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How Saving Regularly Can Help Reduce Financial Stress

By Katie Brockman - Feb 20, 2020 at 6:02AM

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It's a simple move that can have a positive effect on your entire financial situation.

Stress about money is a serious concern plaguing millions of Americans. Fifty-eight percent of U.S. adults say their finances control their lives, a survey from Capital One found, and that stress often results in fatigue, sleepless nights, and difficulty concentrating at work.

If you're stressed about your finances, you may think a fatter paycheck will solve all of your problems. But even the highest earners also experience financial stress, with 32% of those earning $200,000 or more per year saying they run out of money before they receive their next paycheck, according to a report from Salary Finance.

There's one easy thing, though, that you can do regardless of your income level to reduce that stress: get into the habit of saving regularly.

A man removing his glasses and looking at paperwork on the table near some cash and coins

Image source: Getty Images.

Saving consistently can improve your entire financial situation

Forty-six percent of people who save regularly say they don't experience financial stress, the Salary Finance report found. However, 52% of those who do not save consistently do stress about money.

When you're not saving for the future at all, it can put you at risk in several ways. First, if you don't have an emergency fund, an unexpected expense could cause a host of problems. You may be forced to take out a loan or rack up credit card debt to cover it, and if you're already stretched thin financially, paying back that debt could be challenging. Then, if you face another unexpected cost while you're still trying to pay off the first one, you'll only end up digging yourself deeper into debt.

Second, if you're not saving for retirement, your senior years could be more stressful than relaxing. The average Social Security check comes out to around $1,500 per month, or $18,000 per year -- which is hardly enough for most retirees to live on. Unless you have a pension or some other sort of income, you'll need a significant amount of money in savings in addition to Social Security benefits to make ends meet. So if you're not doing anything to save now, retirement may not be as enjoyable as you'd hoped.

Unexpected costs wreaking havoc on your finances and going into retirement unprepared can be stressful, so the key to avoiding that stress is to save as much as you can to be prepared.

How to save more when you're on a tight budget

It's easy to fall into a vicious cycle of financial struggle. If you're already living paycheck to paycheck, you may not have much extra cash to save. Then, if you're hit with an unexpected cost and are forced to take on debt, saving may seem impossible. But if you never save anything, you'll only end up deeper in debt and further from your retirement goals if you continue facing unplanned costs.

Saving more when you don't have much to save in the first place is challenging, but it can be done. The first step is to establish a thorough budget so you know exactly how much you're spending every month.

Sometimes you may not realize you're overspending in certain areas until all of your costs are in front of you. In fact, even though nearly 60% of Americans say they live paycheck to paycheck, the average person spends close to $500 per month on unnecessary expenses, according to a survey from Charles Schwab. If you're overspending without realizing it, a budget can help you spot those problem areas and reallocate some of that cash to your savings.

Another way to boost your savings is to set up automatic transfers straight to your retirement fund or savings account. If you have a 401(k) through your employer, you may be able to transfer a portion of every paycheck straight to your retirement account. Or if you have an IRA or simply want to save more in your savings account, you can set up automatic transfers from your bank account to your retirement or savings account every week, month, or however often you choose.

With automatic contributions, you never have to remember to save. And because you'll be stashing money away consistently, you can easily build that expense into your budget -- forcing yourself to prioritize saving. You may need to make some financial sacrifices in other areas, but after a while, you'll get into the habit of saving, and those budget cuts won't be so painful.

Managing your money can be stressful, but the more you save, the more prepared you'll be to face any challenges life throws your way. Finding extra cash to put toward your savings can be tough, but take it one dollar at a time. Every little bit counts, and even a little bit in savings can go a long way toward reducing your financial stress.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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