7 Tips for Reducing Financial Stress

If you’ve ever laid awake at night worrying about bills, felt a knot in your stomach when checking your bank balance, or argued with a loved one about money, you’re not alone. In fact, a staggering 73% of Americans identify money as the number-one cause of stress in their lives, according to a recent CreditWise survey. 

Financial stress affects people from all walks of life, regardless of their income, and can arise from many sources, including overwhelming debt, job insecurity, and unexpected expenses. It’s a pervasive problem that doesn’t just impact our bank accounts but our overall well-being and quality of life.

The good news is while financial stress is common, it doesn’t have to be a permanent fixture in your life. Understanding the root causes of financial anxiety and learning effective strategies to manage it can help you alleviate this burden and pave the way for a more secure financial future.

Understanding Financial Stress

Financial stress is a common experience that affects people across all income levels. It’s typically caused by factors such as overwhelming debt, insufficient income, unexpected expenses, job insecurity, or poor financial management. 

The root causes can vary from person to person, but the effects are often similar and far-reaching. In fact, the implications of financial stress typically extend beyond monetary concerns. It can have significant impacts on various aspects of life, including:

• Mental health. Anxiety, depression, and constant worry are common side effects.
• Physical health. Stress can manifest physically, leading to headaches, insomnia, and even more serious health issues.
• Relationships. Money troubles often strain personal relationships, particularly with spouses or partners.
• Work performance. Financial worries can decrease productivity and focus at work.
• Decision-making. Stress can lead to poor financial choices, perpetuating a cycle of money problems.

Indeed, managing and reducing financial stress is crucial for your financial stability and overall well-being. By understanding the causes and implications of financial stress, you can take proactive steps to manage it effectively, leading to a healthier, more balanced life.

How to Reduce Financial Stress

Tip #1: Create a Budget and Stick to It

Creating and adhering to a budget is the cornerstone of financial stability. A budget serves as a financial roadmap, offering clarity on your income, expenses, and savings goals. This awareness alone can significantly alleviate financial stress by putting you in control of your money.

To create an effective budget, start by diligently tracking your income and expenses for at least a month so you have a realistic picture of your financial habits. Next, categorize your spending into essential and non-essential items to help you identify areas where you can potentially cut back.

Numerous tools and apps can help simplify the budgeting process. Popular options include YNAB (You Need A Budget), Goodbudget, and Monarch. These digital resources can automatically categorize expenses, send alerts for bill payments, and provide visual representations of your financial progress.

Once you have a clear overview of your spending, create a realistic budget you can stick to over time. Don’t forget to regularly review and adjust your budget as needed and celebrate small victories to stay motivated along the way. 

Tip #2: Build an Emergency Fund

An emergency fund is a dedicated savings account set aside for unexpected expenses or financial emergencies. It serves as a financial buffer, providing peace of mind and reducing stress when faced with unforeseen circumstances such as medical bills, car repairs, or job loss. Having this safety net can prevent you from relying on high-interest credit cards or prematurely withdrawing funds from your retirement accounts during challenging times.

Financial professionals typically recommend saving three to six months’ worth of living expenses in your emergency fund. However, the ideal amount can vary based on your individual circumstances, including job stability, health, and financial obligations. 

Here are some tips for building your emergency fund:

• Start small and be consistent. Even saving $20 or $50 per paycheck can add up over time.
• Automate your savings. Set up automatic transfers from your checking to your emergency fund account.
• Use windfalls wisely. Allocate a portion of tax refunds, bonuses, or gifts to your emergency fund.

When deciding where to keep your emergency fund, prioritize accessibility and safety over high returns. For example, a high-yield savings account at an FDIC-insured bank can be an ideal choice. These accounts offer better interest rates than traditional savings accounts while still allowing quick access to your funds when you need them. 

Tip #3: Tackle Debt Strategically

Debt is a significant contributor to financial stress, often creating a cycle of worry and sleepless nights. According to a recent survey by Forbes Advisor, 54% of Americans with debt say they always or often feel stressed because of their debt.

