Taking care of your mental well-being could help you stick with your financial goals.
Two recent reports show that Americans are under more financial stress than ever. According to a CreditWise survey released by Capital One, 73% of Americans rank finances as their No. 1 stressor.
And a Fidelity study revealed 79% of women are burdened by job and stress issues, up from 67% a year ago. The majority of participants were worried about their ability to manage day-to-day expenses and save for goals beyond retirement.
The studies confirmed what many Americans already knew: Dealing with personal finances can be stressful.
Dealing with financial stress
If money issues have you worried, you're not alone. And stress can easily spiral -- psychiatrists blame financial worries for a host of mental health issues, including anxiety and depression.
It may sound counterintuitive, but sometimes the way to reduce financial stress can be to put less pressure on yourself. That doesn't mean throwing your budget out the window. Instead, perhaps some small changes will help you save money without it costing you so much energy.
In the long run, that could help you to pay down debt, save for short- and long-term goals, or bulk up an emergency fund -- all of which will ease your stress even more. Here are three ideas to help reduce money worries and protect your mental health.
1. Park your money somewhere smart
A 2020 report by the Federal Reserve notes that 30% of Americans would not be able to cover a $400 emergency expense. Worry that you can't handle an emergency is the type of thing that can keep you up at night.
Try parking some cash in a high-yield savings account, which will make it easier to build up your reserves. You don't have to do it all at once, especially if you're struggling to make ends meet. Move a small amount into your savings each month -- you'll be surprised at how quickly it builds up. Interest rates are not that high right now, but you can earn some interest and still keep your money available for emergencies.
When you're ready to earn higher interest rates, you can look beyond savings accounts to other options like CDs and money market accounts.
2. Use credit cards wisely
Depending on how you use them, credit cards can be a major source of financial stress or contribute to your sense of financial freedom. I recently jumped on the bandwagon and began using rewards credit cards. Now when I shop, I'm earning 5% back on my purchases, which adds up to hundreds of dollars each year.
To maximize this benefit, I pay off my credit card balance each month so I don't waste money on unnecessary interest charges.
Interest charges are the downside to credit card spending. Credit card companies tend to charge relatively high interest rates, so charges can easily pile up. Many Americans are making progress in paying down balances -- data from the New York Federal Reserve revealed we paid off an incredible $108 billion in credit card debt last year. That's a huge step forward, but total balances still come to nearly $1 trillion.
If you struggle with your credit card balance, it might be a good idea to look into some alternatives. For example, you may find it easier to use a debit card that doesn't accrue fees. Check out our guide on how to pay off debt for more information on ways to reduce your interest charges.
3. Invest in your goals
It might sound strange, but to save money, you might need to spend money.
Like New Year's resolutions, it isn't easy to change your financial habits. And the more something feels like a chore, the higher the stress level and the less likely you're going to stick with it. Making changes in a way that doesn't add anxiety to your life can be a smart financial decision -- even if you have to spend some money to do it.
Here are a few examples:
- If your goal is to stop eating out more, invest in the right equipment to help make your life in the kitchen easier.
- If you don't like dealing with numbers and spreadsheets, a budgeting app can help track your spending and savings. There are plenty of free options, but what if the free apps don't ease your financial worry? The best budgeting apps fit your lifestyle. Even if it comes with a monthly or yearly fee, that's still a good investment if it helps you stick to a budget without adding stress.
- If you want to quit your daily coffee-buying habit and K-cups aren't cutting it, investing in a coffee grinder and brewer might show you a thing or two about how good coffee can taste at home. And in the end, you're still going to save more than you would buying coffee every morning.
The trick is to spend wisely. Research before you buy. Find ways to get deals on your investments. And don't buy anything that you're not going to use consistently in a way to make saving money worthwhile.
Look after your well-being
The point of building healthier financial habits is to add to your overall well-being, not increase your stress levels. Small changes in how you save and spend money can help you take better control of your finances -- and improve your overall mental health.
And remember, it's not all or nothing. If you're not ready to cut certain habits, don't. If buying your daily coffee helps reduce stress and keeps you moving forward, enjoy it. Look for other ways to improve your financial health while continuing to invest in your well-being and your happiness.
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