Have you ever felt anxious about money? Most of us have. Things happen in life that can very often cause fear and anxiety related to money, threatening our ability to even enjoy life. The idea of not having enough money — and especially the idea of not being able to do something about it — can be terrifying.
Whether it’s caused by an unforeseen circumstance or our own choices, for ourselves or for those we love, not having enough money can put us in situations where we have less choices. But the good news is, making better choices about money can lead to less anxiety and more freedom when it comes to our overall livelihood and well-being — in addition to more peace of mind in the way we think about money.
The ultimate goal of money management and saving is financial freedom — the ability to do what you want or have to do, when you want to have to do it.
Money is the leading cause of stress in America
Financial stress is a big deal in America. Not only is stress about money the leading cause of relationship strife, according to a 2015 survey, but it’s also the number one cause of stress in America today, according to a American Psychological Association survey.
On top of that, financial stress is also affecting our health. According to the survey, almost 1 in 5 Americans have skipped, or considered skipping, going to the doctor because of their financial situation.
APA CEO and Executive Vice President Norman B. Anderson, Ph.D. commented, ‘Regardless of the economic climate, money and finances have remained the top stressor since our survey began in 2007. Furthermore, this year’s survey shows that stress related to financial issues could have a significant impact on Americans’ health and well-being.’
Here are 8 ways to conquer money-related anxiety and help you have more peace of mind when it comes to your own financial life!
Read more: 7 easy ways to cut your monthly bills
1. Live within your means and keep a budget.
If you ask the average person if they have a budget, they will most likely say no. In fact, according to a Consumer Financial Literacy Survey, the majority of people (60%) surveyed said they did not have a budget.
Whether it’s because taking a good look at your money makes you feel overwhelmed, or you’re afraid of what you’ll find when you do, diving into budging for the first time may feel a little like ripping off a band aid. But although it’s a tad bit painful, the peace of mind you’ll have once you set a budget and start living within your means is priceless.
Living within — and really, below — your means is the only way you will get ahead financially.
Whether you’ve tried budgeting before or you’re just starting out, check out this step-by-step guide on how to create a budget, track your spending, and ultimately, reach your goals.
Bonus tip: Revisit your budget frequently — since expenses can fluctuate month to month, especially as you start to reduce your expenses and free up extra money for savings!
2. Make your savings automatic: today!
Whether you have nothing in the bank right now or you have just a little, getting in the habit of consistently saving every month is a must!
Even if you start with only $5 or 1% of your paycheck, just getting started is the hard part — and then you can work yourself up to saving more. A habit of saving can give you a huge amount of peace of mind, and, if you have a budget, you’ll have a category in your budget just for saving.
Read more: Clark’s investment guide
Pay yourself first
To make saving as easy as possible, and so you don’t spend what you had planned to save, set up your direct deposit to automatically send a certain percentage of your paycheck directly into savings. That way you won’t see it in your checking account — so you can’t spend it!
This will allow your money to keep growing without you even having to think about it. And although savings rates are pretty low right now, keeping the money out of your checking account (and in savings), will still allow you to save more. And once you start doing this for a few months, you’ll be amazed at how much savings you’ve accumulated!
As far as retirement savings goes, this can be automated, too. Clark recently talked about what his policies would be related to Social Security and employer-sponsored retirement plans if he were in politics. What would he do? As a ‘benevolent dictator’ he would mandate automatic savings of 10% for everyone — no borrowing or early withdrawals allowed — that would automatically be placed into a private retirement account.
The average American doesn’t have enough saved for retirement, and it’s costing us way too much stress and heartache. Is there a way for you to adjust your lifestyle to decrease your expenses, or take a different or another job to increase your income? While it may very likely require some sacrifices, living below your means now will give you peace of mind and a sense of stability about the future. Do what you have to do now to adjust your lifestyle so you can save a dime of every dollar you make! Later on, you’ll be so glad you did.
Bonus tip: If saving 10% just isn’t possible right now, start small and build up from there. Have your paycheck send 1% of the money directly into savings each month and then six months from now, bump it up to 2% — and continue doing that 1% increase every six months. The amount is so small that you won’t miss it, and as you begin to adjust your lifestyle and expenses, you won’t notice the money missing even as you increase the amount that goes into savings.
3. Use cash.
According to a study led by Avni M. Shah, an assistant marketing professor at the University of Toronto Scarborough, paying with cash will help you spend less because we have a different psychological response to using cash than we do when using plastic.
In the study, Shah found that using credit cards was too easy, and people often don’t feel the expenditure. Think about how easy it is to just swipe a card for a few bucks here and there — the problem though is that those small purchases can add up to a lot of money over the course of a month.
On the other hand, when people use cash, they value their purchases so much more. If you have $5 to spend, you might think twice about that $4.50 latte, which you’d probably buy if you had a card in your hand.
