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Posted in Financial Fitness

12 Ways to Reduce Spending and Financial Stress

If you’re feeling more financial stress than usual, you’re not alone. Gasoline prices have been fluctuating on the higher side and inflation is still wreaking havoc with household budgets. However, there are steps you can take to identify your primary stressors and plan to overcome them. In this article, we’ll offer 12 tips for how to deal with financial stress.

Write a List of Concerns

Sometimes just writing down your worries helps get them out of your head. The act of making a list can feel like the first step toward solving a problem, temporarily relieving your financial stress. Once you make the list, the next step is to prioritize. You can’t fix everything at the same time, so pick one concern at a time to tackle. Listing the steps you’ll need to take will help break a bigger problem down into clear and actionable tasks.

For example, if your biggest concern is how to reduce spending, you could identify your current discretionary (non-necessity) spending and choose something to eliminate or do less of, such as dining out.

Happy man and woman sitting on steps outside looking at smartphone together.

Make a Budget

If you’re not already following a budget, this is definitely the first place to start. A regular budgeting habit is one of the best ways to reduce your overall financial stress and anxiety.

There is more than one way to budget, so you can experiment with different methods and formats until you find one that works best for you. However you budget, the goal is to know where every dollar goes so that you can realign your spending as needed to better match your financial goals and values. Feeling in control of your finances will give you peace of mind and help you increase your savings, pay off debt, or whatever else you want to achieve.

Make a Plan to Avoid Living Paycheck to Paycheck

Once you find a budgeting method that fits your life, it will be easier to break the paycheck-to-paycheck cycle. This is when you have no financial buffer beyond each paycheck and you often or always run out of money before getting paid again, possibly overdrafting your checking account in the process. Living paycheck to paycheck can feel like a high-wire act, so breaking that pattern should alleviate a lot of stress.

Give Yourself Small Rewards

Budget for some fun money to reward yourself for sticking to your plan. Unlike an impulsive splurge that can leave you full of regret (and further in debt) the next day, small rewards that are budgeted for can be enjoyed guilt-free. For example, treating your family to ice cream, buying your favorite coffee drink, going to a movie, or whatever else feels like a treat to you.

3 smartphones being held.

Create an Emergency Fund

Most emergencies can be thought of as known unknowns–we don’t know when they will occur, but most people will confront an expensive car repair, trip to the ER, last-minute travel to visit a dying relative, or another emergency sooner or later.

When you have money in the bank, you can deal with the emergency itself without the additional stress of wondering how you will pay for it. Open a basic savings account to set aside funds for a rainy day. You may want to start with an initial smaller goal such as $500 or $1,000. In time, you can work up to saving at least three months of living expenses.

A common source of financial stress is the unknown and being caught in an unexpected situation that you’re not prepared for. Having an emergency fund can be an amazing financial safety net and peace of mind.

Get Rid of Debt

In terms of financial burdens, debt can feel like the heaviest one. While certain types of debt, such as mortgages and vehicle loans, usually have lower interest rates and fair terms–which is why they are considered good debt–unsecured debts like credit cards, personal loans, and student loans can be harder to manage.

If you’re struggling to dig out from a debt hole, it’s important to take small steps toward your larger goal of freedom from debt. Working on one debt at a time, choose the best method to pay off debt such as:

  • Snowball: Start with your lowest-balance debt regardless of interest rate. Make minimum payments on all other credit accounts while throwing as much as you can at the lowest balance until it’s paid off. Then move on to the next-lowest balance.
  • Avalanche: Start with your highest-interest rate debt regardless of balance. Make minimum payments on all other credit accounts while throwing as much as you can at the highest interest rate until it’s paid off. Then move on to the next-highest interest rate.

It may seem hard or even impossible to make progress on your debt payoff goals while also juggling your regular monthly expenses and putting money into savings. However, if you stay the course you will eventually get there. The best thing you can do while paying off a credit card balance in particular is to stop using the card you’re paying off.

Automate Your Savings and Payments

If you’re looking for good ways to save money, automation is your friend. Set up recurring funds transfers for your emergency fund, retirement, college savings, and other savings accounts. However small the amount, such as $25 a week or month, will eventually add up to a larger sum. If possible, stash your savings in a high-interest savings account such as a Certificate or Money Market account. Retirement savings should go into a tax-advantaged retirement account such as a 401(k) or IRA.

For your bills, set up auto-payments to ensure timely payments (good for your credit score) and avoid late fees. Use our Bill Pay feature, available through mobile and online banking, to keep your bills organized and eliminate the stress of falling behind.

Two friends smiling taking a walk looking at phone together.

Communicate With Your Significant Other

Couples should budget together or at least check in regularly even if one person manages the finances. Money is a well-known relationship stressor, but you can ward off disagreements or resentments by talking openly and supportively with one another about your immediate financial situation, the problems you want to solve together, and your long-term financial goals.

As you make progress together, celebrate with one of these fun and cost-effective date night ideas.

Create Additional Income Streams

Having multiple income streams can provide extra money for savings or debt payoff goals. It also serves as a buffer if you happen to lose one of them–at least there are others to fall back on. Some people juggle multiple part-time jobs, whereas others may have one full-time job and then a side hustle. For example, making and selling handmade goods, becoming a rideshare driver or working for a delivery app, freelancing with a creative talent, babysitting or pet sitting, etc. You can also earn extra income by renting a room in your home, buying an investment property, or becoming an Airbnb host.

Don’t Compare Yourself to Others

You’ve probably heard the adage about “keeping up with the Joneses.” In our digital age, social media can make it seem like everyone is the Joneses and you feel left out or like you can’t compete with others’ vacations, clothing, home decor, and so on. Remember that most people only share the highlight reel online and that spending money doesn’t mean someone has a lot of money in the bank. The grass will always seem greener, but you can only focus on the things within your control–meaning your own choices around spending and saving.

Find Your Frugal Tribe

You won’t be tempted to try and keep up with the Joneses if you find like-minded friends to hang out with instead. Suggest inexpensive ways to spend time together such as taking a walk instead of eating dinner out. Your true friends will want to support you in your financial goals. If someone is always pressuring you to join them in expensive outings, you may want to step back and ask yourself if the friendship is still working for you.

Group of four friends laughing together at work.

Talk to Professionals (Financial and Mental)

The burden of financial stress can have a negative effect on your well-being. Don’t push it aside–it’s important to deal with stress in healthy ways such as exercise, therapy, or identifying practical solutions with a financial professional.

Did you know that DNCU and our partner, GreenPath, offer free financial counseling to members? Whether your primary goal is paying off credit card debts or something else, we can help. Learn more about GreenPath services for DNCU members.

We are your ideal partner for a better future!

As a member-owned, not-for-profit financial institution in New Mexico, we are dedicated to providing sound and unbiased financial advice to help you alleviate stress and reach your financial goals. Our credit union Share Certificates offer great rates for savers looking to maximize dividends. Open a Certificate today! Ready to get your finances in order? Schedule a consultation with a DNCU Financial Professional today!

 

Disclaimer: This article is for informational purposes only. For advice regarding your specific financial situation, please consult a financial planner or a trusted financial professional.