5 Simple Steps to Reduce Financial Stress

financial stress

Financial stress can become overwhelming if we don’t learn ways to manage our finances. Money is often a major source of stress for many people.  In fact, it is also a major factor in many relationship breakups. So, if you want reduce stress in your life, it’s important to find ways to manage your finances. I learned about financial stress the hard way. That’s why I want to share five simple steps I use to reduce financial stress.

financial stress -budget

Reduce Financial Stress -#1 – Getting  Control

The worst  stress I suffered was when I let finances get out of control.  So, my first step to getting control was to develop the habit of reviewing my finances regularly. This starts with writing out a simple spending budget. Then, its about reviewing this budget regularly to get a handle on where your money is being spent. Once you know where your money is going, it’s possible to make choices to get you back in control of your money.

I started out with weekly reviews until I regained enough financial control. After a few months, I was comfortable to move to monthly reviews. The more control you have over your finances the less stress you are likely to experience.  Therefore, you owe it to yourself to keep up to date with your  budget review. Longer term it’s about developing financial discipline so that you only spend money that you have budgeted to spend.  This means trying to limit impulse spending until you have your finances under control.

financial stress -pay bills

Reduce Financial Stress -#2 – Automatic or Manual?

One of the best lessons I learned was to pay all regular bills by automatic payment. If you work out a weekly or monthly budget you’ll know what payments are due and when. By setting up automatic payments, you can make sure you don’t forget to pay a regular bill. Once you do this, you can then develop a very clear idea from you budget how much money is left for other day to day spending. By paying your regular bills automatically you very quickly get an idea of how much cash you have left for living expenses.

financial stress -communication

Reduce Financial Stress -#3 – Just Talk to Me

Money can be a major source of stress on any relationship. That’s why it’s really important to communicate about finances.  With good communication and agreement it’s possible to avert or survive any potential financial crisis.  Our finances are often at the core or our dreams for our life. That’s why it’s really important to agree all spending decisions. This is particularly important in relation to major high cost items as well as impulse spending.

If you do suffer a financial crisis, communication becomes even more important. Most suppliers will be flexible with your payments as long as you discuss your situation with them and agree a recovery plan. So, communication about money is a vital way to reduce financial stress.

financial stress -debt

Reduce Financial Stress -#4- The Big D

One major cause of financial stress comes from taking on excessive debt, often due to impulse spending. It’s so easy to get another credit card and just keep spending without considering the long term impact on our financial position and stress levels. Credit card debt was a major issue for me so I knew I needed to do something fairly drastic.

One powerful yet radical method I learned to control debt was to cut up my credit cards. This was about ‘tough love’ to control my impulse spending and it seems I am not alone. With regular payments over time I was able to retire many thousands of dollars in debt and the stress that came with it.

So, to reduce financial stress it’s important to manage you level of debt.  It may be time to ask yourself some hard questions. Am I taking on more debt to get something I want or something I really need? If you are increasing debt for impulse purchases, it may be time to think about reducing your spending and begin retiring your debt burden.

financial stress -safety net

Reduce Financial Stress -#5 – Your Safety Net

My idea of managing my finances used to be to spend my income until there was nothing left. Then, I used credit cards to make up any shortfall which was fine in the short term. However, in the long term it was a disaster both financially and for my stress levels.

Once I had learned how to reduce my debt levels, I new I had to build a safety net. One to the most powerful ways I learned to build my own safety net was to ‘pay myself first’.

This works by paying a regular amount into a savings account that does not have easy access. By paying yourself first regularly you can develop a powerful savings habit without any stress. This may sound very simple and obvious to many, but I talk to many people who fell into the same spending trap I did.

Building up savings seemed like an impossible task. The key is to start very small with an amount you would not even notice. Start saving the equivalent of one cup of coffee a week and then steadily increase the amount.  Over time I increased this from around two percent to over fifteen percent of my income. This treats your savings just like paying any other regular monthly bills by automatic payment.

Building a safety net of savings is one of the most powerful ways to reduce financial stress. Once you move beyond financial stress it’s possible to become more creative with your life and how you want to live it.

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