“While the convenience of going cashless is undeniable, it comes with an inadvertent downside — we tend to value purchases less when using a card than when we pay via the more ”˜painful’ methods of cash or check,” write authors Avni M. Shah (University of Toronto), Noah Eisenkraft (University of North Carolina), James R. Bettman, and Tanya L. Chartrand (both Duke University).
In addition, a study done by Dun & Bradstreet found that people spend 12% to 18% more at fast-food restaurants when they use plastic — instead of cash.
Since the psychology of using credit cards and cash is so different, the studies prove that in order to save yourself the most money for regular expenses — especially as you try to rein in your spending — cash is king.
4. Get out of debt.
The average American is spending about $6,658 per year in interest alone; about 9% of the average household income. That’s money going straight out the door — to Mr. Banker!
If you want to improve your financial life, both now and down the road, you have to get out of debt.
Clark says using cash is one of the best ways to get out of debt. ‘Cash is king when it comes to getting out of debt. It forces you to get some discipline and stick to a budget,’ he says.
Here are some ways to get out of debt quickly — and save yourself tons of money long-term!
- 6 ways to tackle your credit card debt
- 10 tips to become debt-free as quickly as possible
- How to get out of debt in 5 simple steps
- 49 ways to get your debt paid off quicker
Read more: 7 things debt-free people never do
5. Commit to learning.
Let’s face it: Learning something can be difficult. It takes more time and it can often be uncomfortable. Think about the first time you tried to ride a bike. It didn’t happen automatically — you had to practice — A LOT — to be able to balance yourself on that bike and then ride it without training wheels.
In the same way, managing money is a skill — and it doesn’t happen overnight. You’ll find some things that work for others may not work for you, and vice versa. You will probably make a few mistakes here and there, and that’s okay!
Just commit yourself to getting back on the bicycle and trying again. The goal is to make your money work for you, instead of you feeling out of control about money. Learning as much as you can about money management will help you take control of your own money and your own life. You will be able to make better, more informed financial decisions that can help you succeed in reaching your money goals.
Read more: 13 things I learned about money in my 20s
6. Get disability and life insurance.
Disability insurance is one of the most overlooked forms of insurance because no one thinks they’ll ever need it, and it’s not mandated by law.
But according to the Social Security Administration, 56 million Americans, or one in five people, are currently live with a disability. And an estimated 25% of people in their twenties will become disabled before reaching retirement.
Though these are not pleasant statistics, they are very real statistics. So to get you started, here are 8 things to do before buying disability insurance.
No one likes to think about life insurance either, but having life insurance will definitely give you more peace of mind about the future — especially if you have a spouse or children. Here’s a look at who needs life insurance and how much to get.
Read more: How to shop for term life insurance
7. Practice gratefulness and contentment.
Gratefulness is something we may or may not be taught when we’re young, but it’s so important to help us avoid stress and anxiety when it comes to money. If we’re grateful for what we do have, we’re less likely to want more. Removing the desire for more means we’re less likely to splurge on impulse purchases, which in turn can help us avoid draining our bank accounts and overspending on credit cards.
Being grateful for what you already have leads to contentment, so they work hand-in-hand. It can be very easy to get carried away by consumerism — so much so that it ruins our ability to think clearly about money and see it for what it truly is — a vehicle to get us to a destination. People who do not practice contentment see money as the destination, and so it becomes a never ending cycle of wanting more and never feeling like the ‘more’ is enough.
The book The Millionaire Next Door makes a clear distinction between people who were PAWs (Prodigious Accumulators of Wealth) and people who were UAWs, or Under Accumulators of Wealth. The interesting thing about the UAWs is that they often looked as though they were wealthy on the outside — expensive cars, large and beautiful houses, big incomes — but they did not have a lot of savings or investments compared to their income.
These people were working very hard to keep up with their lavish lifestyles — but they were also very stressed and did not have a lot of savings to fall back on. Conversely, the PAWs (Prodigious Accumulators of Wealth) did actually have a lot of wealth, but typically they did not show it on the outside — and didn’t feel as though they needed to. They had average houses, average cars and average lifestyles. They did not care about keeping up with the Joneses — and changing your mindset to focus inward first can change your life and your future.
If you’re content, there’s no urge to buy things you don’t need or can’t afford. It’s much easier to live within your means when you feel content. By no means does this mean you shouldn’t strive toward your goals or never splurge when you get a pay raise. It just means you can be grateful for what you have now while you’re on the way to getting where you want to go.
8. Make winning with money fun, instead of a chore.
People who win with money have figured out a way to reward themselves along the road to success by making it fun, and they also keep the big picture in mind.
Consider Mike on our team who paid off his mortgage in just two years! He says of his success, ‘For every $5,000 I knocked off my mortgage, I allowed myself $100 to spend on whatever I wanted. Sometimes I didn’t even use that money because I was so focused on reaching my goal,’ he says.
Regardless of how many adjustments you make to your financial routine, some or all of these changes can help you have greater peace of mind when it comes to money now — and your financial life down the road.
Read more: 9 successful habits of debt-free people