We certainly are in interesting times. Although we’ve lived through other shocking world events and economic downturns, Coronavirus brought it to a new level. We’ve never before experienced such a widespread reversal of our routine lives. Understandably, many are feeling anxious.
The good news is there are a few things we can do during this time to curb our financial anxiety. Review this list of 5 ways to deal with financial anxiety and your money stress will begin to fade.
Talk About It
While we’ve culturally dismissed talking about money as taboo, there is a lot to be gained by learning how to open up about this topic. Every single person has to manage basic finances in their day to day lives, yet we’ve convinced ourselves it’s distasteful or even harmful to talk about it. If you’ve ever opened up about any other sensitive topic before, you know how freeing it can be to realize you aren’t alone. It is no different when it comes to money.
Even better, younger generations are more open to talking about money than generations before. In a recent study by Ally Bank, 60% of millennials acknowledged talking about their income with others, although they also agreed a social setting is not the place to do it.
Reach out to one or two of your closest family members or friends in private and begin with the biggest concerns on your mind. Steer clear of specific details until you are certain this is going to be a trusting, private conversation. Respect their privacy and do not put them on the spot with pointed questions like how much do you make, how much do you have saved for retirement, how did you afford your house/car/etc. While you’ve decided to open up about your money questions, respect that they may not be ready to talk about their own financial details.
Ways to start a conversation might include:
- I’m not sure if I’m saving enough. How are we supposed to know?
- Do you have any tips for how to stick to a budget?
- Do you ever have a hard time not buying something you want because you know you shouldn’t?
If you can’t talk to a family member or friend, seek out a stranger to air it all out to. While this might sound a little crazy, you have nothing to lose and everything to gain. Your spouse is bad with money and you shoulder all of the burden? It isn’t going to get back to them. Your life looks amazing, but you’re loaded with debt to keep up your image? Get your reality check from someone who won’t get their kicks from your vulnerability.
There are wonderful communities online to air all of your dirty laundry with no risk to you. Find a money blog, like MissFinFree or others, to read through relevant content and ask questions or share your circumstances. Talking about it with strangers lets you keep an anonymous profile. You don’t even have to put your real name or email address when commenting. The point is to start to get comfortable putting yourself out there.
If you aren’t sure who to talk to, reach out to me and I’d gladly help you work through it. There is nothing I find more fulfilling than helping people get rid of the stress that money can bring.
Know Where You Are
Who feels more anxiety, the person hiking a known trail in the woods or the person who is lost? Clearly the person who is lost. This is the same for many other situations in life: relationships, career, money. We work, spend, save, repeat. It all becomes so routine that sometimes we lose focus of where we are in the grand scheme. We need to know where we are to figure out how to get to where we want to be.
Understanding where you are financially is not as big a task as it might sound. It involves knowing everything coming in and everything going out. Put it into a weekly or monthly view so that you can see the forest from the trees. Each detail only matters so much to let you zoom out and see the big picture.
Are you bringing in more than you’re spending? If so, you’re already on the right track. You are in the minority 40% of Americans who make more than they spend. Great start!
Are you spending more than you thought? If so, you might want to dig into the details to see if any of it is unnecessary. You are not alone. You are part of the 60% who live beyond their means. This is unsustainable and now is the best time to start to change that.
Are you saving more than you thought? If so, you should feel confident that your strategy is working. Keep it up!
By creating a monthly summary, you’ll have a good understanding of where you are, and what that means for your future. From here, you can realize which problems need tackling and set your goals. Now you have something tangible to pursue. Knowing where you are and where you want to be is the most important activity for dealing with financial anxiety.
Don’t Deprive Yourself
Just like crash diets, deprivation strategies rarely work because they’re unsustainable. What’s the point of having good finances if you end up with a life you don’t like?
Living frugally does not mean you deprive yourself of anything extra because it costs money. It means cutting back in areas that you don’t value as much as others. Exercising moderation is key.
