Financial Wellness

Everything You Need to Know About Managing Financial Stress

(9 Minute Read) – Financial stress is real. If you find yourself continually spending more than you earn, you need to take a hard look at where your money is going. Write down every amount that comes out of your checking account or is charged to your credit card.

We all make financial blunders and mistakes. Part of being an adult is learning from these blunders and not repeating the same actions again and again.

Are you under a lot of financial stress? Are you on the verge of foreclosure or bankruptcy?

Do you avoid going to the mailbox because you don’t want to see your bills? Do you avoid looking at your credit card statement because you feel guilty for having such a large unpaid balance? Do you have to give yourself a pep talk before looking at your online bank statement? Do you buy things you don’t need because you assume you will always be in debt and that you will always have a credit card balance?

You’re not alone. Financial stress is prevalent in all walks of society. Maybe your neighbor who seems to have it all together is stressed because he has missed his last two house payments. Perhaps your doctor has enormous student loans, made poor investment decisions, and is struggling to make ends meet. It could be that your parents lived all their lives paycheck to paycheck and saved little for retirement without your knowledge.

Sometimes, people hide their debts from others and put on a happy face. They post photos of vacations they can’t afford and take pictures of meals they charge to credit cards. You may feel that you’re the only one with money troubles, but you’re not. 

Even though financial stress is common, this doesn’t mean that you can’t do anything about it. At some point, you have to face the reality of the situation and work to fix it. Here are some action items you can take if you find yourself on the verge of financial ruin and in a dire financial situation.

Assess Your Situation and Downsize When Possible

Track Everything You Spend

If you find yourself continually spending more than you earn, you need to take a hard look at where your money is going.

Write down every amount that comes out of your checking account or is charged to your credit card. You can do this by using a basic (free) spreadsheet on your computer or by writing down the charges on a piece of paper. Try to avoid the software that automatically records your electronic charges and instead, write down each transaction so you can think in terms of real money.

Write down EVERY expenditure. It doesn’t matter if you bought a pack of gum and a soda at the gas station with cash. Write it down and be vigilant in this task and ask for receipts wherever you go! If you have a spouse, encourage them to do this exercise as well.

Once you have recorded a week’s worth of expenditures, add up how much you are spending in each category. Then, do the same thing at the end of the month. This exercise alone can help you spend less money. If you know you have to write down each transaction in a spreadsheet, you’re less likely to spend extraneously on things you don’t need or make impulse purchases.

Writing down your expenses will also allow you to see exactly where your money is going.

Are you overspending at the grocery store each week? Maybe you are overbuying food and find yourself throwing out produce. Perhaps you are spending a lot of money at the gas pump and need to consolidate car trips to save money. Maybe your children’s activities are the cause of your financial strain. Maybe you are spending a lot on Netflix, Amazon Prime, and Audible subscriptions, food co-op memberships, or a wine of the month club. This leads us to the next step in the process of how to save money.

Determine Wants From Needs

Once you see where the money is going, start figuring out where you need to cut spending. Start with the easy items. 

Check for automatic withdrawals that come out of your checking account or are charged on your credit card. You could be paying monthly charges on an app you no longer use or a subscription service that you can’t afford.

If you have cable or any paid streaming services, consider canceling or switching to a cheaper alternative. If you have a gym membership, consider canceling it and run around the high school track or in your neighborhood instead. Try doing your own nails and making your own coffee if you usually pay for those services. 

Start bringing your lunch to work—if you don’t do so already—and avoid restaurants. Instead of meeting friends for a dinner date, meet instead for a stroll in the park. Rather than meeting friends for drinks, buy a bottle of inexpensive wine on your way home and have them come over for a game night. 

Simplify your life. You may find that you have more time to do the things you truly love if you are not managing online accounts, running kids to activities you can’t afford, or attending home sales parties thrown by work acquaintances. 

Cutting these small expenses can make a big difference in your bottom line. 

Look at Large Ticket Expenses

Look at each of your monthly bills. Are there ways you can cut back expenses in each category? For example, can you find more affordable auto and home insurance? Compare the rates you are paying with other companies. 

Look at your cell phone plan. Check out other carriers to see if you can get a better deal. Cut your landline phone if you haven’t done so already. If you are making car payments, consider selling your vehicle. Buy a cheaper vehicle and use the proceeds to better your financial situation. Try to save as much as you can on utility costs.

