- Jenna Gleespen
How to rid yourself of financial stress
Updated: Feb 13, 2021
Stress is something that all of us experience, and it can be tied to a number of problems we face. Stress can arise from personal issues, family issues, relationship issues and financial problems. Financial stress is reported as the number one type of stress in the UK. 1 in 5 adults living in Great Britain report that not having enough money is the major cause of their stress. Whilst some stress can be therapeutic, such as the stress of a fun or interesting project, stress can also have negative effects on our health. Mental health and physical health can both suffer from any form of stress, especially if that stress is financial. There are ways, however, to reduce your financial stress and live a more content lifestyle.
Know your debts Knowing your debts is half the battle. Debts can easily pile up, creating more stress around financial matters. When a payment is missed, for example, our worry and fear increase, causing us added stress. While debts can be a huge stressor for anyone, there are ways to manage debt that can help alleviate the stress of getting bills paid on time.
First, you need to start by listing all your bills, along with any added interest. Prioritise the most important bills, like rent or mortgage first. By prioritising your debts, you will be able to get a clearer picture of where your money is going. You may find that some debts at the bottom of the list can even be eliminated. It is important to have your priorities in order when it comes to managing debt so that debts which cannot go without making a timely payment are taken care of first. For example, although it is likely the highest of your bills, rent and mortgage should be taken care of first and foremost so that you do not lose your home. Then should come necessities such as electricity and water. These are non-negotiable when it comes to paying off. Whilst utilities are not exactly a debt, keeping them at the top of your list will help reduce stress by knowing your essentials for living are taken care of.
Near the bottom of your list should be your loan repayments outside of mortgage and credit cards. While these debts do need to be paid, you will not be homeless or without needed electricity and running water do they not get paid. Creditors are often willing to work with you as well to come up with an adjusted repayment plan. Credit cards should really only be used for emergencies or large purchases that are planned for and you can make timely monthly payments on. Eliminating credit card debt by not using your cards for everyday purchases can be a great start to getting out of debt. Although using them frequently is an attractive option since many credit card companies offer rewards such as airline miles or cash back, not using a card and paying off the debt associated with the account is the best way to rid yourself of debt. Start paying off the credit cards with the smaller amounts of debt on them and work your way to the larger balances. Doing this will help you completely payoff certain cards quicker, thus helping your credit score and making tackling any remaining debt seem more manageable.
Set a tight budget It is a no brainer that a budget is key to living a more stress free lifestyle. However, many don’t plan a budget strictly enough. Leaving too much room for non-essential purchases can be one way that you quickly see your bank account dwindle in size. Using a spreadsheet to plan your budget is a way you can remain organised and on track. A spreadsheet, or even a simple budgeting template can help you more easily keep track of your finances as a whole. Templates are widely available across the web, and many of them such as the ones on Vertex42.com are free.
The first thing you need to do when making a budget is note your net income. Remember to deduct any taxes or withholdings from your pay so that you can have a good idea of the money you actually have to spend. Next, you should make note of all fixed expenses. These are expenses like rent or mortgage, car payments and utility bills that stay about the same each month. You should then track your variable spending, bills that can differ over time. This includes grocery bills, credit card bills and entertainment. When tracking these expenses thoroughly, you will likely find some areas that you can cut back. Use any extra money from cutting down on variable expenses for savings, whether that be personal savings or for something like retirement.
Setting budgeting goals is a good way to stay on top of your spending. Setting a goal such as saving a certain amount over a period of time is one way you can feel rewarded for being fiscally responsible.
Finally, making a steadfast plan for how you intend to spend your money, leaving little room for accidentally spending too much will help you stay in line with your budget. The key to planning a budget is to be realistic, so make sure that when creating one you are not putting too much away for savings or non-essential purchases such as clothing or recreation. Staying on a plan will also help you feel more organised, and thus can relieve the added stress of spending too much.
Plan for your future It is never too early to start saving for retirement. Pension plans are a good way to save for this, especially if you are self-employed. By setting up a pension plan, you can make regular contributions that come with a tax benefit. Pension plans for paid employees of a company also typically come with employer contributions, thus adding to your overall retirement savings. It is recommended that to start saving for your retirement you take the age at which you started retirement contributions and half it. This is the percentage of your pre-tax salary you should put into your pension plan annually. Annuities can also be a good way to manage expenses as a retiree. Annuities are set up by insurance companies and typically use your pension pot to pay out steady, reliable income in monthly intervals during your retirement. An annuity can help you decrease your non-essential spending and keep you on track with a budget. However, annuities aren’t for everyone, so it is worth speaking to a financial advisor about if an annuity is a good option for you.
Saving for your future is always a financially sound idea. So much added stress in retirement is due to not saving properly for it. After all, saving now by cutting back on non-essential expenses is one way you can ensure a happy future.
Reevaluate your lifestyle This should go without saying, but one way to minimise financial stress is to cut back on purchases that are not necessary, By reevaluating your spending you will be able to stick to a tight budget and eliminate some financial worry. Perhaps after writing down all your monthly expenses you notice that a little too much is going to take away or entertainment of sorts? These are areas that are easy to cut back on and can help you not only be more responsible with your spending, but can help you create a savings plan as well. Putting money once spent unnecessarily towards a savings account, whether that be a personal one or one for retirement, is one way you can become more financially sound. Often, by reevaluating our spending habits and lifestyle, we see areas where spending may have been frivolous or unnecessary.
Practice mindfulness Practicing mindfulness can be helpful when it comes to finances. Being mindful of your spending and taking the time to fully evaluate each purchase can help take away financial stress. Feeling good about where your money is going helps to ensure that you are at ease with your spending. Mindfulness practices can have a good effect on your overall health and stress levels in many areas of life, and finances are no different.
Stress free is the way to be Tackling finances is certainly a good way to reduce daily stress. Becoming more financially responsible, understanding where your money is going and prioritising financial responsibilities can help you live a more stress free lifestyle. In the end, eliminating financial worry only leads to a much happier and healthy lifestyle.