How to deal with financial stress

If money worries keep you up at night, you’re not alone. More than 8 in 10 people said they experience stress about money, according to NerdWallet’s 2024 Financial Angst Report.

The sources of financial anxiety vary. Some people fret over having unmanageable levels of debt, while others fear losing their jobs or not having enough money to retire. Still, many of us share a sense of growing unease about covering everyday living expenses. According to the report, 50% of respondents cited food costs as a major stressor, while 40% pointed to housing expenses as a top financial worry.

Rising costs are reshaping the way people think about money, according to Traci Williams, a certified financial therapist. “There’s a shift from what they thought their life would look like at this stage to what it’s turning out to be,” she explains.

Many of us are asking, how do I reduce my stress about finances? While you can’t control everything, there’s plenty you can do to take charge of your financial situation. Here are seven concrete tips for overcoming financial stress through better control of your money. 

Change your money mindset

Early experiences often shape our emotions about money, Williams says. “If your parents struggled with money, you might feel like you need to save extra to make up for that,” she says. “On the other hand, you might feel like you need to spend a lot because you couldn’t when you were growing up.”

Another common pitfall? Feeling like there’s something wrong with you because you can’t make ends meet, even though you earn a good income. “About half of people who make $100,000 or more each year are living paycheck to paycheck,” according to Williams. “Money isn’t something we openly discuss, so it can feel isolating—but what you’re experiencing is quite normal.”

The key is acknowledging your emotions about money, not burying them. “Just allowing yourself to feel them can be helpful,” Williams says. And don’t forget to focus on gratitude for what you do have. “When you’re stressed, it’s easy to fall into negativity,” she adds.

Build a smarter budget

You can’t fix what you don’t understand—and that’s where a budget comes in. It’s one of the easiest ways to figure out how to deal with financial stress because it gives you a clear path to follow.

The 50-20-30 rule is a simple way to begin. First, list all your sources of monthly income. Then, allocate 50% of this amount to the things you need, like rent, groceries, and utilities. Next, set aside 20% to pay off debt and increase your savings. Finally, use the remaining 30% for discretionary expenses, like entertainment, dining out, and hobbies.

You can adjust these percentages as needed. But be honest with yourself. One of the biggest budgeting mistakes people make is underestimating how much they spend. “Online shopping and meal delivery services are two of the biggest culprits,” Williams says. “It’s easy to spend small amounts here and there without realizing how much it adds up.”

And don’t just focus on cutting expenses. You should also look for simple ways to make your money work harder. For instance, you might be surprised at how you can save money with your checking account, especially one that offers cash back on purchases you need to make anyway.

Managing your money should feel less overwhelming when you know where it’s going. “Just having a plan can help you feel more in control,” Williams explains. “You might discover you need a side hustle to make ends meet. You also might find you already make enough money for your needs, but you just haven’t been tracking your spending closely.”

Pay down debt

Debt can feel like a heavy load, but dealing with it systematically can make it easier to carry. Start by understanding the full scope of your debt—list all your balances, including credit cards, student loans, personal loans, and home mortgages.

Then, dig into the details: How much interest are you paying? How much do you need to pay each month? And how long will it take to pay it off? “Many people who have debt don’t understand it,” Williams says. “It’s important to see the complete picture.”

Prioritize paying off high-interest debt, like credit cards. Once you knock out those balances, you can move on to lower-interest debt. This approach is called the debt avalanche method. But if you need extra motivation, a different strategy might work better: The debt snowball method works by payingoff smaller debts first—no matter the interest rate—to rack up a series of quick wins and build momentum.

Seeing is believing. “In my sessions, we use a debt payoff calculator to illustrate how much faster someone could pay off their debt by reallocating just a small amount,” Williams says. “What they learn can be mind-blowing.”

Whatever strategy you choose, keep making payments and limit new debt. Even if it takes time to reduce your debt load significantly, chances are you’ll feel more empowered with a plan in place.

Create an emergency fund

Life is full of surprises, and unexpected expenses like car repairs or medical bills can easily derail your finances. However, building a dedicated emergency fund can help you prepare for unforeseen events.

Aim to set aside at least three to six months’ worth of living expenses in a separate, high-yield savings account, where your money can grow without being locked away. Consistency is key, even if you save just a small amount each month.

The peace of mind that comes with an emergency fund is great for overcoming financial stress. Knowing you have the resources to handle unexpected situations without relying on credit cards or loans builds confidence.

Maintain good credit

Your credit score plays a large role in your financial well-being, impacting everything from loan approvals to the interest rates you’ll pay. A strong credit score can save you money, ultimately reducing stress in the long run.

Here are the top four ways to keep your credit in good shape, according to USAGov:

• Pay your bills on time.

• Check your credit report regularly. If you spot any errors, report them to the three major credit-reporting bureaus: Equifax, Experian, and TransUnion.

• Keep balances below your credit limit.

• Build a long credit history by keeping credit accounts open and using them responsibly.

Manage your savings for life goals

Let’s say you’re covering your basic needs but are still worried about funding big life goals like college, a wedding, or retirement. Finding a balance between frugality and personal fulfillment is important for overcoming financial stress. Here are some quick tips for managing everyday spending while still making progress toward your dreams:

• Create a budget for college. Whether you’re paying for your education or someone else’s, having a spending plan for college expenses can reduce stress.

• Be strategic about weddings. Prioritize your must-haves. From flowers to catering, you can find creative ways to throw a wedding for less.

• Boost your retirement savings. Time is on your side when it comes to planning for retirement. Starting now—even with modest contributions—will pay off later. Try upping your contributions when you get a raise or bonus (your future self will thank you). And if your employer offers a 401(k) match, make sure you’re contributing enough to get the full benefit—it’s basically free money.

Call it a sunny day fund—online savings with no monthly fees

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Visualize how to deal with financial stress

With these practical steps, you’re on your way to building a strong financial foundation—a key part of how to overcome financial stress. Staying focused on your future goals will help keep you motivated along the way.

“I encourage people to dream,” Williams says. “What do you want your future life to look like? And what financial decisions can you make today to get there?” 

To set clear goals, imagine where you want to live, what you want to do in your free time, and what kind of work you’d like to do. Williams says this kind of visualization exercise helps create an emotional connection to your future self—and that may inspire you to take action today.

With these tips to guide you, financial stress may become a thing of the past. Learn how a Discover^® Online Savings Account can help you get organized and get the most out of your savings.

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