If you're concerned about how to manage your money, you aren't alone. According to a recent survey conducted by Capital One, 77% of Americans report they're worried about their financial situation -- including close to 6 in 10 Americans who indicate their lives are controlled by their finances.
If you're one of these Americans, you're probably sick of spending your life stressed about money. But the good news is, you don't have to keep going like this. By taking a few simple steps, you can take back control and get yourself to a place where you don't have to worry any more.
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1. Stop the paycheck-to-paycheck cycle
Living paycheck to paycheck is one of the biggest sources of financial stress for families. After all, if you don't have savings to fall back on, you have no safety net, and any unexpected income drop or surprise expense could cause a major financial problem.
You can break this cycle by making a budget that enables you to save up an emergency fund. Track what you spend and figure out your fixed and discretionary expenses -- then look for ways to cut costs until you have money left over to save. Put some of that savings into an emergency fund until you have enough to cover three to six months of living expenses.
Having this money means you won't need to worry nearly as much about a job loss, medical problem, costly repair, or other situation that could leave you facing surprise expenditures or a cut to your income.
2. Automate your financial plans
If you take a hands-on approach to managing your money, you constantly have to make decisions about what to do with your cash. You also have to be responsible about making sure all the bills are paid and money is allocated to savings. But you can eliminate a lot of the stress that goes along with this daily money management by automating as much of your financial life as possible.
You'll need to have a budget to do this so you know what you can afford to put into savings and have enough in your bank account to avoid overdrafts. But once you do, you can set up automatic transfers of money to retirement savings and other savings accounts and set up your bills for automatic payments.
All your money will be delivered exactly where it needs to go without input from you when you take this approach. And you can freely spend whatever is left over without any guilt because you'll have taken care of all the important stuff first.
3. Create a debt payoff plan you can stick to
Owing money to creditors can enhance your financial stress as you have a commitment to make payments, and you'll see some of your hard-earned cash go to interest every month. To reduce your worries, aim to eliminate your debt by making extra payments toward it.
The simplest way to tackle debt payoff is to get a low-interest loan to refinance your existing debts. If you have only one creditor to pay, you won't have to make choices about which loan to pay off first. You can make payoff less costly if your new loan has a lower rate than your old debt rate. And you can get a fixed date when you'll be debt-free if you take out an installment loan with a set payoff schedule.
If you don't want to refinance or can't qualify for a refinance loan, decide whether you'll pay off your debt with the highest interest rate first or start by paying off the debt with the lowest balance. The first option will save you the most money, but the second could help you stay more motivated as you see debt disappear. Make extra payments to the one debt you're concentrating on first, then roll over that payment to the next debt you want to tackle until all your creditors have been repaid.
These steps will help alleviate your financial stress
If you know you've got money in the bank and a plan to deal with your debt, you shouldn't have to worry about your financial situation once your spending is under control. While it may not be easy to take all of these four steps, it's worth making the effort so you can join the minority of Americans who don't report worries about their finances.
