Raise your hand if you feel like you’re constantly stressing about money?
It’s hard to imagine a room where you could ask that question without someone raising a hand.
Financial stress is pervasive, and it exists at nearly every level of income.
Consider the fact 4 in 5 Americans are in debt from things such as credit cards, car loans, and student loans. Additionally, some 25% of six-figure earners are living paycheck to paycheck. And that around 15% of US households have a negative net worth. One in eight of those negative net worth individuals has a graduate degree. And 43% have a college degree.
In other words, you can have a good education, a good job, even a good income, and you can still feel stressed about your financial situation.
Unfortunately, being stressed about money isn’t the same as managing it. In fact, the more anxious we get about money, the harder it can be for us to actually manage and maximize our finances effectively.
So whatever financial stress looks like for you – a pile of unopened credit card statements or student loan bills. Procrastinating the paperwork you need to file to set up your 401k contributions. Or relying on your partner or your parents to handle the parts of your financial life you don’t feel comfortable taking on yourself, like investing or insurance – here’s a quick guide to tackling financial stress head-on.
1. Recognize the difference between financial confidence and financial competence.
Just because we may feel overwhelmed by our financial lives, doesn’t mean we’re not capable of learning how to manage them.
Unfortunately, anxiety around our finances can keep us from actively engaging with our money, which can keep us stuck where we are. So start building up your financial confidence before making any judgments about your financial competence – your ability to actually manage your money.
How? Start by taking financial tasks that feel daunting or overwhelming and break them down into a single next action step.
For example, you may not feel comfortable building up and managing an entire investment portfolio right away, but there’s probably a smaller piece of that task you can commit to – maybe it’s reading a book on basic investment principles, or setting up a meeting with a financial advisor or your HR rep to review your retirement investment options.
Your ability grows as you take action, but if you let fear, stress, and uncertainty keep you from ever getting started, your ability never develops. So start small, with whatever piece of your financial task you can commit to, and watch both your financial confidence and competence grow as a result.
2. Take a financial inventory.
It’s hard to make a plan for where you want to go if you don’t know where you currently stand. So make a list of your assets, things you own – like your house, your car, your bank accounts, and your investment accounts – and their current values. Then do the same with your debts – making a list of what you owe, to whom, your monthly minimum payments, interest rates, and outstanding balances. Finally, use an app like Mint or Turbo, to track the daily inflows and outflows of your money.
Once you see where you stand financially, with all the numbers laid out in front of you, you can make better decisions about your money and create a concrete plan for how to go from wherever you are today, to wherever you want to be with your money in the future.
So much of our stress about money comes from the many unknowns we have surrounding it. But if we can turn some of those unknowns into ‘knowns’, we’ll have a place from which to anchor our financial decision making and gain a sense of control over our finances, rather than dealing with constant financial stress.
3. Meet with a professional.
There’s absolutely no shame in wanting to be better with money, so don’t feel awkward asking for professional help.
Whatever you want to achieve – more savings, a better a debt pay off plan, planning for a major life milestone, etc. – a financial advisor can be a valuable resource. They can help you take stock of your current financial situation and identify what you need to tackle first to get to where you want to go in the future – helping you with ongoing evaluations and adjustments as your needs evolve.
4. Develop a money practice.
Another reason we tend to feel stress around our finances is because we rarely dedicate time to proactively managing our money. We might put off the financial procrastination and deal with our money when it’s tax deadline day or when we’re facing a financial emergency, but that puts us in a state of constantly responding to money stressors, rather than proactively thinking about, choosing and making a plan for where we want our money to go and why.
So make managing your money a part of your self-care routine in the same way you might schedule workouts, time to meditate or time to catch up with friends and family. This is time you can use to review the financial decisions that have brought you to where you are today. It’s also time you can use to revisit and reset your financial goals and values and make sure the decisions you’re making in the day to day align with the big picture priorities you have for your life.
I know that it’s hard to find time to set aside but think of it this way. Most of us spend 8 hours a day working to earn our money. That’s a third of our time. Are we really willing to spend so much of our lives working to earn something that we’re not willing to dedicate a few minutes each day to maximize?
When we set aside the time to proactively manage our money, it becomes much easier to take the time we’ve been spending on financial anxiety and fear, and turn it into time we spend learning to maximize and optimize our money – ensuring our money is working just as hard for us as we do for it.