Credit Sesame looks at ways you can build good financial habits to make life easier and less stressful.
When your mind is cluttered with thoughts and you can’t focus, it’s easy to feel overwhelmed. The same is true when your financial house is in disarray. Money mismanagement, disorganized finances, poor credit, and lack of financial literacy can result in stress and anxiety.
But the situation is not hopeless. You can get fiscal matters in order and learn to better manage your dollars with patience, discipline, and recommended financial practices. Read on for helpful tips and insights from experts.
Poor Financial Management Leads to Stress and Anxiety
Few things in life can be as worrisome and stress-provoking as money matters. Fears about not having enough money, debt, and accumulating bills can preoccupy our thoughts and lead to relationship conflicts, poor performance at work, and even physical and mental health issues.
“Money, especially debt, is often a source of stress and anxiety,” says Andrea Woroch, a nationally recognized consumer finance expert. “In fact, a recent study found that 36% of consumers said finances were a primary source of stress.”
Lyle Solomon, a consumer finance expert and attorney with Oak View Law Group in Rocklin, California, agrees.
“When people are stressed, they often turn to unhealthy habits. Many use alcohol and smoke to cope with financial stress,” he says. “All these habits may provide a brief respite, but they frequently contribute to increased long-term tension. People struggling financially may also cut corners on their health by eating lower-quality foods and exercising less. To overcome financial shortfalls, they may have to work longer hours, leading to sleep deprivation. And the anxiety and frustration that financial worries bring into a relationship are common causes of separation and divorce.”
The Importance of Developing Good Financial Habits
Get a better handle on your finances, however, and you’ll reap significant benefits.
“Good financial habits are absolutely worthwhile to everyone because they will increase your overall quality of life,” says Carter Seuthe, CEO of Credit Summit. “Those with financial stability are less likely to experience mental despair and pressure as they can take vacations, relax, and invest their time and energy into positive lifestyle habits.”
Positive financial practices can make you feel more in control, help you afford basic living expenses, and buffer you from unexpected bills.
“Developing recommended routines like saving for emergencies, budgeting, tracking expenses, limiting impulse purchases to avoid debt, and ensuring you live within your means can go a long way toward preventing stress,” Woroch adds.
Good Financial Habits for Stress-Free Living
There are many tried-and-true behaviors you can adopt to get and maintain control of your finances. Adopting them can decrease nervousness and distress. Here are several recommended by the pros.
Organize your finances
By carefully calculating what you earn minus mandatory expenses (like food, shelter, and utilities), you can better know how much money is left over for saving and discretionary spending.
“After receiving your paycheck, make a detailed list of “current expenses” and “to-occur expenses” for the month. The benefit of this process is that you will know where your money is going.” suggests Solomon.
Set a budget
David Delisle, an author, entrepreneur, and real estate investor, says the first rule of financial management is to spend less than we earn.
“That’s where good budgeting habits come in,” he says. “Unfortunately, budgeting goes against human nature. That’s because, if we have the money to spend, most of us will spend it and quickly adjust our lifestyle upward so that we are always right on the line of what we think we can afford. Problem is, we don’t have any room if we make a mistake and overlook something.”
Setting a realistic budget is at the core of developing good financial habits.
“This allows you to take control of your finances. Through the budgeting process, you can list out each bill you are paying on a recurring basis as well as an average spend on non-fixed categories like clothing and entertainment to see how it stacks up against your take-home pay,” adds Woroch.
Get out of debt
After budgeting your dollars carefully, devote as much of your leftover savings as you can afford to pay down what you owe, including outstanding credit card debt and student loan debt. Work to pay off the debt with the highest interest first if you can.
Build and maintain good credit
Getting out of debt will help your credit rating. But there are other habits you can follow to improve your credit.
“Always pay your bills on time. And try to automate bill payments so that money is automatically withdrawn from your account to pay for any of your recurring bills, thereby avoiding late fees and penalties,” advises Delisle.
Also, check your three free credit reports (at www.annualcreditreport.com) and look closely for any errors or inaccuracies. If you spot any, contact the credit bureaus to correct them.
There’s no shame in seeking assistance from financial management experts.
“The bank is the easiest place to start. Simply walk into a bank and ask to speak with a financial advisor to get started,” says Delisle.
Alternatively, hunt around for a financial advisor. This expert will charge a fee for their services and expertise, but their advice could be priceless.
“Shop around and haggle to get a better rate. For instance, try to negotiate what you pay with your cable and Internet providers. For wireless service, consider switching to an online-only wireless carrier to pay less,” Woroch notes.
Also, think about transferring your high-interest credit card balance to a new card with an introductory zero interest rate.
“This will give you anywhere from 12 to 21 months to pay off the balance interest-free,” adds Woroch.
Additionally, strive to live a more frugal lifestyle.
“Living within your means and saving more helps you borrow less and take on fewer financial obligations, allowing you to manage your finances better,” explains Solomon.
Lastly, perhaps get a flexible side hustle to earn extra cash that can help you achieve your financial goals. This may not come under “good financial habits” but it certainly makes life less stressful financially.
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.