Managing money isn’t easy, and if you’re stressed out about your finances, join the club – it’s estimated that about 30% of Americans are “constantly” stressed about money, and 85% of people say that they’re “sometimes” stressed about their financial situation.
So, how can you reduce and minimize financial stress? Here are four helpful tips – which you can start implementing in your life today!
- Build a Budget
This should always be the first place to start when you’re looking to take control of your finances. This is because uncertainty is at the heart of most stressful financial situations – do you have enough money for your credit card bill? Where did the money from your last paycheck go? Do you have the money to go out to dinner without feeling guilty?
If you build a budget, you can track every single dollar that you are making – and spending. And, using an online application like Mint or You Need A Budget, you can also track your debt, bills, and other important financial information.
This takes the guesswork out of your finances. You’ll know how much money you have – and exactly where it’s going. And, once you know this information, you can start taking steps to improve your own financial situation.
- Start Saving up an “Emergency Fund”
Once you’ve started a budget, your next goal should be to build up an emergency fund, which can cover between 3-6 months of expenses. This is a “rainy day fund” that can be used for situations where you need to cover an expense like a car breakdown, unexpected bill, or loss of a job. Knowing that you have this money saved will help you feel much less stressed about your finances.
- Know Your Options for Short-Term Loans
It takes time to build up an emergency fund, and life happens – so you may find that you’ve got an unexpected expense, and no way to pay for it. In this case, taking out a short-term loan may be right for you. You’ve got a few different options:
- Taking out a Home Equity Line Of Credit (HELOC)
- Taking out cash advances on your credit cards
- Payday loans or title loans
- Personal loans from a bank
Depending on your situation creditworthiness, and whether or not you own a home or car, any of these products may be right for you. Explore your options – and know which type of loan may be right for covering your emergency expenses.
- Start Tackling Debt (And Consider Consolidation)
56% of people with debt say that it negatively affects their lives. This is why, once you build a budget and emergency fund, you should start tackling your debt – and paying it down as aggressively as you can. There are two popular methods for doing this:
- The avalanche method – In this method of debt payment, you start by paying the minimums on all of your debt and putting as much money towards your highest-interest debt as possible. Then, you move onto the next highest-interest debt, and so on. Mathematically, this is the best way to pay off your debts for the least amount of money.
- The snowball method – In this method, you pay the minimums on all of your debt, and pay down the smallest dollar value debt as fast as you can. Then, you move on to the next-largest debt, and so on. This method is not quite as cost-effective as the debt avalanche – but the psychological effect that repaying smaller debts can have will help keep you on track.
You may also want to consider debt consolidation to reduce financial stress, which usually consists of taking out a low-interest loan, which allows you to repay higher-interest credit card debt.
Free Yourself from Stress – and Work Toward Your Financial Goals!
Following these tips will help you control your money more effectively, and minimize financial stress. You can relax and breathe easy – then start working towards longer-term goals like retirement, purchasing a house, or funding a college educ