• Fewer than half of all Americans have an emergency fund of $500 or more to cover unexpected expenses
• One-fourth of families earning $100,000 or more per year live paycheck to paycheck
• Less than 20% of Americans report feeling “very confident” that they’ll have enough money saved for retirement
It may not seem like it –since talking about money with friends and family ranks right up there with talking about politics and digestive health –but we’re all in this together to one degree or another.
The truth is worrying about money isn’t just bad for your stress levels. It can hurt your health, damage relationships with your spouse and family, and even lead to depression.
The good news? You don’t have to live in constant fear of financial problems.
The key to stop worrying about money and actually enjoy life is a lot easier than it sounds. Grab a note pad and check out the following 5 ways to gain control over your finances and reduce your stress today.
Step 1. You Need a PlanThere’s no easy way to put it –when it comes to money, if you don’t have a plan, plan to fail.
Call it what you wish –a plan, spreadsheet, cash flow statement, budget –but you need one.
Not knowing whether you’ll have the funds to cover an upcoming bill can be incredibly stressful, but it’s also one of the most unnecessary financial stressors.
Creating a budget is as simple as adding up your monthly bills and expenses and allocating your monthly income to cover those expenses. If your expenses outbalance your income, you’ll need to go over each one with a fine tooth comb and find ways to reduce or eliminate them until your budget balances itself.
And let’s be honest: it’s pretty easy to stop worrying about money when you can see on paper that your monthly income covers your monthly expenses.
If you don’t have a budget, I recommend pausing here and reading one of the most popular and detailed budgeting guides on the web. **humble-brag**
Step 2. Start Saving Money in an Emergency FundYour monthly budget is built to handle your typical monthly expenses, but unless you have large amounts of excess cash floating around in that budget, you’ll need a plan to handle unexpected financial emergencies.
But knowing that you have the cash to pay for these one-time financial emergencies is a game-changer.
A healthy emergency fund amount can vary from person to person; some experts recommend $1,000 to start, while others push for six months of living expenses in case you lose your job. I recommend taking a high-level snapshot of your financial life (number of income streams, job security, age and condition of your home and vehicles, recent health history) and arriving at a number that makes sense for you and your family.
Whatever your number, it may seem impossible to save this much money. But anyone can start small by automatically saving a few bucks each day, cutting back on spending at the grocery store, automatically negotiating your bills, and pulling in a few extra bucks here and there.
And when you do find yourself with some unexpected cash –whether from a bonus at work, inheritance money, or a gift –resist the urge to spend it and put it in your emergency fund. It’s a small price to pay to stop worrying about money!
Step 3: Find Out How Much Debt You Owe and Create a Payment PlanConsumer debt has become a way of life for many Americans. And with so many households drowning in a sea of credit card, student loan, car, and mortgage debt, it’s no surprise that so many people can’t stop worrying about money.
To make matters worse, many people don’t even know how much they owe. So many uncertainties make it nearly impossible to stop worrying about money.
The best way to start formulating a plan to get out of debt is by obtaining a copy of your credit report. MyFico will provide a detailed report of all of your lenders, current balances, minimum payments, and interest rates at no charge. From here, you can develop a repayment plan.
Some pros advocate paying off your debts starting with highest interest rates, while others push for paying off the lowest balances first. The first plan will save you a bit more money, but the second can be more motivating as quick wins pile up.
Just be sure that you maintain a healthy emergency fund while paying extra on debt, otherwise you could be forced to swipe your credit card the next time an emergency comes up.
Step 4: Simplify and Automate Your Finances as Much as Possible
Let’s play a game. Have you ever . . .
. . . forgotten to send out a bill payment?
. . . incurred late fees and interest hikes due to late payments?
. . . failed to receive a billing statement through the mail?
We’ve all been there. And it’s incredibly stressful.
But you can put a stop to these worries by taking three simple steps to put as much of your financial life on autopilot.
1. Sign-up for electronic statements for everything. Some servicers may even give you discounts for this!
2. Register for automatic bill pay with your bank. It’s easy, secure, and smart.
3. Schedule recurring automatic payments for your rent/mortgage, utilities, student loans, and any other regular bills.
Step 5: Make Your Next Money Moves – With Confidence!Once you have a good handle on your current financial situation, it’s time to start looking ahead toward the future. After all, once you’ve put a game plan in action and stopped worrying about money every day, you’re going to have some time on your hands!
Sure, there may be plenty of work left to be done. Maybe you’re stuck in an unfulfilling job or facing staggering student loan debt