Ways to Reduce Financial Stress
If the last year hasn’t stressed you out, you probably have nerves of steel. However, if you’re like the rest of us, there have probably been a few moments in the last 12 months where you have felt stressed out.
What does stress look like? It differs from person to person, but it can include anything from insomnia, unexplained weight loss or gain, and brain fog, to heartburn, unusual food cravings, and lack of focus. While there are lots of ways to destress, such as exercising and spending quality time with loved ones, it’s also important to get to the core of the stressor — the thing that’s actually keeping you up at night.
For many Canadians, financial stress has increased over the past year, and will unfortunately continue to increase as the pandemic continues. However, it’s important to know that you have options when it comes to reducing your financial stress.
There are important things you can do — some that take as little as 15 minutes a day — to minimize your financial stress and help you relax again. This advice applies to both your personal and business financial stress, so let’s get down to it.
1. Make a budget so you can manage your financial stress
Photo by Dziana Hasanbekava.
You’ve likely heard this advice before, but it needs to be said again and again: making a budget is a good idea, no matter what your budget is. Whether you’re just making a budget for yourself and your spouse or for your multi-million dollar business, it’s a vital part of reducing financial stress.
While it can seem daunting, making a budget only takes up an hour or two once a year. Once you have your budget set up, you can maintain it by reviewing the details and adding in your income and expenses on a weekly or monthly basis.
However, without a budget, you’re kind of just winging it without a plan — and that can be dangerous. A budget provides you with limits. It lets you know how much money you have coming in and how much of that money you can spend. Without a budget, you’re just guessing, and that can lead to overspending...which leads to financial stress.
2. Audit your spending and earning after major life changes
Photo by Timo Miroshnichenko
A big time of stress for many people is during major life changes. For example, when you have a baby, buy a new house, lose your job, or deal with a global pandemic. All of these experiences can cause you to lose some sleep. However, when it comes to your financial stress, it’s best to take stock of the changes asap.
During a moment of major change in your life, it’s likely your income and expenses will change too. Remember that budget you made? Well, you may have to alter it based on the changes you have just experienced. For example, if you just had a baby, you’ll likely need to add in monthly expenses for diapers, baby clothes, and daycare. During a global pandemic, you may be able to reduce your expenses for commuting and entertainment.
Either way, be sure to frequently audit your spending and earning and see how they compare to your original budget. If you’re going through a major life change, it’s likely your budget will have to change with it. By altering your budget accordingly, you can manage your financial stress and have more control over your money.
3. Start saving for retirement earlier so you can nip financial stress in the bud
Photo by Annie Spratt.
Can you imagine retiring as early as your 30s or 40s? Sounds crazy, right? Well, it is possible, with a retirement savings strategy called FIRE (Financial Independence Retire Early). This is a people-driven approach to retirement which is more about living a satisfying life than it is about the numbers. It involves aggressive earning, saving, and investing, and isn’t right for everyone.
The most important aspect of FIRE is spending your money more consciously. You have to focus on your current financial health and think about what your future financial needs will be. Consider how much you spend every month and how much you actually need to spend every month. Think about what your retirement goals are and what they will cost you every month.
If FIRE isn’t right for you, keep in mind that there are multiple retirement savings strategies you can use. Check them out in this blog on
investing for retirement.
4. Check your bank account daily
Photo by Ono Kosuko.
One of the best ways to manage your financial stress in a short amount of time is to spend 15 minutes each day checking your bank accounts — that’s all the time you need. Staying on top of your bank accounts will help you reduce risk for fraudulent activity because you’ll be able to catch it in time for a quick reversal.
Be sure to make a list of all of your recurring expenses and when they occur so you can see when the money is taken out of your account (and make sure you have enough in there to begin with).
These days, as most bill payments are automated, people have a lot less visibility into where their money is going. If you don’t check your bank accounts daily, you may forget how much money you have in the bank or how much money you have going out for payments.
5. Have a contingency fund
Photo b Fabian Blank.
Whether you’re an individual, small business or both, it’s important to have a rainy day fund in place. This can help you considerably reduce your financial stress because it’s like a safety net.
Building up a contingency fund doesn’t have to be overly complex, and can be based on your needs and income. For example, you can put as little as $20 away into the fund every paycheck or take a more complex approach and allocate a certain percentage of your income.
The key is to be consistent in putting money away on a regular basis, and not touching it in case of emergency. A contingency fund is not to use if you really want to buy that new pair of shoes. It’s for major purchases that affect the quality of your life such as a new air conditioner for your home or new furniture for your business.
6. Build a monthly financial process
Photo b Micheile Henderson.
One of the reasons for financial stress is late fees. If you don’t pay your bills on time, you may end up paying interest or have to deal with fines. These can add up quickly, especially if you owe a large balance. This is why you should build a monthly financial process where you assess what needs to be done and work it into your schedule.
Write down all of your bills and when they should be paid so you can ensure there is enough money in the account to meet those deadlines. Automate any payments where possible so you don’t forget, and add in reminders to your calendar for the ones which cannot be automated.
Financial stress doesn’t have to be a part of your day-to-day life. Whether your annual taxes are stressing you out, you’re not sure if you have enough money in the bank to pay your business expenses, or you need help establishing a contingency fund, Bridex can help.
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