Financial anxiety is fear and worry related to money; it can come from several different financial causes. Financial anxiety can impact many aspects of your life, including your relationships, work, general well-being, and mental health. The good news is, just like any other kind of stress or anxiety, there are ways out. In this article, we’ll help you understand the concept of financial or money anxiety and give you some tangible steps to take that may help reduce your financial stress!
Understanding Financial Anxiety
Financial anxiety is more than just financial worries—something that we may all have dealt with before. It becomes anxiety when these financial challenges remain in your thoughts constantly and take over your life. Sometimes, they may also affect your physical health! Anxiety relief is possible through things like stress management and financial management.
9 Steps to Help You Stop Worrying About Money
1. Assess Your Financial Situation
This is where you take a closer look at your current finances. Here are some things you should get exact or close to exact numbers or ideas on with a financial assessment:
- Your net worth
- Your cash flow (a bank account statement can be helpful)
- The amount of debt you have
- Your savings (savings account, retirement accounts, etc)
- Your credit situation
- Insurance coverage information
- Any financial goals that you have (short-term and long-term)
2. Set Realistic Financial Goals
Having financial goals can help with money worries and improve things like spending habits, financial stability, and personal finance overall.
When setting financial goals, it’s important to be realistic about what you may be able to accomplish in whatever timeline you are planning to do. If you are too ambitious, then it may cause even more stress. The SMART criteria can be a helpful guide to help keep your goals realistic, here is what that criteria encompasses:
- S stands for specific; the more specific you are about your goal, the easier it may be to think about whether it is realistic.
- M stands for a measurable goal, so you can decide what getting to the goal will look like every week, every two weeks, or every month.
- A stands for achievable; really consider whether the goal is achievable for you.
- R stands for relevance. You should consider whether this goal is relevant to your situation and whether it makes sense for you right now.
- T stands for timeline, have a clear date in which you want to complete this goal.
3. Develop a Budget And Stay Within It
A budget can be an extremely helpful tool, and there are many ways you can go about it. Here is what the outline of most budgets includes:
- Tracking your expenses and income
- Categorize your expenses
- Identify places to cut back
- Factor in any goals, such as savings
- Try and stick to your budget as much as possible
Most people stick with a monthly budget, but you can do a bi-weekly or even a weekly budget if that works for you. The first time you do this, you may have to make adjustments, but after the first go or so and those adjustments, you should be able to stick to your budget.
4. Build an Emergency Fund
An emergency fund can be extremely helpful if you are trying to stop worrying about money. It will be a financial cushion when something unexpected happens and can prevent going into debt to take care of your necessary expenses.
Building savings can be as simple as saving a little bit each time you get paid, or you can undertake a large savings plan.
Here are some savings strategies and plans you can consider:
- Create a specific savings goal for your emergency fund with a timeline
- Use a budget plan that focuses on savings, such as the Pay Yourself First budget.
- Use a savings challenge
- Automate your savings
- Focus on cutting back on discretionary spending to grow your savings.
5. Reduce Your Debt
There are many ways to manage debt. Two common strategies are the debt snowball and avalanche method.
The snowball method involves paying off the smallest debt first while maintaining the minimum payments on your other debt. In the avalanche method, you pay the highest interest rate amount first while paying the minimum amount on other debt, and so on. [
Debt consolidation and balance transfers are also popular debt repayment strategies, especially when dealing with high-interest credit cards or loans.
6. Boost Your Income
The more money you have, the more you can allocate towards your financial goals, which can reduce or even eliminate your financial concerns.
If you already have a full-time job, then it may be possible to negotiate your salary, or you can consider side hustles/side jobs that can mean earning more money in your spare time. Investments can also mean passive income streams.
7. Invest for the Future
One big thing about anxiety is not being sure about the future, and investing can be a great way to help you build that confidence with future planning. Investing is the action of allocating money to certain avenues to make a profit or generate income.
When it comes to investing, risk tolerance is an important thing to consider; it is the amount of risk that you may be willing to take with an investment.
Stocks, bonds, and real estate are some common investment accounts. A financial advisor can be a great place to start when researching investment strategies.
8. Develop a Healthy Mindset on Money Management
One of the best things you can do right away with money anxiety and for your mental health is to develop a healthy mindset on money management. There are a few ways you can go about this on your own here are some tips:
- Positive thinking and Gratitude — Positive thinking involves challenging negative thoughts as they come and building positive thought patterns through things like affirmations. Gratitude involves being thankful for the things/expereinces you do have. When done together, both of these tools can be extremely helpful in developing a healthy mindset.
- Develop Outlets for Stress — Sometimes, you cannot avoid the stress that comes with money or anything else, and so having coping mechanisms for this can be extremely helpful. Lots of people use hobbies like exercise, art, video games, and more to help relieve stress when it does pop up.
These are just a few of the coping mechanisms available. Do your own research to find what best fits your lifestyle. And remember, if you cannot tackle stress management on your own, there is professional help out there.
9. Financial Planning
Financial planning is important because it can help you figure out exactly how you want to control your money, which can take away a lot of money anxiety. A financial advisor or planner is a good place to start.
Retirement Planning
Retirement planning is essential so you can live comfortably once you reach the age of retirement. Here are some accounts that can help you with retirement savings or help you reach your retirement goals:
- 401(k) — A 401k is an employee-sponsored retirement account. With this account, you usually get some kind of match while you contribute.
- IRA — An IRA is an individual retirement account that you can set up outside of your job. There are different types of IRA accounts, such as a Roth IRA, a Simple IRA, and a Traditonal IRA.
- Solo 401(k) — A solo 401(k) is a retirement account for self-employed individuals who do not have any employees (other than a spouse).
Along with what kind of retirement plan or account you want to use, you should also consider a timeline of when you want to retire. This will help you figure out how much you want to put aside each paycheck towards that goal.
Estate Planning
Estate planning allows you to allocate your assets to others after your passing. It is essential if you have dependants/and or heirs that you want to protect or pass your belongings/assets to them. There are some basics of estate planning that you should be aware of:
- A Will — a will is a legal document that provides directions in how your assets should be divided along with who takes care of minors if you are their parent or legal guardian.
- Trusts — legal parties that hold funds/assets until they are to be distributed to their rightful beneficiary.
- Benenficaitres — The recipients of your assets and funds.
- Power of Attorney — A document granting someone authority to act on your behalf in financial and legal matters.
- Letter of Intent — A document providing additional instructions or wishes not covered in formal legal documents.
Tax Planning
Tax planning is crucial for individuals and businesses. With this kind of planning you’ll do your best to reduce the amount of taxes that you owe to the IRS. There are all kinds of of tax strategies such as using deductions, tax credits, depositing in reitrment accounts, and more. A tax expert can really be helpful with tax planning!
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Money anxiety is real and common! If you are asking yourself “how to stop worrying about money,” you aren’t alone! The good news is that there are ways to improve your mental and financial health, sometimes simultaneously! Strategies like planning, budgeting, boosting your income, and developing a healthy mindset are just a few of the things that can help reduce financial stress.
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