrawal from social situations as you cannot cope with them and everything else.

Fear about what the future holds for you and your loved ones can make planning seem pointless and taking action when needed impossible.

All of these things added together can make keeping and maintaining a home life alongside a job challenging to juggle Money and mental health.

The above pressures can see even the strongest person has mental health issues.

When you cannot cope with the many challenges thrown at you, you can decline into anxiety, isolation, and withdrawal from friends, family, and work.

Unfortunately, this process makes it even more challenging to cope with money challenges.

A vicious cycle can rapidly develop – poor mental health means managing money is more complicated – worrying about money worsens your mental health.

If you are in a financial crisis, you might need professional medical help to break the cycle.

How do you manage financial stress?

The first step is to gather all the data you can about your money and put it into a simple filing system. Get yourself a folder and dividers; whether hard copy or digital is up to you. Collate all your financial paperwork into a system that works for you. This could be by

  • Bank statements
  • Credit cards
  • Debts
  • Household bills
  • Day-to-day bills
  • Standing orders
  • Enjoyment

You will then want to set a prioritisation for your paperwork.

Are there any red letters or demands?

These should be in the front section with notes explaining what needs to be done and when.

It would be good to have a 1 page summary of all your assets and liabilities or a net worth statement at the beginning of the file.

This one-pager will highlight what you are worth after all this time – hopefully, it’s a positive figure – if not it’s showing you where you are starting from and the amount of work needed to get you back to zero.

Why you need financial goals.

How To Reduce Stress In Your Life
How To Reduce Stress In Your Life

At this point, you also need to come up with some financial goals.

Without any goals, you will continue to drift.

The longer you drift, the more financial trouble you are likely to get into. You need something to aim for and make progress towards and something to keep away from, i.e., debt. Your financial goals could be.

Once you have a few goals, you see where you are now and the gap to reach them.

How you are going to bridge these gaps might take some time to figure out, but at least you are now starting to think about how you could improve your situation.

Track your money The next step is to understand what is going on. Is it a lack of income or overspending or both? 

Start tracking your money

Track your money, so you know what is going on.

You can use pen and paper like the Japanese budgeting method of Kakeibo.

Use two notes books; in the first book

-How much money is coming in?
setting a savings goal
-How much do you need to spend, i.e. essentials and non-essentials
-What could you do to make your money situation better, i.e., spend less or earn more this month?
-After your savings goal, you then divide your remaining income up across four headings, living, culture and education, entertainment, and other spending.  

This is what you will live off for the month.

In the second book, you note down every penny you spend each day of the month.

At the end of each month, you collate your sending and analyse how the next month could be better.

The Kakeibo method claims to be able to save the average person  35% on monthly expenses.

How would saving that amount of money feel to you?

If not analogue, then digital budgeting apps If you don’t fancy doing it with pen and paper, then find an app that will do this for you. Here are a few ideas for some of the current apps out there.

If you are unsure which one to try, why not try one of the free ones and see how you get on.

It’s less hands-on than Kakeibo but will still give you a clearer idea of where your money is going than before. This analysis lets you see where you could get better next month.

Build an emergency fund

The likely most pressing need would be to save for an emergency fund. 3-6 or more months of savings in cash to help ride out any bumps in the road, i.e. house/car repairs, redundancy or health emergency (covid 19)

When you cannot cope with shocks, it will send you right back to the beginning each time something goes wrong.

If you have no savings, the risk of using credit or debt to get out of a hard place is even more tempting, and this is the slippery slope into more and more debt.

All this leads to pressure to earn more money. If not channelled well, this pressure may lead to more desperate attempts to make more money. Either working more hours or taking on more risky jobs.

Being desperate for money may well bring you into contact with risky ventures like day trading, investing in things you don’t understand or closer to people wanting to exploit your urgent cash need.

Getting financial help

When it comes to getting financial help, you have three options.

You can try and do it all yourself.

A DIY approach can be made relatively inexpensively by getting books out of the library, watching YouTube videos, and listening to podcasts about money.

The downside is that you need to read, watch, and listen to quite a lot to build up the knowledge, confidence, and understanding to manage your own money effectively.

Knowing that, unfortunately, the weakest link in your finances is often you and your behaviour.

Do it with someone else

You could work with a financial coach who would sit alongside you, supporting, guiding and educating you on money management’s emotional and practical side.

This option keeps you in control of your money by strengthening your knowledge and emotions around money. The potential downside of this option is that it will be more of an investment than doing it yourself.

Have it done for you

Your third option is to hand it over for someone else to manage it for you.

This could be a financial advisor or a wealth manager.

The downside is that it can be disempowering as you are none the wiser about what is happening.

It is much more expensive than the other options, and you need a lot of wealth to interest a financial advisor.

This is generally once you have created significant wealth and need someone to help you manage the movement of these funds, including taking into tax considerations.

If you are in a debt crisis, there are a few good sources of help if you are in debt crisis:

Summary: Coping with financial stress and its symptoms.

Money and mental health. What financial stress does to you and what you can do about it. The symptoms of financial stress can be both physical and psychological. Poor money management can lead to several poor financial and health outcomes.

  • Feelings of growing financial pressure
  • living paycheque to paycheque
  • growing debt.
  • Worry and anxiety leading to sleepless nights
  • Poor sleep leading to a loss of concentration and irritability
  • Declining mental health and depression
  • Difficulty in managing your money and making important financial decisions

Some of these issues may need specialist help, but some actions you can take yourself are

  • Gather your paperwork together to figure out what’s going on
  • Start and keep to a saving and budgeting plan. Kakeibo might be an excellent place to start.
  • Set some financial goals – give yourself something to aim for (a carrot) and remember what you want to get away from – (the stick)
  • Consider where to get financial support and guidance from, DIY, a financial coach, or a specialist advisor.

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