You can can have money stress and feel anxious about your financial situation, no matter how much you make. Find out the root causes of money stress and 10 strategies to reduce it so you can have a more peaceful life.
3. Radically cut your expenses.
If you’re spending too much due to a hardship or because you or someone in your family is a chronic over-spender, you’re probably seeing your savings dwindle and your credit card debt going up, right along with your anxiety level.
This is a dangerous situation because you can’t save if nothing is left over at the end of the month. And if you can’t save, you can’t get ahead and build wealth.
So, decide what’s truly important to you. Then take control by creating a spending plan and aggressively cutting your expenses.
Can you slash your housing costs? This is a difficult but good place to start because it’s probably one of your largest expenses. A good rule of thumb is to spend no more than 25% of your gross income on a mortgage or rent payment.
If your housing expense is a source of financial stress, take a hard look at downsizing or relocating to a different neighborhood or town. Taking a similar or better job in a less expensive area is another solution to get ahead financially.
Vehicles are another expensive category to cut, when possible. According to Kelley Blue Book, in its first year alone, the average new car depreciates 36%.
So, buying a pre-owned vehicle is a much better deal than buying a new one. Also consider other options to save, such as using public transportation, working from home, or moving to an area where you could drive less.
4. Make saving automatic.
If you have a simple plan in place to achieve your goals, such as retirement, building emergency savings, or buying a home, that can be the secret to alleviating money stress.
If you have a simple plan in place to achieve your goals, such as retirement, building emergency savings, or buying a home, that can be the secret to alleviating money stress. Automate as many of these transactions as possible so they happen without you having to think about it.
Workplace retirement plans work so well because contributions must come from your paycheck before you have the chance to spend them. Always participate and contribute at least enough to max out any employer matching. Make small increases every year until you’re contributing at least 15% of your gross income.
Also work on building an emergency fund at the same time. Having just a few hundred dollars set aside can reduce stress if you have an unexpected expense. Ideally you should work up to having three to six months’ worth of living expenses in a bank savings.
It’s okay to start small. Even if you can only set aside $25 a month for savings and $25 for retirement, you’ll be surprised how quickly balances can grow over time. Treat savings like mandatory bills that you owe yourself and automate them when possible.
A good rule of thumb is to keep the total of all your monthly debt obligations below 40% of your gross monthly income.
5. Get a handle on your debt.
If debt is stressing you out, get serious about reducing expenses so you can pay it off as quickly as possible. A good rule of thumb is to keep the total of all your monthly debt obligations below 40% of your gross monthly income.
Even if you don’t have extra money to whittle down debt balances faster, you drastically cut your interest expenses. Consider options such as refinancing, doing a balance transfer, or changing payment plans on student loans to make debt more manageable.
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