Financial stress is an emotional weight that impacts your physical and mental well-being. It causes sleepless nights, intense arguments, and issues with your partners. Money problems are still among the highest contributor to divorce in the United States. Many people have suffered from financial stress and have experienced all its negative impacts. The good news is… life WILL get better for you and your family if you take the critical steps needed to reduce financial stress. We hope this strategy will help!
The first step in this process is budget, budget, budget! The truth is, once you write down all your expenses line by line, you start to recognize where your money goes every month. Even if you can’t stick to a budget, you’ll know where your financial shortcomings are. Once you’ve identified these shortcomings, you can tackle each area, one at a time. Let’s say for example that your auto insurance policy increased drastically when you added someone else to your policy. If this happened, you could shop around with other insurance companies to find a better rate. This can be a time-consuming process and you want to make sure you have your current policy available with coverage limits so that you’re comparing apples to apples. If you can save money, then it’s time well spent. Budgeting tools, including webinars and budgeting sheets are available on Triangle Credit Union’s YouTube channel. Our budgeting tools are a great resource because they have line-by-line expenses listed, which will give you an idea of which items should be in your budget. Be truthful with yourself about your spending habits but beware, sometimes the truth can hurt when you’re going through this process.
The second step in this process is to reduce your spending. You want to do this in as many areas as possible. Look at service areas such as internet, cable, subscriptions you might have, gym memberships, and utilities. These are areas that have variable costs, which means you can look for better rates with other service providers. Some of these vendors will give discounts if you bundle your services. For example, some providers offer a joint cable and internet package. If there are ways that you can still enjoy your current services while reducing your spending, even if that means switching providers to get a deal, you should absolutely consider that. Reducing your spending is just part of your budgeting process. When you budget, you’ll have a better grasp of spending habits and be able to identify where you can cut costs.
The third step is assessing your income. If you find that you’ve cut your budget as much as possible and you’re still in the red every month, then you may need a larger shovel to dig yourself out of financial stress. This could mean a higher income with your current job, which means that you may have to have a conversation with your supervisors about how you can increase your pay. It may mean that you should look for a new job or you might need a part time job. Some occupations allow you to work multiple shifts. This is particularly true in the healthcare industry so that could be an option as well. If a part-time job is the solution for you, you should look for one that you enjoy. For example, if you love to read, work at a bookstore. If you like gardening, look at your local nursery.
Step number four is creating an emergency fund. An emergency fund is a separate savings account that is set aside for unforeseen emergencies such as medical or job loss. When it comes to the amount, financial experts suggest a 3–6-month emergency fund. To get to the monetary number, you should list out all your basics that you will still need to pay if an emergency occurs. These expenses are housing (rent/mortgage), utilities (water/sewage/gas/electricity), food (groceries) and debts (minimum payments on all debts including credit cards, student loans and car loans). We know it may seem overwhelming when you calculate this number because most likely it will be between $10,000-$20,000. While that’s the ultimate goal, it’s important to start with a smaller, more attainable goal that can be achieved within one or two months which could be anywhere between $750 to $1,500. If you feel comfortable enough at this point to start paying off some debt, you could put the emergency fund on hold and pay off debt before continuing on with fully funding your emergency fund. A money market or an online savings account is a perfect place to park your emergency fund. The peace of mind that comes with a fully funded emergency fund is priceless and well worth any hardship and financial sacrifice.
Our last step is to pay off debt. Being in debt or indebted to your credit card company can create stress and anxiety. Once you set your budget, try to allocate extra money each month toward paying off your debt. Many financial counselors recommend the debt snowball method, which is paying off your smallest debt first and once that debt is paid, apply any money that you were putting to that the next smallest debt and so on until your debt is paid. Others recommend the avalanche method, which is the same principle but paying off your highest interest first so once the debt is paid, start paying on the next highest interest rate debt and so on until all your debt is paid. Debts and payments steal our biggest wealth building tool: our income. You should tackle your debt now and free up your income to build a financially lucrative future. When paying off your debt, it’s important to remember it’s best to throw any extra money you have each month into your debt and pay down that principal as much as possible.
We offer more information about debt free living on our YouTube channel, just search Financial Freedom: Your Path to Debt Free Living. If you get a chance watch the webinar, the webinar goes into greater detail about setting up a path and getting out of debt. Keep accountable and talk about your situation with a trusted person who has your back and your best interest at heart, preferably someone who is smart about money. Sometimes we just need to push and other times we need to shove to keep going. It will take time. But you didn’t get into debt overnight, so you shouldn’t expect to get out of it overnight as well. Check out more of our debt management blogs here.
It’s important to mention that not all these steps need to be completed in the order we put them in. Everyone’s financial situation and journey is different and financial solutions are NOT one size fits all. If you would rather start your journey by getting a second job or asking for a raise because you don’t want to cut certain expenses, go for it! If you would prefer to fund your emergency fund fully before paying off debt, perfect! Regardless of the order of these tips, making some or all of these changes will alleviate some of the financial stress you’re feeling!
