Do you find yourself constantly stressed about money? If you’re always worried about paying your bills, repaying debts or retiring with enough money, then you’re not alone.
According to a study conducted by FP Canada in 2020, 4 out of every 10 Canadians listed money as their major cause of stress.
Money stress continues to outrank other causes of stress like personal health, work and relationships.
Luckily, there are ways to overcome this anxiety and take control of your finances. This post contains 11 strategies to help you manage your financial stress.
How To Deal With Money Stress & Financial Anxiety
1. Identify The Root Cause Of Your Money Stress
To reduce your money stress, you need to start with a proper understanding of the root cause.
Why is this important?
Well, the short answer is that the specific actions to take will vary depending on what is causing the stress.
For example, the actions you’ll take to reduce your stress about debt may be different from the ones needed to lower your worries about running out of money in retirement.
Here are some of the biggest areas that cause financial stress:
- Bill payments and expenses
- Saving and investing for retirement
- Job security
- Housing cost
Start with an assessment of your finances. Understand what keeps you up at night. If you have a partner, make this a joint exercise. Be honest with yourself and keep an open mind.
Once you have a clearer idea of what stresses you out, you’ll be in a better position to identify the specific actions to lower your money stress.
2. Get Advice From A Finance Professional
Speaking to someone about your worries can go a long way in reducing your money stress – especially if the person is a professional. Depending on your situation, this may be an investment advisor, insurance broker, financial planner or advisor and so on.
In general, a good financial planner will help you navigate the different areas of your finances, create a plan you can follow and give you some direction.
Of course, good advice won’t come cheap, but you can get an advice-only or fee-only planner for a reasonable fee.
You can choose to work with them over a few sessions or for longer periods. Either way, you should come out of the exercise with better clarity and a clearer direction with your finances.
3. Set Financial Goals And Build A Plan
Financial goals help you stay motivated and keep your focus on the bigger picture.
Set a financial goal to address each of your money stress. For example, set a goal for when you want to be debt-free and how much you want to pay off by the end of the year.
Be specific and realistic. More importantly, come up with a plan to achieve the goals and be clear about what you need to do. A goal without a plan is just a wish.
For example: if you have a goal to pay off $6,000 in debt within the next 12 months, break it down into monthly goals of $500.
But don’t stop there!
Check your monthly cash flow. Can you comfortably pay off the $500 every month? What other goals or expenses will you have to sacrifice? Do you need to make extra money?
In other words, setting a financial goal isn’t enough. You need to back it up with specific actions.
- 7 Smart Must Have Financial Goals To Take Control Of Your Finances
- 15+ Great Ways To Improve Your Finances (Starting Today)
4. Start Tracking Your Expenses
Another way to reduce your money stress is by tracking your expenses. This gives you a better insight into where your money is going.
Here’s the truth:
It doesn’t matter how much you earn; you’ll always be stressed about money if you don’t keep your expenses in check.
And if you’re interested in creating a budget you can stick with, tracking your expenses for a few months will help you come up with a more realistic spending plan.
5. Create A Budget
If you’re constantly worried about money, creating a monthly budget or spending plan can help lower your financial stress.
Bills payments and expenses, debt repayment and saving for retirement are some of the major causes of money stress. By creating a budget, you will be in better control of your finances.
You probably have a good idea of how much income you make monthly. But a budget lets you plan your spending, allocate your income to your goals and the things that are important to you, and prevent overspending on some expense categories.
And if you have a budget already, revisit it and tweak it if necessary.
Related: Why You Need A Budget
6. Pay Down Debt
For every $1 in income, Canadians have about $1.7 in debt. So it’s not surprising that many people are stressed about their debt level.
Paying off your debt quickly or prioritizing it will reduce the stress, but it’s not that easy. In many instances, there’s a limit to how much we can allocate to debt repayment from our monthly income.
But you must be intentional and smart about paying off debts – especially the bad ones like credit card.
You must be intentional and smart about paying off debts – especially the bad ones like credit card
Start by looking at your budget. Look for opportunities to reallocate money from other categories to debt repayment.
For example, focus on the quick wins. Cancel some subscriptions, start making your own meals to cut down on how much you spend on ordering food, make your own coffee etc.
Then look at cutting other expenses with bigger dollar amounts or making extra income. Do you have a second car? Consider selling it and reallocate the monthly car payments, insurance, fuelling and maintenance to debt repayment.
7. Create or Contribute To An Emergency Fund
Every now and then, life throws some surprises at us. Knowing you have some money set aside in an emergency fund can put your mind at ease.
And when the emergencies happen, an emergency fund can reduce the money stress that comes with it.
Set aside some money in a readily accessible account (a HISA), even if you have other more pressing financial goals like getting out of debt.
Many financial experts recommend starting with $1,000. It is enough for many financial emergencies, like car repairs, and should give you enough cushion to deal with the surprise without taking on additional debts.
Once you’re out of debt, work on saving enough money to cover 3-6 months of your monthly essential expenses.
To learn more about emergency fund, who needs it, how much to save and where to put the money, check the link below.
8. Make Extra Money From A Side Gig
Making extra money from a side business can go a long way in reducing your financial stress. Of course, making some extra income won’t help someone with a spending problem.
For most people though, a few extra hundreds or thousands will be a great relief.
The good part is: There are several options available today.
Offer a service using your existing skills or learn new ones. Consider renting out your car or a room in your house, get a roommate, make and sell a physical product and so on.
Then put the extra money towards your financial goals.
And when you’re ready to register business, you can get $50 off the cost of registering it using the Ownr coupon code here.
9. Change Jobs
If you’re stuck in a low-earning job or one without career projection, it may be difficult to take charge of your finances.
If you’re in this situation, make a plan to change jobs.
Start by assessing your current skills against the skills you’ll need for your dream job. Then put in the work to develop any skill gaps you identify. Udemy is a good place to start.
Finally, always be on the look-out for opportunities to increase your earning potentials. Take trainings and courses and continue to grow your professional network.
10. Save And Invest More
The fear of what lies ahead, for example funding college cost or retirement, can lead to anxiety. But knowing you’re saving and investing towards these goals can lower your stress.
You don’t have to wait till you have thousands of dollars to start saving or investing. Start with what you have and increase your contribution over time.
Here’s the deal:
The earlier you start saving, the more opportunity you have to take advantage of compound interest.
11. Educate Yourself
Finally, educating yourself about your finances and the specific areas keeping you up at night can greatly reduce your money stress.
This may mean different things to different people. It could mean speaking to a financial advisor, watching a YouTube video on how to create a budget, learning how to start investing, and so on.
Whatever it is, you’ll improve your financial wellbeing by educating yourself and knowing exactly what you need to do.
You may not be where you want to be now. But as you continue to learn, you’ll gradually become less anxious and confident in your knowledge of how to get there.
I hope the 11 tips above can get you started in reducing your money stress.
Remember that worrying won’t solve your financial problems. It is only by being proactive and intentional that you can take control of your financial wellbeing.
So start taking charge today, and don’t deal with it alone.
Have any favourite tips for lowering money stress? Let me know in the comments.