Experts Agree: These 5 Steps Make Budgeting Easy
- Budget for important things
- Use the envelope budget
- Designate a shopping day
Vacation plans maxing out your budget? Don’t have an emergency fund? Not sure how you’ll pay down creeping debt? It’s not unusual if thoughts like these keep you up at night or distracted during the day. In fact, survey after survey shows that Americans are stressed about money. According to one by the American Psychological Association, nearly two-thirds of adults (64 percent) say that money is a stressor.
So what’s the answer to the million-dollar question, “How can I deal with financial stress?” Maybe a million dollars… But one thing’s for sure. Worrying won’t solve much. However, figuring out the sources of your financial concerns and working to address them can.
“A lack of basic financial security makes it much harder to feel happy and can add stress to your everyday life,” says Uri Pomerantz, founder and CEO of saving and investing app Twine. “But achieving financial stability doesn’t require a miracle. Just applying a few basic steps, and having patience, can help alleviate any stress you may feel.”
Here are a five simple ways to stop stressing over money:
The first step to help you deal with financial stress is to get in the habit of saving. If you’re feeling stressed about money, start by making a commitment to save a slice of each paycheck and have the funds automatically deposited into a savings account. You can start small to build savings momentum and then work toward a specific savings goal. According to the 50-20-30 rule, for example, 50 percent of your paycheck should go toward must-have living expenses, 20 percent to savings goals and the remaining 30 percent to discretionary spending.
One of the first things you should do with that 20 percent savings bucket to feel less stressed about money is to start an emergency fund, which is cash you set aside for unexpected and often urgent expenses (it’s not fun to think about car repairs, medical bills or job loss, but it’s key to plan for them). You should have three to six months of living expenses saved at a minimum—which means if you need $3,000 a month to cover your basic necessities like housing costs, utilities, gas and food, you’ll need at least $9,000 in your emergency fund.
64 percent of adults are stressed about money.
It’s easy to get stressed about money if you don’t have a way to organize your regular expenses and are not sure which bank account to use for what.
Chad Rixse, co-founder of financial planning provider Millennial Wealth, says the “bucket approach” to budgeting is one way to stop stressing over money. The bucket approach means lumping expenses into categories and creating separate accounts to manage each category. For example, the bucket approach may include:
Using this approach can prevent overspending, minimize the time and effort that goes into effective money management and help you become less stressed about money.
You could get stressed about money if you feel like there’s so much to do to get your budget in order and not enough time. But technology is on your side. Consumer and money-saving expert Andrea Woroch says using the right digital budgeting tools and apps can make money management much easier and offer ways to stop stressing over money. Here are a few smart tips for tapping into them:
Even if you’re feeling good about your savings habits, you may still feel stressed about money when you spend. This stress can be exacerbated when you’re spending on discretionary or “fun” expenses, even if they fall within your budget.
Why should credit cards have all the fun?
Now you can earn cash back with your debit card.
Discover Bank, Member FDIC
Another way to stop stressing over money is to get rewarded for your spend. Rewards checking accounts and credit cards, for example, can allow you to earn cash back or incentives for your regular expenses. With Discover Cashback Debit, for example, you can earn 1% cash back on up to $3,000 in debit card purchases each month.1 You can then use your debit spending to gain savings momentum—sign up to have your cashback bonus automatically deposited into your Discover Online Savings Account every month so it grows with interest.
Those who deal with financial stress often lack confidence when it comes to investing. “Many have misconceptions around what it takes to begin investing,” says Pomerantz, with saving and investing app Twine. Contrary to what you might think, investing isn’t just for Wall Street tycoons, and it doesn’t take a ton of time or capital to get started.
According to a survey from Twine, 46 percent of millennials think they would need at least $1,000 before they can start investing; 17% have even more extreme impressions, believing they need $10,000. Luckily, Pomerantz explains, as little as $100 can get you started with retirement savings plans like a 401(k) or Roth IRA.
Millennial Wealth’s Rixse also suggests capitalizing on employer-matching programs and eliminating high-interest debt to deal with financial stress. “Contribute whatever your organization matches to your 401(k) to maximize the free money you’re being provided, and put everything else toward paying outstanding debt balances down,” Rixse says.
Then move from focusing on short-term goals to investments that help you achieve longer-term objectives, like saving for college or retirement. “I see financial happiness as a journey. And there’s always a chance to ‘level up’ to the next milestone,” Pomerantz says.
“A lack of basic financial security makes it much harder to feel happy and can add stress to your everyday life. But achieving financial stability doesn’t require a miracle. Just applying a few basic steps, and having patience, can help alleviate any stress you may feel.”
Managing your finances and learning how to deal with financial stress can often seem like hard concepts—but they don’t have to be. Achieving your financial goals and gaining a sense of financial control can simply be a matter of changing your way of thinking.
“One of the most damaging beliefs that many of us have is that in order to retire comfortably, we’ll need to be an amazing investor or win the lottery,” Pomerantz says. “If you instead start by changing your mindset, make just a few small tweaks and are patient, you can achieve financial happiness” and feel less stressed about money.
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
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1 “Expenditures on Children by Families, 2015,” Revised March 2017, Center for Nutrition Policy and Promotion, United States Department of Agriculture.
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