Do you ever lie awake at night, money stress keeping you up as you worry about unpaid bills, rising debt, and not having enough savings? You're not alone. Financial issues are one of the leading causes of stress, affecting millions of people.
The good news is, while money stress feels overwhelming, there are achievable steps you can take to get your finances under control. It starts with facing your situation head-on, then making a plan and sticking to it. Easier said than done of course, but very possible.
Facing Your Finances
The first step is confronting just where you stand money-wise. Log into your bank account(s) and tally up balances across checking, savings, retirement accounts, investments, and debts like credit cards or loans.
List your average monthly income - your salary and any other earnings. Then list regular monthly expenses:
Housing (rent/mortgage, utilities, maintenance fees)
Debt payments
Insurance costs
Groceries and household items
Transportation (car payment/insurance, gas, public transit)
Entertainment/dining out
And so on. Be thorough.
Subtract the expenses from your income. If the expenses exceed earnings, you're operating at a loss each month, draining savings to stay afloat. If income exceeds expenses there may be room to pay down debts faster or start saving.
Trimming Expenses
With your full financial picture mapped out, target areas where you can reasonably cut back and save money. Every dollar trimmed from regular spending is one step towards stability and relief from money stress.
Biggest expense for most is housing. Could you rent a less pricey place or take on a roommate to split costs? Even $200 less per month makes a difference.
Food is another big line item. Meal planning to reduce dining out, buying generic brands at the grocery store, and skipping premium coffee drinks are simple ways to save money on groceries.
The average American spends over $2,000 annually eating out. What if you challenged yourself to limit restaurant meals to once a week or special occasions only? Even occasional home-cooked meals would yield huge annual savings.
Evaluate all recurring expenses - cable plans, gym memberships, subscriptions. Trim what you won't truly miss. And resist impulse purchases which add up fast. Establishing a reasonable weekly discretionary budget for non-essentials is smart.
Read personal finance blogs for more cost cutting ideas. The more expenses you can reduce, the faster you'll get out of stressful debt.
Paying Off Debt
Over three-quarters of Americans carry some form of debt month to month, from credit cards to medical bills to personal loans. And total interest costs are staggering.
Paying down high-interest debts with intensity is critical for getting your head above water financially. Credit cards especially should be tackled aggressively with a debt payoff plan.
Two popular strategies are the Debt Snowball and Debt Avalanche Methods. With the Debt
Snowball you list debts from smallest to largest, paying minimums on all but the smallest which you overpay to wipe out fast. Once the first debt is gone you roll that money to the next smallest, creating a payoff "snowball".
The Debt Avalanche Method targets debts ordered highest interest rate to lowest. Extra payments go toward wiping out that most expensive debt first. This method costs less over time but can be slower gratification.
Either can work wonders to get out of debt fast, so pick one and commit. Setting a realistic timeline for being debt-free - say 18 or 24 months - keeps the finish line visible. You've got this!
Building Emergency Savings
As you pay off past debts, become equally dedicated to saving for the future so you avoid new debt.
Experts recommend having 3-6 months’ worth of living expenses set aside in an emergency fund. This protects you from having to resort to high-interest options like credit cards or payday loans when unexpected expenses come up - a car repair, medical bill, or temporary job loss.
Open a separate high-yield savings account and set up automatic weekly or monthly transfers from your checking account - even start with $25 or $50 until you build momentum. Out of sight, out of mind accounts work best to let interest compound over time. Online banks tend to offer the highest rates on savings these days.
Building up even a starter emergency fund brings huge peace of mind when it comes to financial anxiety. And it ensures you won't derail all the good debt reduction work you’re doing.
A Total Money Makeover
Reigning in expenses, eliminating debts one by one, and saving up a rainy day fund...that's how real financial change happens: through incremental progress and sticking to a system that works.
It may seem rigid at first. Or that progress is too slight to notice a difference. But in 6 to 12 months you can transform your whole money situation for the better.
Envision your ideal money makeover - perhaps being mortgage and consumer debt free with a fully funded emergency account. Maybe also saving for retirement, vacations, or your kid's college fund. That can all happen on an average salary through diligent saving and spending reshuffling.
What specific money victories can you achieve this year? Identify 1-3 goals and break them down into doable monthly targets.
Then track your progress. There are so many great budgeting apps and online money tools out there. Or go old school with a notebook, calendar reminders, and a big visible chart on the fridge showing debts shrinking and savings swelling!
However you stay motivated, know that relieving money stress comes down to facing where you’re at now financially, making a plan for where you want to be, then doggedly - and optimistically - working your plan. You’ve so got this!
Comments