Financial stress can be crippling. It can affect your work, your relationships and even your health. Whether you’re worried about making your rent this month, actively dodging collector calls or worried about how you’ll retire, money issues can influence your entire world.
When I graduated from college, I had about $26,000 worth of student loan debt. I wasn’t making much money writing obituaries for a local newspaper (since I didn’t track my income, I’m still not sure exactly how much I was making, but it was less than $24,000/ year.)
Going from five figures in debt in my early 20s, to now being debt free and in control of my money and financial future in my late 20s took a lot of work and persistence. It also would not have been possible without taking the following steps…
1: Know your situation
Knowing the full scope of your money situation is the first and foremost way to become less stressed about it. I wish there was a way to plug your ears, close your eyes and hum and for it to just go away, but that isn’t reality. Fortunately for those currently in the dark, the unknown is always worse than the known.
When the six-month grace period on my student loans ended, I started getting a dozen-plus bills in the mail, due immediately. Each one had its own required minimum payment and I was living hand to mouth – so I ignored them.
A couple months passed and the letters got a little scarier. They had big, red “overdue” stamps on the envelopes and I started getting phone calls about all the money I owed from less-than-pleasant people.
I didn’t know how many loans I had, how much I owed, or any idea if I was close to defaulting or getting into serious, long-term financial trouble.
Needless to say, I was pretty stressed.
I decided I had to know how much I owed and who I owed it to. There was no way to start to attack my debt while still in the dark.
Once I tracked down all of my loans and student loan carriers, and added up the total amount now owed, interest had compounded the debt up to just under $33,000.
Knowing that number was scary.
Knowing that number was horrifying. I screamed. I cried. I had several cocktails I could not afford. But then I was able to begin to make a plan.
2: Make a plan
In it’s most simple form, a budget is a plan for your money.
Without knowing how much money you are bringing in and how much is going out, you run the risk of spending more than you have available.
America’s three biggest banks earned more than $6.4 billion in 2016 from ATM and overdraft fees, according to CNN Money. That is a high cost for miss-remembering how much money you have in Checking.
By knowing and tracking your money with a budget, you get to give every dollar a job to do in your life. Without a budget, my money tends to just disappear. I have no idea where, when or what I spent it on, and it certainly isn’t helping my financial future. With a budget, I get to plan for expenses, savings and even having fun – all guilt free because I know everything is covered in my plan.
3: Have an emergency budget
In the middle of a crisis, no one is the best at managing their money. We spend emotionally. We panic .. We don’t have the stability and guidelines that our budget normally provides us.
Enter the Emergency Budget, your new favorite tool for peace of mind in a crisis.
Building one is simple and lets you know exactly how much money you need to live off in an emergency situation. This will give you some peace of mind as it’s likely much less than your current income. Second, it allows you to make hard decisions with a clear head, versus later during crisis mode.
By creating an emergency budget NOW, you’ll know the amount of money you really need to survive the month with a roof over your head, clothes on your back and food in your belly.
4: Work toward building an emergency fund
Even just $500-$1,000 saved in an account to be used only for emergencies can have a hugely relaxing effect on your mental stress.
That is enough money to pay for an unexpected medication or a blown tire.
It’s enough to turn something disastrous into something annoying.
While it won’t cover every situation, it will certainly help. Once you have an emergency fund, you’ll never want to be without it.
5: Set track-able money goals
Once you have a firm grasp of your money situation and spending habits, you can start to alter your daily choices to better your financial future.
Making room in your budget to prioritize saving for your emergency fund, paying down your debt or saving money for future expenses will all allow you to work toward things you want and will benefit you in the long term. Setting and following a plan to accomplish those goals will bring you a sense of achievement and joy as you complete them.
You will be in control of your money and much less financially stressed.
- What is the most stressful money-related thing in your life?
- What was a money-related stress that you’ve defeated? How?