Five steps to take now to manage your financial stress

If you’re worried about money, you’re not alone. Worry, anxiety, and emotional tension related to money – financial stress – is felt by everyone from time to time.

In a recent Bankrate survey, 52% of adults cited money as having a negative impact on their mental health – more than health, current events, relationships, and work. And those who earn less feel it more. For those with annual incomes of less than $50,000, 59% felt financial stress,  compared to 45% of those making more than $100,000, according to Bankrate.

The good news? There are five steps you can take now to manage your financial stress and take charge of your money.

1. Create and stick to a budget

A budget is simply a roadmap for your finances – a way to understand and track money coming in and money going out. To create a budget, add up how much money you take home each month, list your monthly fixed and variable expenses, and estimate the monthly cost for each. The amount you place in each category is how much you plan to spend in that area. Make adjustments as you go and reset the budget at the beginning of the next month.

Writing down your expenses may help you find areas where you’re overspending. Are you spending more than you realized dining out? Are those online purchases adding up? A budget helps you make conscious decisions about your spending, from cutting back on unnecessary expenses to focusing on what brings you satisfaction.

When you have a plan, you’re less likely to rely on credit for unexpected expenses. And if there’s money leftover at the end of a pay period, you can use it to chip away at what you owe or grow your savings. You’re in charge and that’s a big step to reducing financial stress.

2. Build an emergency fund

Setting money aside in an emergency fund helps you better prepare for life’s unexpected turns, from medical expenses to job loss. Think of an emergency fund as a rainy day fund. When it’s raining – or pouring – use that money to cover an unexpected expense instead of reaching for a credit card or scrambling to pay a bill.

But how much should you save? According to The Balance, you should save three to six months' worth of living expenses in your emergency fund. If that seems daunting, saving even $500 or $1000 can make a big difference.

Build your emergency fund, kept in a separate account, by treating it like any other bill. Determine how much you can consistently save each pay period and add it to your budget. Transfer any extra cash you have to your emergency fund to help it grow faster. In no time, you’ll be better prepared for whatever comes next.

3. Automate some of your financial transactions

Automating bill payments helps avoid missed payments and the late fees, service disruptions, dings to your credit report – and stress – that comes with them. Set up alerts before your due dates to make sure you have money in your account to cover each bill.

It’s easy to set up automatic bill pay through your bank or credit union. Go to your online or mobile banking site and look for Pay Bills or a similar tab and follow the prompts to set up recurring payments for bills you owe each month. Or, you can set up automatic bill payments through companies’ websites.

Remember to regularly review and adjust your automated payments to ensure they match what you currently owe. And always check your statements carefully for incorrect, duplicate, or fraudulent transactions.

You can also automate your savings. Set up automatic transfers from your checking account to your savings account or check with your employer to see if your direct deposit can be split into more than one account.

4. Pay down your debts

Reducing your debt – how much you owe – can help you feel less stressed about your finances. One method is to pay off one debt at a time while making minimum payments on your other debts. You can choose to pay them off smallest to largest or from highest interest rate to the lowest. Your strategy matters less than your commitment.

Paying more than the minimum will bring down your debt balances faster, save you money on interest, and may impact your credit utilization score, which generally accounts for 30% of your credit score. If making more than minimum payments isn't possible with your current budget, look for ways to cut expenses or bring in extra money.

Consider calling the companies you owe to ask for a reduction in your interest rate. Another option is consolidating higher-interest debt by transferring your loan balances and refinancing your loans into a single loan with a lower interest rate. But be careful. Debt consolidation can lead to unintended consequences, including paying more over the life of the loan.

5. Ask for help

Sharing your money challenges with trusted friends and family can provide a fresh perspective on budgeting, saving, or investing. Even if they’re not financial experts, they can provide emotional support and encouragement, which can prove invaluable when you’re overwhelmed by financial stress.

A quick internet search will lead you to online blogs, podcasts, articles, and more to help you learn more about personal finance. Free online personal finance courses and other resources are available through the Consumer Financial Protection Bureau and the FDIC, for example.

Free financial classes, workshops, and other materials are often available through local libraries and community centers, employers, and financial institutions. Webinars hosted by financial advisors can provide in-depth knowledge on specific financial topics. While they’re sometimes geared toward promoting a product or service, they often provide valuable insights.

Nonprofit organizations, charities, and medical debt assistance programs also may offer free financial counseling services or help paying your bills. You may also qualify for financial assistance to help with your heating bill, housing costs, or food bills through your state or federal government.

Building a more secure future

Worrying about money is inevitable, no matter your income level. But with the right tools and strategies, you can better manage your money and your financial stress. Budgeting, building an emergency fund, automating your finances, reducing debt, and seeking help when needed will improve your current financial situation and lay the groundwork for a more secure future.