Learning how to deal with financial stress can have a tremendous impact on your overall well-being. According to a recent survey of more than 19,000 American adults, about three in five people feel anxious when thinking about their personal finances, and about half feel anxious when discussing financial topics with others. Financial issues are the most common cause of stress—particularly chronic stress—in the developed world.
As reported by FINRA, the study states, “Major factors contributing to high levels of financial anxiety and stress include a lack of assets and insufficient income, high debt, money management challenges, and low financial literacy.” When left unaddressed, financial stress can have a negative impact on your relationships, your physical health, as well as your emotional well-being. It can even cause you to make irrational financial situations, such as impulse purchasing, which may make your financial situation even more challenging.
If you are an adult stressed about your personal finances, you are certainly not alone. Luckily, in almost all cases, there is a light at the end of the tunnel. With the right resources, support, and plans in place, your finance-related stresses can eventually be overcome.
Develop a Financial Plan with a Financial Planner
You might hesitate to hire a fee-only financial advisor or other financial professionals—you are already stressed about your finances, after all, so you probably instinctually want to avoid taking on any additional expenses. However, hiring a planner (something that is likely much more affordable than you’d initially assume) will almost always be beneficial and improve your financial situation.
Upon your first meeting with a retirement planner, they will ask you questions about your finances, including your expenses, income, tax status, and more. They have very likely worked with people in similar situations in the past and can use their experience to help you craft a plan specific to your needs.
Finding a way to decrease expenses can help you quickly improve your financial situation. Cutting out a $5 daily expense can help you save nearly $2,000 per year—or, in other words, possibly an entire month’s rent or mortgage. Cutting a $10 daily expense will save you close to $4,000, even better. Of course, your financial planner will help provide much more advice than to simply spend less. Financial planners can also help you identify opportunities to reduce your tax obligations, consolidate debt, streamline your monthly household budget, and more.
Working with a planner can help you establish a state of financial stability and move away from debt entrapments or needing to live paycheck to paycheck. Finding a way to get even just one month ahead on your expenses may significantly reduce the stress that you feel and also help improve your overall attitude towards your finances.
But your financial advisor will do more than just help you stay afloat—they’ll also help you get ahead. Working with a financial planner is one of the best ways for you to identify your long-term financial goals, prioritize your financial desires, and chart the best path forward from where you are to where you someday hope to be.
A good planner will help you allocate your savings to where they can grow and be productive over time. Choosing to begin saving for retirement just one year earlier, when all are equal, can potentially help you have more savings when it comes time to retire. Your financial planner can also make it easier to manage the various accounts associated with retirement savings, including your IRA, 401(k), and others.
Furthermore, a comprehensive financial planner can help you navigate the other, often confusing, portions of the financial world, such as insurance, mortgages, and filing taxes. They can become your “go-to” person for all things finance and help you continue making measurable progress towards your goals.
Pay off Debt
Dozens of scientific studies have demonstrated that individuals who are overwhelmed by debt are more likely to suffer from a host of mental health challenges, particularly stress and anxiety. In fact, individuals who are holding significant amounts of debt are more than ten times as likely to be diagnosed with a generalized anxiety disorder than those with little to no debt.
If you are currently feeling stress or anxiety, and you know these feelings are connected to your personal finances, one way to alleviate some of this anxiety could be to accelerate the rate at which you are paying off debt.
Now, you’re probably thinking, “if I could have gotten rid of my debt that easily, I would have chosen to do so already!” and we are not trying to diminish how challenging paying off debt can be. But there are also a few things that almost everyone can do to help lift their current debt burden. Increasing monthly payments, when possible, will help reduce the total cost of holding the debt. Consolidating your debt, refinancing major sources of debt (mortgage, car loan, etc.), and taking other actions can also put you in a much better position. Your planner, undoubtedly, will have quite a few strategies in mind.
Develop a Better Financial Philosophy
Whenever you get a hard-earned raise, your first instinct is to treat yourself to something nice—you do deserve it, after all. However, if you significantly inflate your lifestyle (something that is very easy to want to do), you won’t end up being any richer. In many cases, excessive lifestyle inflation can drag your debts out for years longer than is necessary.
While everyone wants to “keep up with the Joneses,” living beyond your means is one of the surest paths to financial stress. On the other hand, if you can maintain your current lifestyle, your financial situation will get easier and easier to manage as time goes on.
It can be tempting to want to keep floating on, hoping that things will work out. But the way you choose to approach your finances—and it is, in fact, a choice—is something you will need to actively be involved in. With a better philosophy, an aversion to debt, and the right financial planner by your side, you’ll be on your way to overcoming these common stresses.