There are tons of necessary expenses: insurance, food, utilities, transportation, healthcare, child care, etc. These are dollars we spend because we have to. But that doesn’t mean we have to spend as much as we do. See if there are ways to reduce them without feeling like you’re sacrificing anything. For instance, use an insurance broker who will shop around on your behalf. They don’t cost you any money, and the only time they cost you is the time spent picking one.
After looking at necessities, focus on the optional expenses. Start from the biggest expenses to the smallest. Do those that cost the most provide the most happiness? It’s not uncommon to find things that cost very little often provide the most enjoyment. Review bank statements looking for expenses you didn’t realize you spent or those that you regret.
Take note of any monthly or annual subscriptions and decide if they’re worth it. A study of 2500 consumers showed they thought they were paying about $80/month in subscription services when in reality they were paying $237/month. Out of sight, out of mind. Netflix, Hulu, DisneyPlus, Amazon Prime, Google Drive, Costco, Spotify, DropBox, Chewy, Dollar Shave Club, Stitch Fix, the list goes on and on. Make a list of all your subscriptions and how much they cost, then cancel those that are not worth the money.
If you aren’t sure what you can slice out of your routine, have a friend or family member take a look. Getting someone else’s opinion can help highlight opportunities that you may have glossed over as must-haves without really thinking about it.
Keep an Emergency Fund
Emergency funds are a God-send for curbing financial anxiety. Let’s face it. Life has an existential uncertainty about it. We cannot predict the future. Things could go perfectly one day and down the drain the next. Not knowing what’s coming can be very stressful, especially if money is tight. This is where emergency funds come in.
An emergency fund is a designated set of dollars to be used only in true emergencies. It is a safety net that stops the freefall and helps you overcome whatever curveball you were thrown. An emergency fund is perfect if you unexpectedly lose your job, the water heater breaks or a family member has to go to the ER. All of these are cases that would be difficult to predict and therefore difficult to plan for. So instead of figuring out how to come up with the money when disaster strikes, have it ready and waiting for you when you need it.
Most recommend a good emergency fund be in a separate account from your normal savings, cash or cash-like (checking/savings account), and enough to cover 3-6 months of living expenses.
For me, just knowing I have an emergency fund helps keep me calm during uncertainty. After all, it’s intended to bail me out when the unexpected happens. The mental relief of not only having a plan but having the money puts me at ease.
Forecast Your Future
Earlier we talked about the importance of knowing where you are. Forecasting is about knowing where you will be in the future. It’s isn’t a guarantee; it is an estimate of where you will be if you continue your current saving habits.
I found this to be extraordinarily helpful for answering that elusive question of whether or not I am doing enough to someday retire. Having ballpark figures of what my retirement accounts will look like in 10, 20, 30 years really calmed my financial anxiety. It let me stop worrying if I was making the right decisions today to have the future I want.
While I did this in my own spreadsheets, there are many calculators available online that you can quickly use to get a spot check on how your financial future is trending. You can do this with just a little legwork. Here’s what you need to use basic online calculators:
- Current account balance
- How much you contribute monthly
- Interest rate
- Duration (usually in years)
I like to run these calculations using 2 different interest rates so that I have a range instead of a single total. The first interest rate is the stock market average 10%. But because a dollar won’t go as far in the future as it does today, I also calculate it with a 7% interest rate. The 7% rate is the 10% stock market average minus the 3% average rate of inflation. Having this ballpark range gives me a good sense of how my future is trending.
Dealing with Financial Anxiety
Money problems do not improve by ignoring them. If you struggle with financial anxiety, start by talking with others, reviewing your current and future situations, allowing yourself to splurge on low cost high happiness expenses, and keeping an emergency fund. Each of these will help you begin to address the financial uncertainty in your life.
As I said before, reach out to me if you need someone to talk to. After going through years of financial stress, I want everyone to feel the liberation that comes with knocking out the burden that money can bring.