Don’t Worry, Be Happy: 11 Ways to Reduce Financial Stress

Advertising Disclosure: When you buy something by clicking links on our site, we may earn a small commission, but it never affects the products or services we recommend.

Woman relaxing for the holidays on vacation stress-free at home
Antonio Guillem / Shutterstock.com

Editor's Note: This story originally appeared on NewRetirement.

The last three years and especially the last few months have been an emotional rollercoaster for many people, and you may be feeling constantly stressed or uncertain about your finances. You’re probably asking yourself, am I making the right financial decisions to be happy in retirement?

If you are worried, you’re not alone. According to a survey conducted by John Hancock Retirement, “while only 44% of participants reported experiencing financial stress prior to the pandemic, the number grew to 67% following the outbreak.”

And, a more recent study found that almost all (90%) of Americans say that financial considerations have an impact on their stress levels.

But stressing does not fix the problem.

Here are some real steps you can take that will enable you to worry less about money.

1. Focus on What You Can Control

Woman using a tablet
Ground Picture / Shutterstock.com

If you can control inflation or the stock market, please call President Joe Biden, the head of the International Monetary Fund, and all the industry tycoons. We need you.

However, the odds are that you can’t control the big economic factors that impact all of us.

So, to reduce your financial stress, focus instead on what you can control, which may include how much you save and spend. For example, find the cheapest gas in your community and put the savings into your retirement account.

You don’t have to solve all of your financial woes, but the feeling of accomplishment from taking a small positive step can increase your sense of control and reduce your financial stress.

2. Take Care of Debt to Reduce Financial Stress

Person cutting up credit card
Bignai / Shutterstock.com

Eliminating debt is what most survey respondents believe would have the most significant impact on their financial situation – even more so than earning a lot more income.

Most experts would agree that eliminating or reducing debt is a great way to improve your financial outlook.

Depending on your situation, you can reduce debt by:

  • Adjusting your budget so you can make bigger payments against your debt
  • Securing a reverse mortgage to eliminate ongoing mortgage payments
  • Consolidating debt into a lower-interest credit card or a home equity line of credit
  • Downsizing your home to reduce the size of or eliminate your mortgage

3. Know How Much You Really Need to Save

Couple counting money saved moving to a new place
LightField Studios / Shutterstock.com

Knowing how much you need to save can be confusing. There are a lot of interrelated factors that go into this calculation. And frankly, it can be scary to face the overwhelming task of saving enough.

However, getting a realistic target – one based on personalized calculations – can be a great way to get motivated.

And, many people actually find out that they may be saving too much!

The NewRetirement Planner is a very detailed and completely personalized retirement calculator that enables you to get a realistic idea of how much you really need to achieve the retirement you want to have.

4. Ignore the Financial Markets

Stressed woman working on a laptop in a coffee shop
Goksi / Shutterstock.com

The markets are down, and economic factors seem grim. All-time highs weren’t that long ago.

While the only thing we know for sure is that the financial markets are unpredictable, we can be reasonably certain that the long-term outlook is good.

That is why you should set an investment strategy – preferably a diversified portfolio — then forget about it except for once every quarter or half-year when you rebalance to maintain your asset allocation strategy.

Experts say to set your strategy and stick to it. Consider creating an Investment Policy Statement and make sure you have documented how you will bridge your finances through down times.

Whatever you do, it is probably a bad idea to sell your holdings in a down market. Always remember that losses are not losses unless you actually sell. If you can hold onto your investments, the odds are high that you’ll recover.

5. Maintain a Detailed Financial Plan

couple going over their finances
goodluz / Shutterstock.com

A good financial plan means that you know how much you have now, how much you will have at retirement, and how much you will have near the end of your life. You also need to know how much you will need at those different time periods.

A recent study by the Employee Benefit Research Institute (EBRI), using data from 2005 to 2017 shows that spending in retirement decreases over time. The authors conclude that ” the probability of having a budget deficit — defined as having higher total spending than total income — increased with age, even though the average dollar amount spent was lower for older age groups.”

Basically, over the last 15 years, retirees have had a hard time creating a retirement plan that accurately reflects the money they will need to spend.

Not knowing is stressful. And, knowing can really help you make adjustments and set attainable goals. This knowledge can give you the motivation to save more, work longer, and spend a little less.

Best of all, retirement planning does not need to be difficult. Online calculators can help you set up a detailed plan and enable you to maintain it over time.

6. Create a Backup Plan

Woman doing her taxes
Pra Chid / Shutterstock.com

One of the underlining worries about money is that you don’t know what will happen in the future. And, when you retire, without the security of a job you need to rely on what you have. While you can’t exactly plan for the unknown unknowns, you can have a backup plan.

Your backup plan might include:

  • Tapping home equity: Homeowners are particularly lucky to have home equity that can be tapped in a crisis either through downsizing or securing a reverse mortgage.
  • Getting a side gig or going back to work (it can be doing something you enjoy) after retirement
  • Reducing expenses when times get tough
  • Building enough flexibility into your budget and investment plans to bridge you through tough economic times

7. Flip Your Perspective

Thinking about the future.
By Rawpixel.com / Shutterstock.com

Saving for retirement is one of the biggest stresses for most people. However, retirement is an entirely different way of life from the working grind. As such, you may need to shift your perspective in different ways to adjust to your new post-career world.

