Struggling against persistent inflation and incomes that frequently lag behind rising expenses, numerous individuals find themselves grappling with financial strain as they strive to cover basic needs, safeguard their finances, and prepare for what lies ahead.
Indeed, Bankrate’s 2024 Money and Mental Health Survey reveals that nearly half (47 percent) of adults acknowledge that money has occasionally or frequently adversely affected their mental well-being.
1. Prioritize what you can control on discretionary spending
Focus on what you can control to alleviate stress and improve your situation. Take your food budget, for example. Explore ways to trim expenses from your grocery spending, such as comparing prices across different brands. Not only will you save money, but the sense of achievement and regained control may also help alleviate stress.
Reducing your food costs can positively impact your budget, especially considering that food prices are projected to rise by 2.2 percent in 2024, as reported by the U.S. Department of Agriculture. Opting for store brands instead of name brands is a straightforward method to save on groceries, with store-brand items typically priced around 40 percent lower than their name-brand counterparts, according to research from CNET.
2. Find ways to earn more money
While cutting expenses is essential, be mindful not to let a tight budget add to your stress, especially with the current higher-than-normal prices of consumer goods straining your budget already.
Consider seeking ways to boost your income instead. Here are some options:
- Work additional hours: Discuss the possibility of working extra hours with your employer, especially if you’re paid hourly or eligible for overtime pay.
- Negotiate for a raise: If you’ve been excelling at work, consider asking for a salary increase. If a raise isn’t feasible, explore negotiating for non-monetary benefits like remote work, which could save you commuting expenses.
- Sell unused items: Clear out clutter by selling items you no longer need, such as old furniture, clothing, or tools.
- Take on a side gig: Supplement your income with a flexible side gig like food delivery, tutoring, or blogging. Side hustles can be lucrative; in 2023, the average person with a side hustle earned $810 a month, according to a Bankrate survey.
3. Pay essential bills
According to a recent Bankrate survey, 60 percent of working Americans feel their income hasn’t kept pace with rising household expenses due to inflation. If you’re concerned about covering all your bills, it’s crucial to prioritize essential expenses first. Here’s why sorting through your bills and giving them priority matters:
- Identifying unnecessary expenses: Reviewing your spending helps pinpoint bills that can be reduced or eliminated altogether.
- Ensuring timely payments: By prioritizing bills in advance, you can allocate sufficient funds to pay them on time, avoiding late fees or penalties.
- Alleviating financial stress: Paying attention to your bills and prioritizing them can help ease financial worries, potentially improving your sleep quality.
During financial difficulties, some service providers and lenders may offer payment extensions, granting extra time to settle your bill. While this can provide relief, it’s essential to carefully review the terms of any extension agreement. Be aware of any associated fees and understand how the extension affects accrued interest.
4. Save money during trying times
Consistently saving money can be challenging, especially when financial pressures loom large. Economic factors like inflation and rising interest rates are cited by 63 percent and 45 percent of individuals, respectively, as reasons for reduced savings, according to Bankrate’s emergency savings report.
However, adhering to a savings strategy and establishing an emergency fund can instill a sense of control and alleviate stress.
Exploring high-yield savings accounts is worthwhile, as they often offer significantly higher returns compared to traditional bank offerings with near-zero rates.
Despite this, many consumers still earn subpar rates on their savings. Bankrate’s Online Savings Survey reveals that only approximately 22 percent of Americans with short-term savings enjoy yields of 4 percent or higher. Conversely, around 22 percent receive mediocre annual percentage yields (APYs) ranging from 1 to 2.99 percent, while 17 percent earn less than 1 percent APY. Another 17 percent report earning no interest at all.
To facilitate regular savings contributions, consider setting up automatic transfers from your checking account to your savings.
Once you’ve established an emergency fund, consider allocating surplus funds to a certificate of deposit (CD), offering a guaranteed return rate for a specified term.
Additional savings options include money market accounts, cash management accounts, and individual retirement accounts (IRAs).
5. Track your money-saving progress
Tracking your financial progress is essential for understanding your financial situation and ensuring that your efforts are effective, emphasizes Tracey Bissett, president at Bissett Financial Fitness. Without tracking, it’s challenging to gauge whether your actions are making a difference.
Monitoring the growth of your emergency fund over time can significantly impact your well-being. According to Bankrate’s Money and Mental Health Survey, 56 percent of U.S. adults who report negative effects on their mental health due to money concerns attribute it to inadequate emergency savings. Increasing your emergency fund can alleviate worry, knowing you’re better equipped to handle unforeseen expenses without resorting to debt.
Cara Macksoud, a certified financial behavior specialist and CEO of Money Habitudes, underscores the importance of understanding your financial situation for fostering good financial health and a positive mindset. By comprehending your finances, you can grasp your opportunities, options, and how your money works for you. This understanding can be a catalyst for developing a positive outlook on money matters.
Macksoud suggests that if you currently lack a positive mindset, gaining insight into your finances may prompt a shift towards a more positive perspective. Understanding the narrative your finances tell can serve as a reality check and encourage a more optimistic mindset about money.
For those looking to determine how soon they can achieve their financial goals based on monthly savings, Bankrate’s savings calculator is a valuable tool.
6. Talk to your lenders
Debt can weigh heavily on both your finances and mental well-being. However, rather than allowing debt-related stress to consume you, consider reaching out to your lenders for assistance.
Anna Barker, a personal finance expert and founder of the personal finance website LogicalDollar, advises that lenders are often receptive to discussing your situation and exploring potential solutions, even if only temporarily.
Your lender might be open to adjusting the terms of your loan, such as extending its duration or lowering the interest rate, to alleviate your monthly payment burden. Alternatively, refinancing could be an option worth exploring.
7. Consult with an expert financial advisor
Consider seeking guidance from a financial advisor to alleviate some of the burden associated with setting goals, saving, and reducing debt.
Research conducted by consulting group Envestnet | PMC suggests that working with a financial advisor, particularly in areas such as financial planning and investment selection, can potentially increase your portfolio’s annual returns by around 3 percent.
“In times of stress, a financial advisor should provide validation for your feelings and demonstrate why you can feel confident in the plan you’ve established,” explains Cara Macksoud from Money Habitudes. “Through a long-term relationship with an advisor, you can track your progress and gain assurance that you’re still on course, even amidst market volatility. This reassurance can bring peace of mind, especially when you have a well-diversified portfolio.”
In Conclusion
Financial stress and anxiety are prevalent in today’s climate, whether it’s due to inflation impacting your ability to cover expenses or concerns about bank stability following high-profile bank failures in 2023.
However, with dedication, you can proactively manage your finances to alleviate worries. Start by establishing a budget and monitoring your progress in saving. Seeking guidance from a financial advisor or confiding in a trusted friend or family member can also provide valuable insights.
Numerous free online resources exist to assist with money management, frugal spending, and living within your means. Utilize tools like Bankrate’s money-saving calculator to plan for your financial goals. Additionally, consider leveraging money-saving apps or features offered by your bank’s app to bolster your savings efforts.