Your finances can seem like both a gift and a curse when navigating through life. It can be a sense of overwhelming accomplishment or a downward spiral that can lead to health issues if not managed.

According to a study by Thrive Global, 90% of individuals say that money impacts their stress levels. Whether your issues are caused by a loss of employment, accumulating debt, or unforeseen bills, financial anxiety is one of the most common stressors in modern life. We are often faced with challenges when money is involved, but knowledge and planning can help alleviate much of the stress that may occur. With a wide array of resources out there, it can be hard to know where or how to start your journey, but following the tips laid out in this article can help start you down a path to reach your goal.

Reduce Debt

Debt is often the biggest contributor to financial stress. This can be debilitating financially but also mentally. Once you’ve accumulated a large amount of debt, it’s hard to see a way out. How can you move forward if you’re paying your bills each month but the balance barely budges? Set a goal, educate, and organize.

The first step on your road to being financially stress-free is to set a goal. This will provide you with direction, something to work for, and serve as the catalyst for changing your behavior. It can be hard to stay on track but maintaining focus is key to accomplishing your goal. Having zero debt does not have to be your only objective. To help you stay motivated and give yourself a feeling of achievement along the road, you might set smaller, more realistic goals.

Educate yourself on the two main debt reduction strategies: the highest interest rate method and the snowball method. The first approach is focusing on the debts with the highest interest rates, such as credit cards and student loans. The goal is to pay these off as quickly as possible because they are costing you the most. This will eliminate your most costly debts first and be most beneficial in the long run.

On the flip side, the snowball method focuses on the smallest debts. While making the minimum payments, put any extra money towards these debts and in turn, you will pay them off sooner. Although this approach could appear more rewarding in the short run, it typically results in higher long-term costs.

Organizing your bills can seem like a daunting task, but it will serve as a guideline to being successful. You’ll need to know what, when, and how much you owe each month. Keep a spreadsheet or calendar to track your payments so you’re always aware of what’s due next.

Create a Budget

Creating a budget may be the most important step in the process of reducing financial stress because it’s the foundation for allocating where your money is going each month. A personal budget is an essential tool that helps you organize and prioritize the expenses in your life. This will help you make better decisions with money and ultimately reduce financial stress.

Your net income serves as the cornerstone of an efficient budget. Your take-home pay is the sum of your income or salary minus tax and employer-sponsored benefits like retirement plans and health insurance. Focusing on your gross pay instead of your net pay may drive you to overspend because you'll believe you have more money accessible than you actually have. You should know what to expect with each paycheck and if you are self-employed, then you will need to keep thorough records in case of any fluctuating revenue.

Now that you know how much money is coming in, you can start determining where it needs to go. Similar to organizing your bills, tracking your spending is crucial for staying on course. Tools like a monthly expense tracker are perfect for helping you stay focused each month. Begin with your fixed expenses such as your mortgage or rent, car payments, utilities, and other loans you may have. There is usually no wiggle room on these bills, so it’s important to account for these first. Next, address your variable expenses such as gas, groceries, and entertainment. These are areas where you may be able to make some cuts (more on that later). Credit card and bank statements are a great way to track what and when you made a purchase.

Now you can analyze what you actually spend versus what you want to spend. Use the list of variable and fixed costs you created to estimate your spending over the next few months. Then compare that to your priorities and your net profit. This will determine if there is enough money to not only cover your bills but to start paying down some of your debt.

Make a plan and stick to it. Staying diligent is the best way to avoid new debt and get closer to financial security. Also, remember to review your budget on a regular basis. Things can change from month to month or year to year, so keep on top of any changes that may occur.

Cut Expenses

It is important to be aware of what you are spending money on. No matter what you are buying, it’s likely there’s a less expensive version available and, in some cases, the expense could be eliminated altogether. Cutting expenses is really an extension of budgeting. People often feel societal pressure to sign up for a service or buy an item. Ask yourself a couple of questions: Do I need this? If so, is there a cheaper option? Remember, most of these things are called non-essential items for a reason.

The easiest way to cut expenses is to update any subscription services you may have. These may include streaming services, memberships, or magazines. Think about how often you use these. Has it been months since you've used them? If so, cancel them. You can always re-subscribe when your financial situation has loosened up.

Limiting your utility use is another option, although a little trickier since electricity and water are essential. Any one of these tips won’t make a noticeable difference alone, but combining all of them can.

