A 7-Step Plan to Quit Stressing Out About Your Finances

If you’re worried about your finances, you’re not alone. Money has historically been a leading stressor for Americans, according to the American Psychological Association’s annual “Stress in America” survey.

Fortunately, this is one form of stress you can reduce, if not eliminate. And it all starts with taking a close look at the way you use the money you currently have.

The following tactics will help you get control of cash — and quit stressing.

1. Follow the money

According to the FINRA Investor Education Foundation, 19% of U.S. residents spend more than they earn — not counting big-ticket items like new cars or houses. And 23% have past-due medical bills.

Do you have ever-increasing credit card balances and calls from collections agents? Super stressful! Fortunately, you can make two quick changes to pull yourself out of the hole:

1. Track your spending: Use pen and paper or software like YNAB (short for “You Need A Budget”). At the end of the month, you might be startled to see how much money leaked away on impulse purchases or, yes, those doggone mocha lattes.
2. Make a budget: It doesn’t have to hurt! YNAB will walk you through the process. Or try the 50/30/20 budget: No more than half of your after-tax income goes toward needs, 30% toward wants and 20% for savings and debt repayment.

2. Know what you owe

Make a list or a spreadsheet of every debt you have:

• Student loans
• Mortgage
• Car payment
• Credit card balances
• Child support

Add up the minimum monthly payments — make sure you’re sitting down when you do this — and you’ll have a clear idea of what has to go out each month.

3. Set attainable money goals

Maybe your goal is to pay off debt quickly. That’s fine, especially if you are paying bruisingly high interest rates on your credit card balance. For more tips, check out “How to Pay Off $10,000 in Debt Without Breaking a Sweat.”

As soon as you can, though, start to finance your retirement. That means contributing to a 401(k), individual retirement account (IRA) or some other retirement vehicle.

If you’re lucky enough to have an employer match on your 401(k), aim to contribute enough to get the full match, even if you have to start small.

No such benefit at your workplace? Look into IRAs and get going. Automate at least some money each month into one of these accounts, even if you have to start small.

4. Celebrate every victory

Make a monthly money date with yourself — and your spouse or partner, if you have one — to look clearly at your funds. Look at all signs of progress, and celebrate them:

• “My consumer debt is 15% lower than when I started a few months ago. If I keep going at this rate, I’ll be debt-free within one year.”
• “My Roth IRA has $1,100 in it — woohoo! This time last year I didn’t even have a Roth IRA.”
• “Only three more car payments and the vehicle is mine.”

Just remember that “celebrate” is not a euphemism for “blow money mindlessly.” Reward yourself modestly, so you don’t undo all the good you have achieved by changing your spending and saving habits.

5. Create a few long-range goals

Here’s where the fun starts. Now that you’ve gotten a better grip on your finances, it’s time to blue-sky the rest of your life.

What do you want out of that life?

• Travel?
• Entrepreneurship?
• Buying a house?
• Raising a family?
• Retiring early?

Keep in mind, however, that “I want to backpack around the world” shouldn’t come ahead of building an emergency fund or saving for retirement.

Once you’ve identified your goals, take action. For example, clean up your credit so that when you are finally ready to go house shopping, you can get a great mortgage rate.

6. Use technology well

The more streamlined your money management, the less stressful your life will be. Use tools like automatic and online bill payment, and you’ll avoid late fees.

Again, tools like YNAB make budgeting easy. That is a type of stress-reliever, too.

Prevent paper clutter by scanning things you need to keep, and shredding everything else. Messy piles of bills and insurance paperwork are stressful. A clean desk is calming.

7. Seek answers to your questions

Maybe it stresses you to hear friends talking about ETFs and IRAs because you haven’t got a clue what they mean. Don’t be ashamed: A lot of people grow up with little to no financial education, either at home or at school.

The internet makes money education easy. Money Talks News, for one, is filled with explanations of the best saving and spending tactics, along with more in-depth discussions on topics such as retirement and investing. Some recommendations:

• “How to Get Started Investing With $500 or Less”
• “7 Tips for Stress-Free 401(k) Investing”
• “Confused by Retirement Accounts? Roth, Regular IRAs and 401(k)s Made Simple”

What are you doing to destress and get your finances under control? Share with us in comments below or on our Facebook page.