How to Cope with Financial Stress

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Experiencing stress with money is completely normal and actually very common.

The American Psychological Association found that 72% of Americans experience stress over money. Although it is normal to feel stressed and a bit overwhelmed, the goal of this blog and specifically this post, is to create a plan so we are better prepared for the future.

Let’s calm those worries about money. I’m going to be walking you through some actionable steps you can take. I started learning about money and budgeting because I felt overwhelmed by how expensive life was. With a plan that fits your specific needs, you will be able to stop stressing over money just like I did.

Learn how not to stress about money!

I have created a completely free resource library full of budget templates for google sheets and budget printables to help you along this journey! To gain access, join here. Alternatively, you can purchase my Ultimate Wealth Planner, which is the exact budget template for google sheets I use for my finances!

Table of Contents

Step 1: Acknowledge the Stress of Money

Yes the worries about money exist, but what exactly are they?

Let’s pinpoint what is causing you stress. Take a moment to write down three things that are causing you the most money related stress.

Not having enough money saved?

Making your bill payments?

Comparing yourself to your friends?

Having too much in student loans?

Once we are able to write down the worries about money we have, we are able to create more situation specific goals that can help us get out of that situation. If we don’t take a moment to truly think about what is causing the money related stress, we might be trying to solve the wrong problem.

Figuring out the root concern might be difficult and scary! But we can only begin preparing correctly if we admit to ourselves where the stress of money is coming from.

Step 2: Stop Comparing Yourself with Others

Before we continue, I want to make sure you are only thinking about yourself right now. Focus on your situation and what you hope to accomplish with your own money! Don’t look at other people.

It can be really easy to compare yourself with others financially. When you look on social media you might be seeing luxury vacations, designer clothing and fancy restaurants. However, oftentimes we want people to perceive us a certain way, so we only share on social media what we want others to see and not the full reality.

You don’t actually know other people’s full situation. You don’t know how much money they have in their bank account, and it shouldn’t matter. For all you know, they could be struggling too! And that’s OK.

There’s no reason to feel bad or have shame about your financial situation because you are in control of changing it. You are able to create a plan and set goals that can help you relieve some of the stress with money you have.

Step 3: Stay Positive and be Realistic

I’m not going to say “we can all be millionaires if we want” because that just isn’t reality. But with time we can all set goals, start saving money, max out our Roth, have a full emergency fund, max out our 401k and so much more!

This might sound a little silly and hippie-ish, but humor me for a second. Close your eyes and remember that it’s going to be ok!

You are here reading this, which means you are taking an active role in your financial stress. You WANT to learn how to not stress about money and you will! Willingness to make changes and see progress is huge!!

Taking the leap and learning more about money will only benefit you. So if you’re feeling lost, the fact you’re reading this and getting started on your financial journey is already a massive step forward! Be proud of yourself for that.

Related: Start Changing your Money Mindset
Related: What I Spend in a Week

Step 4: Make a Commitment to Take Money Seriously

It can be easy to put off starting if you’re feeling overwhelmed and don’t know how to get started. Start with baby steps to set yourself up for success!

You had previously written down three things that are bringing you the most stress with money. So start brainstorming some actionable steps you can take to work towards changing those anxieties.

Related: How to Track Your Expenses
Related: How to Calculate my Net Worth

Tips on How to Budget.

The biggest recommendation I have is to create a budget in the first place. A budget is a plan.

Budgeting will help you know exactly what you’re spending on and where your money is going. Having a budget will bring peace of mind because you’ll be more aware of your financial situation.

I have several posts dedicated to helping you create your first budget, so check those out for more specific details!

If you need a budget template for google sheets, consider joining my email list to get access to my free resource library! You can also purchase my Ultimate Wealth Planner, which is the exact budget template spreadsheet I use for my personal finances, from The Budget Empire!

Related: Why Should You Budget?
Related: Tips on How to Budget and Save Money

Tips for How to Save Money.

There are two major ways to save more money.

One: Reduce Your Spending

Cut out or cut down on luxury expenses you don’t need. These are things like eating out, buying clothing or beauty products. It’s ok to indulge in some of these expenses but prioritize your spending. Figure out what is most important to you.

