Financial stress is something we all deal with. If you’re feeling the pressure in our post-pandemic, inflation-driven world where the cost of living is endlessly increasing – you are not alone. One major challenge about financial stress is that it seriously impacts your mental health. And the decline in your mental health makes it even harder to manage your financial stress and money issues. These two cycle back and forth and compound on each other over time, making the issue feel impossible to navigate. In this blog, we'll discuss how to manage money and debt when times are tough, starting with a reminder for your mental health.
Talk to Someone You Trust
Bypass the shame and stigma and talk face-to-face with someone you love and trust. Talking to someone doesn’t require them to fix your problems or give you money. You’re not even necessarily looking for advice. You’re just looking for support: someone to listen without judgement, make space for your emotions, and help you process the challenges you’re experiencing. Getting a fresh perspective and a break from the isolation and fear of dealing with everything internally, can be a huge relief.
If you’re interested in advice, it may also be a good time to seek professional advice from a financial advisor. There are organizations that offer free counseling and financial resources for those looking to learn how to better manage their finances. If you’re ready to take more control and more responsibility for how your money is working, consider talking to a professional.
Strategies for Navigating Tough Financial Times
Managing money is a challenge for many when life is “normal.” When unexpected life events happen, there is even more pressure. It’s important to understand that you won’t necessarily be able to implement all of these approaches. The nature of “tough times” means there’s not always enough money to go around. If you are just trying to stay afloat and keep your head above water, one of these financial strategies may be able to help.
Take a Full Inventory of Your Finances
Sometimes, when things are out of control, we’d rather not know exactly how out of control they are. We don’t check our bank account balance, or we leave bills unopened. If you have committed to solving this puzzle, you must look at all the pieces. Figure out all of your income, all of your debts, and all of your spending. Identify areas where you can make small, easy changes. Reduce spending, make a plan for paying bills, and research some proven methods for paying down your debt.
Build Up Your Emergency Fund
If you have not been saving, or if you’ve depleted your savings, now is a good time to start building again. Look into a high-yield savings account, and start practicing with small amounts (maybe $25 or $50 per paycheck.) Set up an automatic withdraw. You are practicing the habit itself, don’t worry about the amount. Building back up your cash reserves can be a comfort and a point of pride during the chaos of financial stress.
Make More, Spend Less
The day-to-day financial formula is simple, income minus expenses. So, there are two very clear options: make more income, spend less on expenses.
- Find ways to earn more money: Depending on your job, consider talking to a supervisor about working additional hours or maybe even getting a raise. You might also try to pick up some simple chores like babysitting, repairs, or cleaning. Lastly, think about getting an extra job or side hustle like delivering food, being a personal shopper, or selling items online.
- Find ways to spend less money: Prioritize what you can control. Fixed costs are typically outside of your control, and they’re usually critical expenses (think: rent, utilities, childcare, phone, and automobile expenses.) Variable costs, on the other hand, are a great place to target a little savings. Variable costs change from month-to-month and are often more flexible and optional. These are things like groceries, hobbies, entertainment, and memberships/subscriptions. Think about where you could trim some expenses in the short term and give yourself the gift of a little breathing room.
Know What Bills to Pay First if You Can’t Cover Everything
Think about your bills strategically – cover your essentials first: home, utilities, food, transportation, and childcare. Next, when looking at debt payments, consider the consequences of different approaches. If you pay the minimum on credit cards and loans, you avoid missed payment marks on your credit report. But, you may pay more interest in the long run. Whereas, if you skip some payments some months, you can put more cash towards what you are paying (avoiding interest) but you may hurt your credit, temporarily. Make sure you know which interest rates are high and where the penalties for missed payments might just be even more money. Also, talk to your lenders! Some programs offer extensions or payment plans to help people through hard times.
Use Credit to Your Advantage
During difficult seasons when cash is short or the emergency fund has already been used up, you may find yourself putting more on credit. This is another strategic option, but one that should be approached with care. Credit debt can easily pile up and will stay with you long after a temporary financial pressure. That said, if your credit score is good, you can sometimes increase your credit limit, which will help you avoid damage that comes from using too much of your available credit. You could also consider a balance transfer credit card, which may allow you to transfer to a 0% interest line of credit temporarily. Some credit card issuers also have hardship programs, to offer some relief when financial emergencies, setbacks, and major life changes come up.
Avoid Accessing Retirement Savings
If you have retirement savings out there, it can feel like an obvious answer in times of extreme financial stress. However, it’s important to know that retirement funds are protected by layers of fines and extra taxes. It’s not easy to access this money because you’re not supposed to access it until retirement age. It’s best to leave all retirement savings, 401ks, and IRA accounts completely alone.
No matter who you are or where you come from, we are all coping with financial pressure in this modern world. Whether you’re dealing with a job loss, building debt, a growing family, or other pressures, it’s important for you to pace yourself. Remember to take care of your body and brain on the ground-level. By approaching money challenges head-on, and being patient and understanding with yourself, you will find a way through the chaos and regain control over your finances.
