While most conversations about leading factors of stress center on physical, mental, or emotional strain, or juggling the commitments of work and personal life, an often-overlooked contributor to stress is finances.
If you’re worried about money, you’re not alone. Research shows that nearly 75% of adults report feeling stressed about the financial situations – whether it’s making ends meet or saving for the future.
Financial stress, if severe, can lead to negative effects of your mental and physical health. It can cause anxiety and depression, as well as cause one to withdraw from social activities. Learning to effectively manage your financial situation can help you feel more in control of your life and ultimately reduce stress.
Here are some tips to creating healthy finance habits to help you reduce stress and build a relaxing future:
- Understand your debt
In order to effectively manage your debt, you have to understand where it’s coming from, what kind of debt it is, and why it may be out of control. Make a list of all of your debts, including the total amount owed, the interest rate, and the minimum monthly payment. Next, prioritize your high-interest debt first. For example, credit card debt should be more of a priority to pay off if it has a much higher interest rate than your student loan. Make sure you’re making minimum payments on all your debts, but focus on paying extra towards the highest interest rate debt first. Being honest with yourself about what you can tackle will help create a clear picture of your debt so you can develop a plan to pay it off.
- Stick to a budget
Grab a pencil and paper and take look at all of the money going in and out of your bank account. Determine the total cost of your necessities on a monthly basis (rent, car, gas, groceries, etc.). Next, tackle your debts by making the greatest payment you can financially handle, even if it’s just a bit over your statement balance. Set aside a small amount for entertainment and social activities, and remember to choose these activities wisely. Figure out any recurring charges you can decrease or eliminate, such as subscriptions or memberships. Depending on your situation and pay schedule, aim to transfer approximately 10% to 20% of your paycheck directly to savings.
- Find additional income opportunities
If you’re stressed about money, it’s likely no surprise that you need more funds to work with in your budget. Adding a part-time job or side hustle might be a good way to relieve financial pressure. If possible, make this additional income have a specific purpose so it doesn’t encourage frivolous spending. For example, any money received at your part-time job will solely go towards paying off a loan or covering groceries the week.
- Practice healthy spending
Having healthy spending habits is crucial for managing financial stress and achieving long-term financial stability. There’s no spending plan that’s one size fits all – it’s centered on your individual goals and situation. Reference your budget and pay close attention to your expenses and what categories these charges fall into (rent, food, transportation, entertainment, etc.). Be sure to create a category for savings and/or investments. Separate these categories and respective items into needs and wants. By prioritizing your needs, you can ensure you’re covering your essential expenses before spending money on non-essential items, like dining out or shopping. If you are a chronic spender, avoid impulse purchases by taking time to consider your purchases before making them.
The first step of managing and eliminating financial stressors is practicing self-discipline and understanding that you are in complete control of your financial situation. For more tips of budgeting and savings, visit www.penncommunitybank.com.