Money stress is killing me. How can I stop stressing about money?
Money is a widespread source of anxiety in any household. How to get more of it, how to keep it and what to do with what you have. And of course, paying for all the things you need and want.
Putting in place a few key systems can ease many of your money stresses helping you to live a Financially Happy life.
1. Begin with the end in mind
Imagine you wake up tomorrow and all your financial stress has gone.
What has happened overnight? Has your financial situation become clearer, have your debts been paid off or have you had a massive pay rise?
When you begin to think about what you want your life to look like and in particular what you want your financial situation to look like you can often figure out what you need to do.
I’m not saying that is necessarily going to be easy or that you will even like doing it, but it is often quite simple to see what you need to do.
Having a vision of what you want your life to look like as opposed to what you don’t want it to look like could help you to monitor and manage your money habits to your advantage.
What would someone who has their finances under control look like? Or in this case, what would someone who doesn’t suffer from money stress look like? What would they be doing with the money that you are not?
Would they be
- saving regularly
- managing and monitoring their spending daily weekly or monthly
- managing and or minimising their debts?
- planning their spending
- Spending money they don’t have
- trying to keep up with friends and neighbours with Instagram lifestyles
The most significant thing that anyone or family is doing to try and reduce their money stress or financial anxiety is living within their means. They have some sort of plan for their money right now and for things they need or want in the medium to long term. Whether that is a house, car, Holidays or having enough money to deal with unexpected emergencies.
Ultimately people with less money stress or financial anxiety have an idea when they want work to become optional and have a plan for better or worse to reach that goal other as soon as possible or within a given time frame.
Could you begin to come up with a plan for yourself and all your family that would help you get your finances in order and help to reduce your money stress?
2. Get your sh*t together
I know what you’re thinking you’re thinking whaaaat! I’m too cool for school I’m not doing any admin that’s for somebody else to do.
OK so point me towards the person that’s doing your admin? Hmm, should be you really, shouldn’t it?
So let’s start with your paperwork what sort of order is it in?
Maybe your answer to this is it’s all in one draw/shoebox/pile on the floor.
How has that been working out for you then? I imagine it’s not been that clear where or what is going on in any of your finances.
So let’s start with a clean slate and try and establish a system that works for you and makes it easy to find critical documents.
you could file things by
- bank or provider name
- house car or other items
- by service insurance utility’s loans
- whatever way makes sense to you an easy your management of those things
putting your poop in a group will help ease the spaghetti junction of documents and papers which are just adding to your money stress.
Take control of your paperwork, and you should feel your money stress dropping a little now that it is clear what is going on.
3. Build an emergency fund
A crucial part of removing money stressed and financial anxiety is to know that you have a safety net in place. A financial safety net that will help you avoid financial ruin if or when things go wrong.
An emergency fund is a stash of cash to help you ride out most financial difficulties.
It’s generally three to six months worth of spending. Still, you might want to adjust this to your circumstances or your desire to avoid risk or have greater financial safety uncertainty.
For instance, if you are in a sector or job which you think will be challenging to find another job or contracts are very uncertain maybe you need something like 6 to 12 months savings put aside in an emergency fund.
How do I build an emergency fund? Well, first you need to calculate what does one month’s living costs look like to you. Then you need to time this number by three or six.
Remember to take into account or at least think about those months that are more expensive than others. You might also want to think about Holidays and birthdays and how these might affect your monthly expenses and how you might want to factor these into your emergency fund.
Now you need to act like your emergency fund is an emergency and scrimp an save everything you can to get to your emergency fund amount.
Keep this emergency fund in a separate account from your day to day expenses. Come up with some rules about how and when you can access this money. For instance an unexpected weekend away is not an emergency. Therefore something like this needs to be saved for in its own right, raiding the emergency fund for non-emergencies should not be allowed.
4. Automate your finances
Put the robots in charge.
You can set your finances up now for nearly everything to happen automatically. Bills and that’s can be paid on time savings can be automatically transferred to your emergency fund or day to day accounts with just a small bit of admin to set it all up.
