Of all the types of stress in life, financial stress has got to rank up there in the top.
There seems to be more of it these days due to the instability of jobs, bad economy, consumerism, materialism, etc.
So how do we go about reducing it?
You know the obvious spiel – budget, cut costs, downsize, etc., in other words, do all the technical subtraction things.
Aside from that, what else can we do to reduce financial stress?
Here are 3 points to remember to help in that area.
Understand The Power of Emergency Savings
It really sucks when you diligently save month after month only to have a big chunk of that get wiped out when something happens.
New tires, property tax, the pipes burst – you name it, something WILL happen.
That’s why you should always have a nice chunk set aside for instances you cannot foresee.
The benefit in doing this is twofold.
One, you’ll know you have things covered. Nothing feels better than knowing you’ve got something covered.
Two, you’ll no longer have the “one step forward, two steps back” feeling ever again. It’s ok if you use your emergency savings because that’s what it’s there for. I wouldn’t even count it as part of your general savings. This allows you to constantly feel you are adding to your real savings pile, never taking away from it, helping you feel less stressful in the process because you’ve got a handle of things and you feel that you’re always growing.
It’s very stressful when you don’t have that kind of money set aside and then have to dip into your real savings account or worse yet your plastic, knowing you will have to pay interest on it for several months.
Open up an emergency savings and fund it to $1,000 for starter. Replenish it immediately if you ever dip into with your next influx of cash.
Understand the Law of Maintenance
It’s so easy to buy one thing and not see how many small holes it can poke in your bank account.
Your car – the cost for gas, insurance, repair, maintenance, cleaning, etc.
Your house – the cost of insurance, repairs, upkeep, property tax, etc.
Even golf – the cost of shoes, clothes, clubs, training, golf membership fees, etc.
Next time you make a big buying decision, look at all the leaks it’s going to cause and be sure you can cover those leaks before buying.
Even the best built ship will eventually sink if there are too many leaks.
Learn Financial OFFENSE instead of Defense
Personal finance is great and all but there’s a limit to it. You reach a ceiling. There’s only so many articles you can write on clipping coupons, budgeting, saving money, etc.
The trap to watch out is that you don’t become such an expert on defense that you fail to improve on other areas of the football financial team, namely offense and special teams.
I don’t care if you have the greatest defense in the NFL.
You’re not going to win any games.
It’s ok to learn personal finance and apply it but once you get the nuts and bolts and create a system for managing your money, AND YOU STICK TO IT, leave it at that.
Once you’ve mastered managing it, go to the next step. Learn the offensive game. Get points on the board.
Your time and energy is better spent on the offensive side, how to bring in more money.
Start seeing how you can improve at your job, study entrepreneurship, develop the kinds of skills you will need to add more value to others in order to bring in more money.
It will feel overwhelming at first, as if there are a ton of puzzle pieces that you have to assemble but that’s normal. Find those pieces, start at the corners and work you way inward. Eventually you will find your own financial offensive strategy that works for you whether that’s through choosing a new career, advancing in your current one, starting a business, investing, etc.
When you start getting more money, keep your lifestyle the same. Try not to add any more “holes” to your bank account.
The bigger the gap between your income and expenses, the less financial stress you will have.
It’s ironic how people think that financial stress will be reduced once they start earning more, but the problem is that they get even more financial stress if they ignore the law of maintenance. The pressure to keep the status quo and maintain the new lifestyle with all the things that need to be maintained in it keep them in the very financial stress cycle they want to get out of.
Obviously do all the subtraction technical spiel (budget, cut costs, live simply) first to create some more breathing room to relax, build your emergency savings fund, be conscious of the law of maintenance, and start learning financial offense – these are the 4 keys to reducing your financial stress in life.
