A perfect storm of world events is understandably triggering financial stress in the vast majority of Americans. In a recent survey by the American Psychological Association, more than 80 percent of U.S. adults said they were feeling increased financial stress due to:
- Higher inflation (87 percent).
- Ongoing supply chain issues caused by the pandemic (81 percent).
- Global uncertainty due to the war in Ukraine (81 percent).
Furthermore, hardships related to the coronavirus pandemic – including poor health, loss of loved ones, difficult work and family situations, isolation and inconvenience – have affected the entire nation and the world. In the U.S., 63 percent of respondents said COVID-19 has changed their life forever.
The financial toll of stressed-out employees also has impacted companies. A survey conducted by PwC reported 34 percent of employees across several industries said money worries in the past year have had a major-to-severe impact on their mental health; 18 percent said it hurt their productivity at work; 38 percent of financially stressed employees said they were looking for a new job; and 37 percent of those had used payday loans in the past year.
The obvious question in wake of all this ramped-up financial stress is, how can you reduce it?
1. Structure and Stick to a budget
This is an alarming number: at the start of 2022, nearly two-thirds of the U.S. population was living paycheck to paycheck. Soaring Inflation is certainly a factor, but the bottom line for many individuals and families experiencing financial stress is they:
- Don’t have a budget.
- If they do, they don’t stick to it.
Financial stress is often caused by a disconnect between the money you’re spending and the money that’s coming in.
Establish a budget that fits your monthly income and expenses – the latter includes all monthly bills and debts – then use a spending tracker to learn about your spending habits. All of that information will help you identify ways to reduce your spending, starting with eliminating more of the non-essential expenses.
2. Be Strategic and Create a Debt Repayment Plan
Mounting debts or barely making a dent in paying them down each month strangles us financially, reducing disposable income and the amount of money you can save. So develop a workable plan to get rid of your debt.
Rank your debts in the order you want to pay them off. First paying off the credit card or loan with the smallest amount gives you the satisfaction of crossing one off your list and building momentum. Or you could pay off the debts with the highest interest rates first, such as credit cards. Getting high-interest debts paid off as soon as possible saves you the most money in the long run.
Focus on paying off one debt at a time, putting extra money that was saved from restructuring your budget toward the first debt you’re trying to eliminate. When you focus on paying off one debt at a time, you’re able to pay off the debt more quickly, because more of the money will go directly to the principal balance and less is spent on paying interest.
3. Prioritize Saving Money
The things we can’t control tend to worry us. Knowing what you can control and taking the appropriate action can reduce your stress. A good example of taking advantage of what you can control is sticking to a consistent savings plan. The act of saving will give you a sense of accomplishment and comfort. As you build savings, you’ll know money is put away in case you need it.
It’s important to understand this: Paying down your debt, and eventually eliminating it, will have a direct impact on how much and how well you can save for the short term and long term. Everyone needs an emergency fund. Ideally, if you have the money and the discipline, you’ll develop a two-pronged savings approach that puts money in an emergency savings account every couple of weeks and in a long-term savings account, such as an IRA, 401(k) or high-yield savings account.
Once you’ve built your emergency fund substantially, you might consider putting some of it into a certificate of deposit, which brings a guaranteed return rate that’s generally higher than traditional savings accounts.
Financial stress can seem overwhelming and unmanageable if you have no steps in place. Keep it simple, be honest about what’s causing the stress, and stay positive while knowing that making small changes here and there can lead to big differences over time.
The content on 30Seconds.com is for informational and entertainment purposes only, and should not be considered financial advice. The opinions or views expressed on 30Seconds.com do not necessarily represent those of 30Seconds or any of its employees, corporate partners or affiliates.
Take 30 seconds and join the 30Seconds community, and follow us on Facebook to get inspiration in your newsfeed daily. Inspire and be inspired.