Automating your finances probably takes out the weakest link in your financial system, i.e. you.
Automating your finances will help take out the endless and tiring decision-making around money. It will just happen in the background without you needing to get involved or make day to day decisions around money.
This should help with bills being paid on time and your savings starting to grow even if only little by little.
The fact that you are now not needing to make every single payment going into your account transferring the money should help with reducing your money stress.
You can also use some money apps that are out there now that will help you budget and track you’re spending on a real-time basis. This will help you keep on top of your money so that you know how much money you have in all your accounts and if you need to make any immediate, short or long term changes to your finances.
5. Dealing with debt
If you are dealing with debt, this can have a significant effect on your anxiety and stress around money.
Here we are mainly talking about high-interest debt such as credit cards, payday and or car loans. Of course your mortgage debt may also be causing you problems if you are struggling to cope with it.
The best way to deal with debt is to accept the reality and come up with a plan to deal with it and then stay out of debt.
You need to make sure you are always paying the minimum amount required on any debt to avoid growing interest charges, but you then need to think about what is your plan for this debt.
Is it to keep paying it forever and ever or is it actually to get rid of that debt?
How to pay off debt
There are two well-known ways to pay off debt. One is called a debt snowball, and the other is called the debt avalanche.
The debt snowball is where you start with the smallest debt paid off and then move to the next one and then the next one and the next one slowly building up to paying off the most significant debt.
The psychology behind the debt snowball is that the quicker you can make progress on paying off debts, the more motivated you will be to keep going. As you chalk off each debt repaid, you will find more energy to move to the next one and then the next one.
The debt snowball is a way at chipping away at your debts rather than trying to pay them all off at once, which might be too big a debt snowball to eat at once.
The 2nd way to pay off debts is called a debt avalanche. This is where you start with the debt with the highest interest rate and throw everything you have at that trying to pay this one off as quickly as you can.
With the debt avalanche method, you make minimum payments on all your debts and then work your hardest to pay off the highest interest rate debt as quick as you can.
How to stay out of debt
The key with any debts that you have, whether they be credit cards car loans or store cards is also to spend a little bit of time reviewing how and why you got them.
Spending a little time just thinking about why you bought the thing you purchased, how much joy or use it has brought you might help you reflect on whether you want to buy that again.
Given how these purchases may have added to your money stress, maybe avoiding other items like this and only buying what you have the actual money for might help reduce your financial anxiety in the future.
If you are dealing with crippling debt, then you might need outside professional help which you can get from either step-change or the money advice service. These are both free services offering debt advice.
Money stress is killing me: Conclusion
Begin with the end in mind of what you want your life to look like can help set you they cleared the direction to head in and help you decide which path will get you there either the quickest or the smoothest.
Getting your paperwork sorted will help to remove some of the confusion and anxiety around were or what your money is doing. Get yourself a file some dividers and start ordering your paperwork.
Build yourself an emergency fund of three to six months or whatever size seems appropriate to you to ride out any likely financial challenges. This way, you can sleep at night easily knowing you have enough money to cover your lifestyle costs until hopefully, you can find another income.
Automate your finances. This will reduce the amount of time you need to spend jumping in and out of your bank accounts to set things up he should make sure that bills are paid on time and that savings happen automatically. You can also find apps that will give you real-time information on when and where you’re spending your money.
Dealing with debt. Make sure you are making the minimum payments on all your debts to avoid further interest adding to your debt. Decide on a plan for dealing with your debt whether that’s using methods like the debt snowball or the debt avalanche to start freeing yourself of this source financial and money stress.
As a financial coach, I can help you to think about how to manage your money for a stress-free life and what your options for budgeting, saving and investing might be.
Through this guidance process, you will be able to make informed choices for yourself and start taking action towards your Financially Happy life now before it becomes even more painful and expensive.
I won’t be recommending specific products or trying to sell any. If you need specific debt or product advice, then a financial advisor might be your best call.
Contact me here for a free chat about what options you might have for making money work for you.