To alleviate this burden and reduce financial stress, it’s crucial to approach debt reduction strategically. Two popular methods for tackling debt include:

• Snowball Method. This strategy involves paying off your smallest debts first, regardless of interest rates. As you eliminate each small debt, you gain momentum and motivation, like a snowball growing as it rolls downhill. While this method isn’t mathematically optimal, it can provide quick wins and psychological boosts.
• Avalanche Method. This approach focuses on paying off debts with the highest interest rates first. While it may take longer to see initial progress, this method saves more money in interest over time. 

In some cases, you may be able to negotiate with creditors, as many are willing to work with you to create a more manageable repayment plan. 

It’s also critical not to accumulate new debt while trying to pay off your existing debts. Be sure to stick to your budget and consider using cash for discretionary purchases to keep your spending in check. 

Tip #4: Increase Your Financial Literacy

Increasing your financial literacy is a powerful way to reduce financial stress and make more informed decisions about your money. Financial education empowers you to understand advanced financial concepts, make better decisions, and navigate the ever-changing economic landscape with confidence.

Numerous resources are available to help you improve your financial knowledge, including books, online courses, podcasts, and financial professionals. By tapping into these resources, you’ll gain the knowledge and skills to take control of your finances and reduce financial anxiety.

Tip #5: Practice Mindful Spending

Mindful spending involves understanding how your spending aligns with your personal goals and values, so you can be more intentional with your purchasing decisions. This approach can significantly reduce financial stress by helping you make more thoughtful choices about where your money goes.

Here are a few strategies for practicing mindful spending:

• Implement a waiting period before major purchases. When considering a significant expense, give yourself a cooling-off period of at least 24 hours. This helps avoid impulsive buying and allows you to evaluate whether the purchase is truly necessary or worthwhile.
• Distinguish needs from wants. Regularly assess your expenses and categorize them as either needs (essential for living) or wants (desirable but not crucial). This clarity can help you prioritize spending and cut back on non-essential items when necessary.
• Find low-cost alternatives. Before making a purchase, explore whether there are more affordable options that can fulfill the same need or desire. This might involve comparing prices, looking for second-hand items, or finding creative DIY solutions.

By being more intentional with your purchases, you’re likely to spend less overall, which can free up money for savings or debt reduction. This, in turn, can alleviate financial pressure and provide a greater sense of control over your finances.

Tip #6: Open the Lines of Communication

Finances can be a major source of tension in relationships, often ranking as one of the leading causes of stress and conflict between partners. However, openly communicating about money matters can significantly reduce this stress and strengthen your relationship.

To effectively address money issues with your spouse or partner, consider the following tips:

• Schedule regular “money talks”. Set aside time periodically to discuss your finances in a calm, non-judgmental environment.
• Be honest and transparent. Share all relevant financial information, including debts, income, and spending habits.
• Listen actively. Try to understand your partner’s perspective, concerns, and financial values.
• Set shared financial goals. Work together to establish short-term and long-term financial objectives.
• Divide financial responsibilities. Assign tasks based on each partner’s strengths and preferences.
• Seek professional guidance if necessary. Consider consulting a financial advisor or therapist if you’re struggling to see eye-to-eye on money matters.

Tip #7: Partner with a Fiduciary Financial Advisor

Finally, partnering with a fiduciary financial advisor can be a powerful step toward reducing financial stress. A trusted advisor can offer personalized guidance and expertise, providing tailored advice to address your specific challenges and goals.

A financial advisor can also assist in developing a comprehensive plan for your financial future, including retirement planning, estate planning, and investment strategies. Furthermore, they can help you stay on track toward your financial goals through regular reviews and adjustments to your plan as needed.

With professional guidance, you can develop a clear path forward, potentially reducing your financial stress and working toward a more secure financial future. In many cases, simply knowing that an experienced professional is overseeing your finances can provide confidence and peace of mind.

TrueNorth Wealth is here to help.

Reducing financial stress is an ongoing journey that requires patience and persistence. With consistent effort, you can build greater financial confidence and achieve more peace of mind.

If you’re looking for support on this journey, TrueNorth Wealth is here to help. Our team of fiduciary CFP® professionals offers personalized guidance tailored to your unique situation. We’ll work with you to create a comprehensive financial plan that supports your goals and helps reduce your financial stress.

TrueNorth Wealth is among the top Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.

 

For our team at TrueNorth, it’s about so much more than money. It’s about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.