By Cameron Huddleston
Are worries about money keeping you up at night? You’re not alone. According to a survey conducted by GOBankingRates, money is one of the top concerns of Americans.
“Everybody worries about financial decisions, in-decisions or consequences,” says Scott Bishop, the director of financial planning at STA Wealth Management. Worrying won’t solve your money problems, though. In fact, he says it can lead to even more stress and mistakes.
Fortunately, there are steps you can take to prevent your financial problems from overwhelming you. Here are eight ways to stop worrying about money and get your finances on track.
1. Understand Your Money Situation
“You can get a better understanding of your money situation by identifying what your assets (house, investments, savings) are and what your liabilities or debts are,” says Michael F. Kay, a financial planner and president of Financial Life Focus. Once you know what you have and what you owe, you can identify what your biggest problem is and assess what needs to change. “For most, it’s too little savings and too much debt,” he says.
“Before you can stop worrying, you need to know where you stand financially,” Bishop says. “The best way to do that is to get a handle on or snapshot of your current situation.”
2. Know Where Your Money Is Going
“Once you know where you stand financially, you need to know how you got into that position. This means figuring out where your money goes each month,” Kay says. First, identify your necessary expenses — mortgage or rent, utilities, transportation and anything else you must pay for each month. Then, look at your bank and credit card statements from the past month to see how much you’re spending on discretionary items — things you want but don’t need.
“If you’re spending $1,000 on discretionary items, ask yourself what else you could do with that money,” Kay says. You might be worried about living paycheck to paycheck or not making ends meet, but tracking your spending might help you realize that you actually have the cash you need to boost savings, pay off debt or get ahead — if you cut back on unnecessary expenses.
To keep tabs on where your money is going in an ongoing basis, Bishop recommended using an app such as Mint, which lets you track all of your accounts and spending in one place as well as creating a budget. You also could use software such as Quicken, or even give yourself an allowance of cash to limit your spending, he says.
3. Get a Handle on Your Debt
If you’ve taken the first step to figure out your assets and liabilities, you should have an idea of how much you owe. “It is important to see how much this debt is costing you, and draining your cash,” Bishop says.
List your debts and the interest rate on each of them. You should focus on paying off your highest-rate debts first—likely credit card debt—so you’ll pay less in interest over time. If you’ve taken the second step to figure out where your money is going, you should know what discretionary expenses can be cut so you can put more money toward your debt.
“However, before you start paying down debt, understand why you have accumulated it,” Kay says. Was it because you had a major medical expense or borrowed heavily to cover the cost of college? Or are you simply using debt to cover your spending? “If this is your normal way of living, it’s time to take stock and think about why,” Kay says. “You might need to work with a counselor to figure out what is triggering your spending, and how to get it under control,” he says.
4. Set Financial Goals
To stop worrying about your finances, it’s not enough to know where your money has been going. You need to give it a place to go, which means setting goals. “Look at what must happen for you to feel like your finances are on track,” Kay says. It might mean being debt-free, having a certain amount in savings for retirement or building a college fund for a child.
In addition to covering your necessary expenses, your money should be going to these “musts” before your wants. Then evaluate whether your career and other financial choices you’ve made will help you meet those goals.
What are your options if your current income won’t get you where you want to go? Bishop says, “You might need to get a second job, go back to school or look for other sources of income to reach your goals.”
5. Educate Yourself about Personal Finance
“You might be worrying about money because you feel like you don’t know enough about personal finance. However, gaining mastery of your finances doesn’t mean you need a degree in finance,” Kay says. But you do need to know what’s creating fear or discomfort for you.
Perhaps you’re worried because you don’t understand how your credit score affects your ability to get credit. You can learn the basics at a site such as myFico.com, the consumer division of the company that invented the FICO credit score.
If you’re confused about how much to save for retirement, check with your employer to see if you have access to financial advice through your workplace retirement plan or visit one of the numerous personal finance websites to learn money basics.
6. Plan for the ‘What Ifs’
“You can alleviate some of your financial worries by identifying your worst-case in money scenarios, and preparing for them,” Kay says. For example, if you consider losing your job to be the worst thing that can happen financially to you, ask yourself what you should do to prepare for a job loss. Creating an emergency fund to cover expenses while you’re out of work is a good place to start.
“If you have people who depend on you financially, you need to have enough life insurance to help support them when you die. If you become disabled, you need to make sure you have enough disability insurance coverage to replace your lost wages. Consider everything that could derail your aspirations, and cover all of your bases,” Kay says.
7. Stop Trying to Keep Up with Others
“You need to be honest with yourself about whether your money woes stem from tying to keep up with what others have—whether you’re spending to impress others or belong,” Kay says. Ask yourself what you’re working so hard for. “Is it a label on a shirt, a certain watch, a vacation in Tahiti? Or are we working for something else?” Kay says.
To avoid falling into the trap of trying to keep up with others and worrying that you can’t, write down what you care about. If you’re married or in a relationship, ask your partner to do the same. Then agree on what you both want and let those values guide your spending decisions.
8. Get Help from a Financial Advisor
If you’re worried about your health, you’d likely visit a doctor. If it’s your financial health that has you concerned, you can get help from a professional too. You can hire a financial planner to help you with any of the above steps—from understanding where you stand financially, to setting goals, to creating a plan to reach those goals.
Kay recommends looking for an advisor who is a fee-only fiduciary and will work in your best interest rather than try to sell you financial products that might not meet your needs. You can find one near you through NAPFA.org, the website of the National Association of Personal Financial Advisors.