Have you ever felt anxious about money? Most of us have. Things happen in life that can very often cause fear and anxiety related to money, threatening our ability to even enjoy life. The idea of not having enough money — and especially the idea of not being able to do something about it — can be terrifying.
Whether it’s caused by an unforeseen circumstance or our own choices, for ourselves or for those we love, not having enough money can put us in situations where we have less choices. But the good news is, making better choices about money can lead to less anxiety and more freedom when it comes to our overall livelihood and well-being — in addition to more peace of mind in the way we think about money.
The ultimate goal of money management and saving is financial freedom — the ability to do what you want or have to do, when you want to have to do it.
Money is the leading cause of stress in America
Financial stress is a big deal in America. Not only is stress about money the leading cause of relationship strife, according to a 2015 survey, but it’s also the number one cause of stress in America today, according to an American Psychological Association survey.
On top of that, financial stress is also affecting our health. According to the survey, almost 1 in 5 Americans have skipped, or considered skipping, going to the doctor because of their financial situation.
APA CEO and Executive Vice President Norman B. Anderson, Ph.D. commented, ‘Regardless of the economic climate, money and finances have remained the top stressor since our survey began in 2007. Furthermore, this year’s survey shows that stress related to financial issues could have a significant impact on Americans’ health and well-being.’
Here are 8 ways to conquer money-related anxiety and help you have more peace of mind when it comes to your own financial life!
1. Live within your means and keep a budget.
If you ask the average person if they have a budget, they will most likely say no. In fact, according to a Consumer Financial Literacy Survey, the majority of people (60%) surveyed said they did not have a budget.
Whether it’s because taking a good look at your money makes you feel overwhelmed, or you’re afraid of what you’ll find when you do, diving into budging for the first time may feel a little like ripping off a band aid. But although it’s a tad bit painful, the peace of mind you’ll have once you set a budget and start living within your means is priceless.
Living within — and really, below — your means is the only way you will get ahead financially.
Whether you’ve tried budgeting before or you’re just starting out, check out this step-by-step guide on how to create a budget, track your spending, and ultimately, reach your goals.
Bonus tip: Revisit your budget frequently — since expenses can fluctuate month to month, especially as you start to reduce your expenses and free up extra money for savings!
2. Make your savings automatic: today!
Whether you have nothing in the bank right now or you have just a little, getting in the habit of consistently saving every month is a must!
Even if you start with only $5 or 1% of your paycheck, just getting started is the hard part — and then you can work yourself up to saving more. A habit of saving can give you a huge amount of peace of mind, and, if you have a budget, you’ll have a category in your budget just for saving.
Pay yourself first
To make saving as easy as possible, and so you don’t spend what you had planned to save, set up your direct deposit to automatically send a certain percentage of your paycheck directly into savings. That way you won’t see it in your checking account — so you can’t spend it!
This will allow your money to keep growing without you even having to think about it. And although savings rates are pretty low right now, keeping the money out of your checking account (and in savings), will still allow you to save more. And once you start doing this for a few months, you’ll be amazed at how much savings you’ve accumulated!
As far as retirement savings goes, this can be automated, too. Clark recently talked about what his policies would be related to Social Security and employer-sponsored retirement plans if he were in politics. What would he do? As a ‘benevolent dictator’ he would mandate automatic savings of 10% for everyone — no borrowing or early withdrawals allowed — that would automatically be placed into a private retirement account.
The average American doesn’t have enough saved for retirement, and it’s costing us way too much stress and heartache. Is there a way for you to adjust your lifestyle to decrease your expenses, or take a different or another job to increase your income? While it may very likely require some sacrifices, living below your means now will give you peace of mind and a sense of stability about the future. Do what you have to do now to adjust your lifestyle so you can save a dime of every dollar you make! Later on, you’ll be so glad you did.
Bonus tip: If saving 10% just isn’t possible right now, start small and build up from there. Have your paycheck send 1% of the money directly into savings each month and then six months from now, bump it up to 2% — and continue doing that 1% increase every six months. The amount is so small that you won’t miss it, and as you begin to adjust your lifestyle and expenses, you won’t notice the money missing even as you increase the amount that goes into savings.
3. Use cash.
According to a study led by Avni M. Shah, an assistant marketing professor at the University of Toronto Scarborough, paying with cash will help you spend less because we have a different psychological response to using cash than we do when using plastic.
In the study, Shah found that using credit cards was too easy, and people often don’t feel the expenditure. Think about how easy it is to just swipe a card for a few bucks here and there — the problem though is that those small purchases can add up to a lot of money over the course of a month.
On the other hand, when people use cash, they value their purchases so much more. If you have $5 to spend, you might think twice about that $4.50 latte, which you’d probably buy if you had a card in your hand.
“While the convenience of going cashless is undeniable, it comes with an inadvertent downside — we tend to value purchases less when using a card than when we pay via the more ”˜painful’ methods of cash or check,” write authors Avni M. Shah (University of Toronto), Noah Eisenkraft (University of North Carolina), James R. Bettman, and Tanya L. Chartrand (both Duke University).
In addition, a study done by Dun & Bradstreet found that people spend 12% to 18% more at fast-food restaurants when they use plastic — instead of cash.
Since the psychology of using credit cards and cash is so different, the studies prove that in order to save yourself the most money for regular expenses — especially as you try to rein in your spending — cash is king.
4. Get out of debt.
The average American is spending about $6,658 per year in interest alone; about 9% of the average household income. That’s money going straight out the door — to Mr. Banker!
If you want to improve your financial life, both now and down the road, you have to get out of debt.
Clark says using cash is one of the best ways to get out of debt. ‘Cash is king when it comes to getting out of debt. It forces you to get some discipline and stick to a budget,’ he says.
Here are some ways to get out of debt quickly — and save yourself tons of money long-term!
Read more: 7 things debt-free people never do