Change your necessary expenses for cheaper options. Some examples would be switching to a cheaper apartment, carpooling when you can, not shopping at Whole Foods. Additionally, make sure you optimize when you do have to spend money, you can learn how to save money when shopping.

Two: Increase Your Income

Unfortunately sometimes the only way to save more money is to increase your income. You can either start a side hustle or ask for a raise at work. Side hustles don’t have to be extremely complicated. I personally enjoy dog sitting! You can easily get an extra $500 a month just from that alone!

Related: 5 Tips for How to Save Money on Any Purchase
Related: Things to Stop Buying to Save Money

Budget Tips

Once you have started budgeting, set up a direct deposit. If the money is not in your checking account you are less tempted to spend it because it is no longer there.

Remember to not try and do too much too soon. The goal is to stop stressing over money, not to create more reasons to stress! So if your baby steps aren’t actually baby steps and are rather large goals, drill it down a bit more!

Related: The 4 Savings Account Types Everyone Should Have
Related: Reasons your Budget Isn’t Working

Step 5: What to do When You Start Saving More Money

So you’re making progress, saving a bit more money, but now what?

Start building an emergency fund.

Emergency funds are key to decrease stress with money. If you have a fear of the unknown, having a full emergency fund will help you mitigate this stress. You’ll know you’ll be protected if you lose your job or have an unexpected event occur.

You should aim to have 6 months worth of expenses saved up! This will guarantee you have at least 6 months covered if you don’t have an income.

Open up a Roth IRA.

A Roth IRA is fantastic because you pay the taxes now and don’t have to pay anything else in the future, when you retire.

You are only allowed to contribute $6,000 dollars a year. Try to take advantage of these tax savings and max out this contribution every year, if you can!

Be aggressive with your debt payoff.

I have a post coming soon about the Debt Snowball Effect and the Debt Avalanche Method, so keep an eye out for that! However, in my opinion, the best way to pay off debt is the Avalanche Method.

This means you want to focus on paying off debt with the highest interest rate FIRST. If you have any additional money, throw it to the debt with the highest interest rate. This will make sure you are paying less interest overall, aka less money overall.

Invest as much money as you can EARLY.

Investing can seem a bit intimidating but the faster you start the better! One of the biggest components to investing is time. How long your money is in the market can be game changing.

I can prove this with some math!

If a 25 year old invests $500 every month for 30 years, compounded annually with a 7% rate of return, they would have $566,765 saved up in the end.

However, if a 35 year old invests $500 every month for 20 years, compounded annually with a 7% rate of return, they would only have $245,973 saved up in the end. Waiting 10 years would mean you only have half as much money. This person would need to increase their monthly savings to around $1,150 in order to have the same amount as the 25 year old saved.

The 25 year old would have only contributed $60,000 more but their money would have grown $320,792 more!

Basically I’m trying to say time is important, and you should take advantage of it!

If you don’t want to put the time into figuring out what to invest in and how to diversify, I would recommend opening an account with Betterment. Betterment is a robo-advisory, aka an automated investing service.

I enjoy using Betterment because, although they do take a small fee, they will invest and diversify FOR YOU. This means all you have to do is deposit money and the rest is taken care of. Yay less work for me!

Check out my recommendations page to see what other money tools I use!

Step 6: Reassess your Financial Situation as Time Passes

As time passes your worries about money will change and evolve. Previous things that were causing you financial stress will no longer apply and new stresses will appear.

Every time something in our financial journey changes or you have new goals; remember to take a step back and reassess. It is completely normal to have different goals as time goes on!

Final Thoughts

Everyone stresses over money.

However, what is important is that we deal with this stress in a healthy way. Set realistic goals and focus on your situation. What is important for YOU and you alone.

It might seem overwhelming at first, but learning the basics of finance will only benefit you and decrease your stress with money.

You can do it!

What more do you want to read about? Send me an email or comment down below! Additionally, don’t forget to check out my free resource library and my shop, The Budget Empire!