Look at Your Living Situation

For many couples, their financial stresses may have begun when they purchased a home they couldn’t afford. If this describes your situation, you may have to sell your home and downsize.

To make sure you are making the most money that you can off the sale of your home, you may consider working with a discount-rate real estate agent in your area. Some realtors will negotiate their commissions and may work for as low as one percent of the purchase price of your house. 

If you are currently renting, you may need to find a cheaper place. Consider moving outside metro areas and suburbs. You can find great houses with large yards in smaller towns for a lot less money than you are spending on rent in your downtown loft. This may not be your ideal living situation, but if you are in a financial crisis, you may not have much choice in the matter.

If push comes to shove, you may have to live with parents or friends. Hardly anyone is happy when this happens, but again, it may be necessary for you to make difficult decisions to clean up your financial mess.

Identify Opportunities for Extra Income

Liquidate Your Assets

This is a fancy way to say sell everything you have of value. Start by selling the obvious items. If you have expensive gym equipment that is gathering dust in the corner of your bedroom, consider selling it. The same thing goes for any jet skis, boats, and campers you have little time to use. Look at the tools sitting idle in your garage and consider selling any you no longer use. If you have a snowblower, sell it and buy a shovel.

You might consider placing any specialty items you have on sale online through eBay or swap sites. Additionally, you might have a yard sale to get rid of the piles of miscellaneous items that are gathering dust in your home.

Take a Look at Your Income 

You might consider applying for a new job. You may need to apply for 20, 50, or 80 positions before you find work that pays more money but increasing your income is a logical way to improve your financial situation. 

If you feel like you are making as much money as your skills allow, attempt to make more money at your current job. If overtime is an option at your work, this is the most obvious way to make additional income. Let your boss know that you are willing and able to take any extra shifts.

If you are paid on commission, put all your energy into expanding your client base and closing sales. 

If you have an hourly or salaried job with a set schedule, use your off hours to earn extra income. You might consider driving for a rideshare company, doing freelance work, making and selling a product through Etsy, delivering pizzas, or house sitting. Whatever you decide, use all this extra income to help make your debt disappear.

Additional Measures

Consider Borrowing From Your Retirement Accounts

If you have an investment or retirement plan, you may consider borrowing from it to help out your financial situation. Before doing so, speak to a certified taxes/investments professional and make sure that you are aware of the fees, taxation, or other financial implications of withdrawing money from your retirement account early. You’ll need to consider your own personal financial situation and weigh the pros and cons to determine what the best step is for you to avoid foreclosure or bankruptcy.

Cancel Your Social Media Accounts

For some, this may be the most difficult advice to follow, but canceling your social media accounts may help you eliminate your financial stress. 

When we follow friends on social media, we experience a phenomenon called “FOMO” or “Fear of Missing Out.” We look at images of friends who are at concerts and on vacations. We see photos of parents gifting their children with elaborate birthday parties and educational experiences. We see pictures of home renovations and new cars.

If you want to manage your financial stress and avoid any unnecessary temptation, don’t look at photos of your friends and acquaintances spending money. We can’t have “FOMO” if we don’t know what we are missing.

Final Words of Wisdom

Don’t Avoid Your Finances

Your financial mess will not go away on its own. You may feel like burying your head in the sand, but when you come up for air, you will still have a credit card bill. You will always be receiving bills from your credit card company, and your mortgage company will still be sending you notices.

Part of being an adult is taking care of your finances. It is not fun. It is more fun to spend money on things and activities that you enjoy. It is more fun to go out with friends and attend concerts. It is more fun to purchase Apple watches and go on weekend trips. But it is also fun to live free of financial stress.

Learn From Your Mistakes

We all make financial blunders and mistakes. We all have purchased items we didn’t need. Part of being an adult is learning from these blunders and not repeating the same actions again and again.

Life is much more carefree and enjoyable when you don’t have to worry about how you will pay for your rent or mortgage. You will find yourself sleeping better and relaxing more if you don’t have a credit card statement looming over you at the end of each month. Your cars will drive better when they are all paid off, and your house will feel like a home when the mortgage is fulfilled. 

Once you have taken care of your debt, try to remember how you felt when you were amid financial trauma. Do everything you can to live within a budget, so you don’t find yourself getting constant messages from creditors again.

Author: Erin Schollaert, Enrich
Keep an eye out for our new Financial Wellness Resource Center coming soon.

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