Are worries about money keeping you up at night? You’re not alone. Finances are one of the top concerns of Americans, a newly released GOBankingRates survey found. “Everybody worries about financial decisions, indecision’s or consequences,” says Scott Bishop, the director of financial planning at STA Wealth Management in Houston. Worrying won’t solve your money problems, though. In fact, it can lead to even more stress and mistakes, he says. Fortunately, there are actions you can take to stop your financial problems from overwhelming you. Here are eight methods to stop worrying about money and get your finances on track.
8 Ways to Stop Worrying about Money
Understand Your Money Situation
You can get a better understanding of your cash situation by identifying what your assets – house, investments, savings – are and just what your liabilities, or debts, are, says Michael F. Kay, a financial planner and president of Financial Life Focus, in Livingston, N.J. Once you know what you have along with what your debt is, you are able to identify what your biggest problem is and assess what must change. For many of us, it’s too little savings and an excessive amount of debt, according to him.
“Before you can stop worrying, you need to know where you stand financially,” Bishop says. “The best way to do that is to get a handle on or snapshot of your current situation.”
Know Where Your hard earned money Is Going
Once you know your position financially, you need to know how you got into that position. This means determining where your cash goes each month, Kay says. First, identify your necessary expenses – rent or mortgage, utilities, transportation and everything else you have to pay for on a monthly basis. Then, look at your bank and credit card statements from the past month to discover just how much you’re spending on discretionary items – stuff you want but don’t need.
If you’re spending $1,000 on discretionary items, ask yourself what else you could do with that money, Kay says. You might be worried about living paycheck to paycheck or not making ends meet, but tracking your spending might help you realize that you actually have the cash you need to boost savings, pay off debt or get ahead – if you cut back on unnecessary expenses.
To keep an eye on where your hard earned money is going on an ongoing basis, Bishop recommended getting an app such as Mint, which helps you to track all of your accounts and spending in one place and create a budget. Additionally you are able to use software including Quicken, or maybe give yourself an allowance of cash to limit your spending, he says.
Get a Handle on Your Debt
If you’ve taken the first step to figure out your liabilities and assets, you need to have an idea of how much you owe. “It is important to see how much this debt is costing you, and draining your cash,” Bishop says.
List your financial obligations along with the rate of interest on each. You need to focus on eliminating your highest-rate debts first – likely credit card debt – so you’ll pay less in interest over time. If you’ve taken the second step to figure out where your moneyare going, you need to understand what discretionary expenses may be cut so you can put more money toward your debt.
However, before you start paying off debt, understand why you have accumulated it, Kay says. Could it have been because you had a major medical expense or borrowed heavily to cover the cost of college? Or are you simply using debt to cover your spending? “If this is your normal way of living, it’s time to take stock and think about why,” Kay says. You might have to work with a counselor to figure out what exactly is triggering your spending, and the way to get it under control, he says. Check out the National Foundation for Credit Counseling’s website, NFCC.org, to find a certified credit counselor near you.
Set Financial Goals
To stop being concerned about your financial situation, it’s not enough to know where your money has been going. You’ll want to give it a place to go, which implies setting goals. Look at what must happen so that you can feel like your financial plans are on track, Kay says. It might mean being debt-free, having a specific amount in savings for retirement or building a college fund for a child.
Together with covering your necessary expenses, your hard earned dollars should be going to these “musts” – your objectives – before your wants. Then evaluate whether your employment as well as other financial choices you’ve made will help you meet those goals.
“What are your options if your current income won’t get you where you want to go?” Bishop says. You might need to get a second job, go back to school or look for other sources of income to reach your goals.
Educate Yourself about Personal Finance
There’s a chance you’re worrying about money simply because you feel like you don’t know enough about personal finance. However, gaining mastery of one’s finances doesn’t mean you need a degree in finance, Kay says. But you do need to know what’s creating fear or discomfort for you.
Perhaps you’re worried because you don’t understand how your credit rating affects your ability to acquire credit. You can learn the basic principles at a site such as myFico.com, the consumer division of the company that invented the FICO credit score.
If you’re confused about how much to save for retirement, check with your employer to find out if you can get financial advice using your workplace retirement plan. Or visit one of the numerous personal finance websites to discover money basics.
Prepare for the ‘What Ifs’
You can alleviate some of your financial worries by identifying your worst-case money scenarios, and getting yourself ready for them, Kay says. For example, if you consider losing your job to be the worst thing that could happen financially to you, think about what you should do to prepare for a job loss. Creating an unexpected emergency fund to pay for expenses while you’re unemployed is a good starting point.
If you have people who depend on you financially, you need to have enough life insurance to help support them after you die. Should you become disabled, you need to ensure that you have sufficient disability insurance coverage to replace your lost wages. Consider everything that could derail your aspirations, and cover all of your bases, Kay says.
Stop Trying to Keep up with Others
You’ve got to be honest with yourself about whether your money woes originate from tying to keep up with what others have – whether you’re spending to impress others or belong, Kay says. Ask yourself what you’re working so hard for. “Is it a label on a shirt, a certain watch, a vacation in Tahiti? Or are we working for something else?” Kay says.
To avoid falling into the trap of trying to keep up with others and worrying that you can’t, jot down everything you care about. If you’re married or in a relationship, ask your significant other to do exactly the same. Then agree on what you both want and let those values guide your spending decisions.
Get Assistance from a Financial Advisor
If you’re concerned about your health, you’d likely go to a doctor. If it’s your financial health that has you concerned, you may get assistance from a specialist, too. You can hire a financial planner to assist you with any of the above steps – from understanding where you stand financially, to goal setting, to developing plans to achieve those goals.
Kay recommended looking for an advisor that is a fee-only fiduciary who will work in your best interest rather than try to sell you financial products that might not suit your needs. You can find one in your area through NAPFA.org, the website of the National Association of Personal Financial Advisors.