Take a moment to breathe. When my father became ill shortly after my 15th birthday, our family’s financial landscape shifted significantly. With a tighter budget, I became acutely aware of my spending habits. Preparing for college and moving from North Carolina to New York City meant I had to save carefully and spend wisely. Unfortunately, my awareness morphed into anxiety, creating a lasting fear of money that lingered for years.
Brent Weiss, a certified financial planner and chief evangelist at Facet Wealth, points out that this anxiety is common. Unchecked worries can take hold of our minds, leading to panic and irrational thinking. While those living in financial hardship may feel this more acutely, anyone can experience financial anxiety. “Spending money activates pleasure centers in our brains, often prompting more spending to sustain that high. How we handle the aftermath of spending impacts our financial anxiety,” he explains. This anxiety can manifest as an inability to enjoy purchases or living too restrictively. “Frugality differs from irrationality, and that distinction is rooted in financial anxiety,” he adds.
So, how do we combat this? Here are some practical strategies that helped me regain control.
Identify Your Anxiety Triggers
The phrase ‘knowledge is power’ holds true, especially with finances. Anxiety can thrive in uncertainty, often stemming from a lack of understanding about our financial situations. Education is crucial in reshaping our relationship with money.
It’s essential to grasp concepts like 401(k)s and Roth IRAs. By becoming informed, we can tackle our anxiety head-on. Weiss emphasizes that recognizing the source of our anxiety is the first step. “Often, it arises from uncertainty or misunderstanding,” he states. “Debt can be a significant source of worry. However, knowing your options and having a plan to pay off debt fosters a sense of control and empowerment. Awareness and education are vital.”
Create a Household Budget
Once we pinpoint our anxiety sources, we can take actionable steps to improve our situation. Financial expert Robert Gauvreau emphasizes the importance of developing a detailed budget. By outlining our income and debt, we can eliminate fear of the unknown. “Understanding your income and expenses brings a sense of calm,” he says.
While we may have ambitious financial goals, it’s crucial to remain realistic to avoid disappointment. Start by assessing your total income, then list all obligations, including rent, utilities, vehicle payments, student loans, groceries, and entertainment. The objective is straightforward: spend less than you earn to facilitate savings. “Understanding your financial landscape reduces anxiety. Clarity about spending helps identify areas for reduction, allowing for better allocation of resources,” he advises.
Be Cautious with Rent
Renting has become more prevalent, with many choosing leases over home purchases. The Census Bureau suggests spending no more than 30% of monthly income on rent, a guideline that’s crucial to follow, says Dana Marineau, a financial advocate for Credit Karma.
If your desired living situation exceeds this benchmark, consider compromises. “Could you share a space with roommates to save money? What adjustments can make your rent more manageable?” she asks. Spending beyond your means limits your ability to handle unexpected expenses and work toward financial goals.
Implement Automatic Savings
Gauvreau discusses the ‘scarcity principle,’ which suggests that available funds are likely to be spent. This is significant for those grappling with financial anxiety. Many prefer to keep their money visible in one account for a sense of control, but this can be dangerous as it invites overspending.
To counteract this, consider setting up an automatic transfer to your savings with each paycheck. “Start with a small amount and gradually increase it as your income grows. If it’s not in your checking account, it can’t be spent,” he advises. “A common mistake is to increase spending as income rises, leaving little for savings. Adjust your savings as your earnings increase and resist the urge to elevate your lifestyle costs.”
Avoid Comparisons
With social media showcasing curated lives, it’s easy to compare ourselves to others. This comparison can amplify financial anxiety, warns Gauvreau. Often, people present an idealized version of their lives, hiding struggles behind their perfect images. “Many portray a flawless life, but they might be part of the 78% of workers living paycheck to paycheck,” he explains. When setting financial goals, focus on your unique journey instead of measuring against others.
