How To Reduce Financial Stress

If there’s one thing almost guaranteed to make us lose sleep from time to time, and cause arguments with our significant others, it’s money.

Not only can not having enough money lead to issues, but sometimes just figuring out how to spend the money you do have can be problematic. This is multiplied many times over if you and your partner have different spending habits.

The truth is, though, that it is possible to eliminate many sources of financial stress by following a few simple guidelines…

Negotiate The Future

First and foremost, if you’re in a long-term relationship then its critical that you’re open about money. Discuss the subject regularly and agree on your collective goals. There can be little things more likely to cause stress than one partner that wants to live frugally and save for the future, while the other spends every last penny.

So put an evening aside, sit down with a pen and paper, and agree on your financial goals. If necessary, negotiate a win-win situation. Then apply this energy going forward, confident that you’re both on the same page.

Set Your Priorities

Much of the financial stress I’ve felt over the years has been as a result of not really understanding my priorities. Time and again I have given up what I really want for what I want right now.

I’d rather save myself some trouble and buy that $5 sandwich on the train than take five minutes to make my own lunch in advance. However this quickly added up, stealing funds away from me that I really wanted to spend on debt repayment.

Having financial goals, and then prioritizing these, helps to set a “framework” for your spending (and saving). It makes it easier to make decisions about money because you already have a plan – you just need to decide how best to apply your finances to achieve these priorities.

Watch Your Spending

A second common source of financial stress is simply not having enough money left as you get nearer and nearer to payday. I know many people who live like royalty for the first days after they get paid, then barely manage to scrape by the rest of the time. They seem to be constantly fixated on when they’ll next get paid. Weeks of their life are spent just “waiting”.

However by living more frugally, and creating a spending plan, you can feel confident that you’ll have the necessary funds to live without discomfort. Indeed, such a plan can even help to kick-start the creation of an emergency fund…

Build an Emergency Fund

An emergency fund is an easily-accessible source of money if financial emergencies arise. Examples might be your car getting written off, or you losing your job.

Those people who spend everything they earn soon after payday would find themselves in quite a muddle if there was a mix-up at work and for some reason they didn’t get paid. Even receiving your salary just a few days late can cause considerable discomfort and stress.

Don’t be like that. Use your spending plan to help you put a little money away each month into an emergency fund. Most experts recommend that you aim for 3-6 months of living expenses. That way, if the worst did ever happen, you could feel confident about dealing with the situation without needing to worry about money.

Protect Yourself

Insurance is a wonderful thing if you’re unlucky enough to need to claim. Most of us insure our cars and our homes, but there are all manner of other types of insurance available. For example, consider the following options:

Cell Phone Insurance

If you’ve just bought an expensive new phone then losing it or breaking it could be an expensive situation.

Consider whether the few dollars a month that it would take to insure your phone would be worthwhile in terms of eliminating financial stress.

Also, try investigating whether you already have insurance that you don’t even know about – an increasing number of banks offer cell phone insurance as a perk of doing business with them.

Income Protection Insurance

I must admit that I only recently learned about income protection insurance, but I’m now actively shopping for the right policy.

The concept is simple; if you’re unable to work for whatever reason – such as long-term sickness or being fired – then income protection insurance will guarantee to cover a percentage of your income until you begin working again.

The exact percentage paid out, and the period of time you must go before the payments begin, can vary – and affect the overall cost of insurance.

But for just a few dollars a month you can rest easy knowing that if the worst happens then you’ll still have income that you can rely on.

Wouldn’t it be wonderful if you fell ill to know for certain that you don’t need to worry about how you’ll pay the bills while you’re recovering?

Contents Insurance

Many of us insure the structure of our homes, but far fewer people seem to invest in contents or possessions insurance. Depending on the policy chosen, many contents insurance plans don’t just cover what’s actually inside your house but also things outside – like your shed, mountain bikes and so on.

Once again, if you’re unlucky enough to be burgled, or to suffer from a flood or a fire, it’s reassuring to know that you’ll be able to get life back on track as quickly as possible.

Plan for the Future

As a final route to reducing financial stress, start planning for the future as soon as possible.

Consider what larger expenses might be coming up in the next few years – having a child, buying a new car, putting down a deposit on a house or getting married for example – and start working backwards so you’re putting money aside all the time.

That way, when your poor old car finally dies, there’s no financial stress. No worry about how you’re going to fund the new car. Infact, the whole situation can actually be fun – who wouldn’t enjoy shopping for a shiny new car knowing that you’ve already got a healthy budget all saved up ready to go?

What situations cause you financial stress? What strategies do you use to deal with them? Please leave your experiences in the comments section below…