Retirement is a big change. You may find that understanding your future retirement and seeing the opportunities with a different vantage point may reduce your stress levels.

8. Talk Finances With Your Family

Multigenerational family members
Monkey Business Images / Shutterstock.com

A Merrill survey found that a whopping 79% of parents provide financial support to adult children. And, according to caregiver.org, 34.2 million Americans provide care to an adult age 50 or older, usually their parent.

At the same time, the Blackrock survey found that 47% of Americans are worried that they themselves will be a burden on their family.

So, whether your concerns are about providing care or receiving care, it is really important that you talk with your family – both your children and your parents – about your expectations and resources.

9. Take Care of Yourself

happy woman planting in garden
ARENA Creative / Shutterstock.com

Want to reduce financial stress? Take care of yourself. A healthy diet and exercise solve all kinds of stress.

Physical Activity: Make physical activity part of your everyday life. If you enjoy exercise, great, this part is easy for you. However, don’t despair if running, lifting and toiling are not preferred activities.

Studies suggest that being physically active as you age can take many different forms. Gardening, cooking, and puttering in the garage are all physical activities that will keep you fit and active. Avoid just sitting as much as possible.

Have Somewhere to Go/Something to Do: Study after study shows that having a reason to be living — a reason to get out of your chair — is vital. And it can be even better if that purpose also provides you with a daily routine. Having somewhere to go on a regular basis is also proven to help keep us healthy and engaged. They say that the regular routine is something that makes work so useful to our overall well-being.

Eat Well: If you have always eaten healthfully, then it will be easy to keep it up as you age. If you have some bad habits, start with some small nutritional improvements — limit sugar, and boost your consumption of fish, nuts, and legumes.

The “Mediterranean diet” offers good guidelines for eating as you age. It can boost heart and brain health and help prevent cancer and diabetes.

Regular Checkups: Medicare pays for yearly checkups and has quite a few programs to support your well-being. Early detection and prevention are great ways to avoid serious physical decline.

10. Stay Mentally Engaged

Couple playing chess
Impact Photography / Shutterstock.com

There are bigger things to worry about than your money. To reduce financial stress, make sure you are mentally engaged. Here are three ideas:

Find a Cause and Commit to It: Gerontologist and Dean and the DeLamar Professor at Columbia University’s Mailman School of Public Health, Linda P. Fried wrote: “We are a species wired to feel needed, respected, and purposeful. The absence of those qualities is actually harmful to our health.”

Develop an Intellectual Hobby: As they say, “Use it or lose it!” We know from brain research that learning new skills and knowledge, and flexibly shifting between them, is key to increasing brain health.

Create Social Habits: Having friends and seeing them on a regular basis is an important way to stay healthy and engaged. Arrange to meet with friends for coffee each morning. Join a club. Find a volunteer or part-time job opportunity. Whatever you do, be sure to make it a habit and something where you will be held accountable.

11. To Reduce Stress and Be Happy, Focus on Happiness

Happy driver
Ground Picture / Shutterstock.com

Financial stress is not good for you. Financial anxiety negatively impacts your health, happiness, home life, mood, social life, and ability to pursue dreams, passions, and interests.

Six out of 10 people now define the American dream as having a happy family life and being financially secure, and two-thirds of U.S. adults believe they can attain it, according to the survey.

The view of what the American dream is in today’s world has shifted drastically. Very few people are interested in “keeping up with the Joneses” anymore. Financial security and having a happy family life are now more important than wealth and social class.

If you want to be happy and have a secure retirement, try to:

  • Prioritize – Know what is important to you and forget the rest.
  • Get rid of stuff – Accumulating stuff does not bring happiness. Psychologists have found that downsizing and paring possessions can increase happiness.
  • Think about experiences – Social psychologists have proven that if you want to spend money on happiness, spend it on experiences. Getting more stuff doesn’t make you happy. Doing interesting things does.
  • Express gratitude – We can always find something to be grateful for. No matter what your retirement looks like, focus on what is meaningful to you, be it grandchildren, health, a garden, a network of friends, a cozy bed, money in the bank, a cherished animal companion, or a hobby.

If you don’t try to do it all and instead focus on what is important, you might be able to better achieve financial independence and you are sure to be happy.

Don’t Worry (About Money), Be Happy

senior woman learning working on laptop
fizkes / Shutterstock.com

Do you remember “Don’t Worry Be Happy” by Bobby McFerrin? If you don’t already have the song stuck in your head, let me help you out!

Hum along while you work on your financial plans!

Here’s a little song I wrote. You might want to sing it note for note.
Don’t worry, be happy.

In every life, we have some trouble. But when you worry, you make it double.
Don’t worry, be happy

Don’t worry, be happy now
(Ooh, ooh ooh ooh oo-ooh ooh oo-ooh) be happy
(Ooh, ooh ooh ooh oo-ooh ooh oo-ooh) don’t worry, be happy