• Use LED bulbs instead of incandescent when possible. They may cost more to buy, but they last much longer and use 75% less energy. Also, make sure to turn off any lights when you leave the room.
• Caulk and weatherstrip drafty doors and windows. Seal any air leaks where plumbing, ductwork, or electrical wiring passes through walls, floors, or ceilings.
• Use a programmable thermostat. Set it to automatically turn your heating and air conditioning off or down when you are typically out of the house.
• Reduce the temperature of your water heater. Lowering it by 10-20 degrees could potentially save you hundreds of dollars per year.
• Repair leaky faucets, showerheads, or toilets. Most people don’t realize a continuous trickle or drip can increase your water cost significantly.

Where you lay your head at night is usually the biggest expense when assessing your finances. There are both positives and negatives to renting or owning a home. Affordability and flexibility are what make renting most attractive. Your monthly costs can be lower since you’re not responsible for any repairs that may occur and you have the ability to move around when you want.

You may also be able to negotiate a better leasing deal if you’re on good terms with your landlord. On the other hand, owning a home is more of a long-term play because you are building equity and will eventually own the home outright. If your credit score rating is sufficient to secure a good interest rate on a mortgage, then it may make sense for you to relocate and/or downsize to a new home.

Insurance costs can add up quickly, from home to health, to car, with most people not shopping around for the best deal. There are more than enough insurance companies to choose from for home and car insurance. You may find that you could save money by switching companies or by bundling them together with the same company. When it comes to your healthcare, the good news is you most likely have several options, including a health care sharing program like Medi-Share. These are often less expensive per month than traditional health insurance’s premium costs.

Find Ways to Earn More Money

If budgeting isn’t enough, utilize your free time to earn some extra income. Although this may not be ideal for some people, it could be necessary to start making an impact on your financial goals.

The best way to bring in some more income is to work extra hours at your current job. Capitalize on overtime pay if it is available. This will most likely give you the highest return for your time. Another option may be negotiating for a raise. If you have a good rapport with your employer and have put sufficient time in at the company, don’t be afraid to ask for a bump in pay. With high inflation and the current labor market, employers may be willing to pay a little more for a quality employee.

A final option may be to get a side gig. These are not only good for bringing in some extra cash, but they can also provide new skills and experience to add to a resume. There are a wide array of choices when it comes to side gigs but here are a few suggestions: tutoring, blogging, delivering food, or selling items on e-commerce sites.

For the most part, this isn’t a permanent situation to help you relieve your financial stress. These gigs may only be necessary for a month or two. Keep your eye on the prize and cut out the extra work or side gig when you feel the pressure has subsided.

Build an Emergency Fund

An emergency fund is a savings account that is specifically set aside for unplanned expenses or emergencies. This is critical for when unexpected events occur. This can include things such as job loss, medical expenses, home repairs, car repairs, or family emergencies. Many times, people fall behind and end up in debt because they were hit with an unforeseen cost that they could not afford. An unplanned expense could set you back years if you have no savings and have to go into debt to pay for it.

Like everything else we’ve talked about, setting a goal is the first step. Most experts suggest saving three to six months’ worth of expenses. This can vary depending on if you have kids or pets to care for. Remember that saving even a small amount of money, such as one month's worth of expenses, is useful.

Create a schedule for making regular contributions and automate it. Figure out a reasonable plan to automatically transfer funds from your paycheck to your emergency savings account. For example, you might transfer 5-10% of your paycheck or transfer a specific amount such as $40 per week. Either way, know you are preparing for the inevitable unexpected expense down the road. If you’re having a hard time setting aside extra money, refer back to cutting expenses. The money saved by canceling subscriptions can be reallocated to an emergency fund.

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Set a guideline so you understand how you want to use this fund. The idea is to use it to avoid creating new debt in an emergency. Instead of taking out a loan or using a credit card, which will end up costing more due to interest and fees, tap into your reserve fund if you have to. Remember, this is for emergencies, not vacations or Christmas shopping.

You may feel more at ease if you are confident that you have enough cash on hand to take care of yourself in an emergency. Even if you can't plan for when an unforeseen expense or other problem may hit your budget, you can reduce your financial stress knowing that you have a reserve fund to help with costs.

Conclusion

Resolving financial problems is a slow and gradual process, but staying committed to your goal will soon show the results you’re looking for. Being overwhelmed by financial stress is a common feeling among many people, so remember you’re not alone. The sooner you start, the sooner you will reach a point of peace knowing you are on your way to being good stewards with what God has given you.

With January being National Financial Wellness Month, it’s a great time to start improving your finances and limiting the stress that comes with it.