It is tough to deal with money stress early in the year but this is not totally impossible. Especially with how the past year unfolded, a lot of people are struggling to get back on track. The health crisis overwhelmed many world economies that challenged the way people handle their finances leading to the pandemic.
Several businesses were forced to let go of a lot of people in their hopes of trying to stay afloat. In a bid to drastically cut overhead expenses, employees were either placed on furlough or let go. Others were a little more fortunate where their companies quickly shifted to online work. Of course, this was not the case for everyone but it did help a lot of businesses to take control of their expenses.
But this did not stop people from having to deal with money stress. Especially so when they or a loved one would get infected with the virus. More than the financial challenges it brought, they would have to deal with the emotional and mental toll it brings as well. It is safe to say that the past year was overwhelming for a lot of people.
Now that we are all starting on a new year, it is not impossible that we still carry over a lot of the financial challenges from last year onto this one. Add the fact that the Washington Post estimated that federal debt per person is at about $23,500. As a result, you could be dealing with an unbelievable amount of financial stress. It can be several debt accounts you had to take out from last year, a shaky career, or even being way off course from your financial goals. If this is what you are dealing with, here are a few things to help you deal with and manage through money stress.
Deal with money stress by identifying the real problem
The first step in dealing with stress is to identify the root cause. There will always be a reason why you are stressed the way you are. It might seem to be an effortless thing to do, but it is one of the toughest realizations you will come across with. You might think that if you are stressed with money, then the problem is that you do not have enough, right? Then the simplest solution is to increase your income.
But this is not always the case. There will be times where the problem lies with your inability to control your spending. You might be able to increase your income every month but if you cannot keep your spending in check, then you will simply circle back to the same problem. This is the reason why you need to go to the root cause of the problem.
This step requires a certain level of reflection and contemplation in knowing your real self. Are you stressed with money because you cannot account for your income and expenses? Maybe the problem is that you really do not know how to manage your finances? If that is the case, you can direct your efforts in learning how to budget your money. The important thing is to get to the real problem so you can start solving the root cause.
Create a comprehensive budget
One of the tools you need to help you deal with money stress is a comprehensive household budget. This means you need to sit down and spend time putting your budget together. But remember that comprehensive does not have to equate to a complicated budget. In fact, it is better to anchor your budget on simplicity.
Have a list of your income on one side and your expenses and payments on another. Your first goal is to make sure you have a complete list. It would be easy if you only have one source of income. But when it comes to your expenses, you might need to spend a lot longer time getting every single detail. If it can help, monitor all your expenses for a month to make sure that you include even the smallest detail.
When you have everything you need, the next objective is to make sure that you have enough to cover all your expenses and payments. If not, this is where you need to put in a lot more work. Some people choose to look the other way when they get to this point because it is a lot of work. But you will never know what you need to work on if you do not have an idea where you are financially and your budget can help you determine that.
Create a concrete plan to solve your problem
When you begin to deal with money stress, the first step is to know the problem. And after understanding where you are financially, it is time to start creating a plan of action. Keep in mind that creating a plan and following it are two different things. You might have a great plan but if you do not act on it, it will never bear fruit.
One tip to help you increase the success rate of your plan in dealing with financial stress is to take small steps. This is more sustainable over a long periods of time. This helps you develop a healthy habit you can rely in the future. If your plan is to start saving more for your retirement fund, divide the amount you want to set aside in a year over 12 months. Cutting it down to smaller goals can help you focus month to month.
A sustainable plan you can stick to is better than a lofty goal that is impossible to reach. Remember the acronym S.M.A.R.T. which stands for Specific, Measurable, Achievable, Realistic, and Timely. It helps to base your plan around these ideals to help ensure that you are putting out realistic targets you can achieve.
Strengthen your reserve fund
One of the best ways to deal with money stress is to make sure that you have a robust reserve fund to cushion unexpected emergencies. Your reserve fund consists of two types of savings – emergency and rainy day fund. Both of which help you get through challenging financial times but each one has a specific use.
The rainy day fund is meant to cover smaller needs such as a piece of broken equipment at home, minor car repair, or even buying small pieces of equipment for your work-at-home needs. On the other hand, your emergency fund should be used for life-changing events. This includes getting laid off at work. USA Today shares that in December of 2020, about 140,000 jobs were lost because of the pandemic.
The main reason why they are separate for most people is to help keep your emergency fund intact when you need it. It is because if you keep taking money out of your emergency fund for small needs, the time could come that you do not have enough when a big emergency happens.
Practice a frugal budget
Another thing that can help you budget better is if you are able to widen the gap between your income and expenses with your income on top. One idea that can help contribute to this is a frugal budget. This is where you live and spend much lower than what you have already budgeted for. For most people, this is the time to let out their creativity.
Take your food expense for example where you might be ordering take out an delivery a few time a week. Why not cook and prepare meals in batches throughout the week for your family? You can prepare them ahead so you do not have to start from scratch every meal time. Are you used to going on vacations? Why not convert your backyard into a perfect camping site for your family? You can stream movies in the living room as well and make your own popcorn and drinks.
It is not an easy task to deal with money stress especially with the effects of the health crisis but it is not an impossible task. You need to identify the root cause of your stress and put together a plan to address it.