According to a 2013 study by Financial Finesse, eighty three-percent of those surveyed reported that they were under some type of financial stress. The feeling that you may have little or no control over your finances can lead to unnecessary frustration. Things like overwhelming debt, living paycheck to paycheck, and trading time off for overtime could all have a negative impact on your stress level.
However, with a few simple adjustments, you can begin to make steps towards regaining control over your spending habits and start enjoying the benefits of a more balanced life.
Create a plan to reduce your debt
In my seventeen years as a financial planner, I’ve found that the biggest money issue for most people is the pressure of paying off outstanding debt. Mortgages, business loans, and other bills can quickly add up and spin out of control if you don’t have a system in place to eliminate debt. The first step in debt reduction is to know exactly how much you owe and how much interest you are accruing. Take some time to sit down, turn off the TV and make a list of all your debts. Once you have done this, highlight the ones with the highest interest rates. I suggest paying off these debts more quickly to save money on interest charges. Set aside an extra amount of money every month that is earmarked for paying down your debt. Once each balance is paid off, you can reallocate the additional funds to help pay off other bills.
Reduce your spending
The best way to get out of debt is to not get into it in the first place. Uncharted spending can easily sneak up on you if you don’t have a plan to tackle it in the first place. I suggest that you keep a spending journal for a month, taking careful note of all your expenses. At month’s end, group the expenses into categories such as dining out, entertainment, transportation, home goods, clothing, and groceries. This will give you an accurate account of how much you are spending by category each month. You can then go through your journal and strategize how you can most effectively reduce unnecessary spending. Your goal should be to minimize impulse purchases and find areas where it makes the most sense to cut back. Use this information to create a budget to guide your future spending.
Put together and stick to a realistic budget
Once you know how much money you owe and how much you spend, you will be on the road to discovering financial balance. The most beneficial part of this process is putting together a budget that you can live with every month. There are plenty of free budget tools online that will make assembling a budget easy to plan and simple to follow. For example, you might try downloading a budget planner from Microsoft.com. A tool like this can help you track your expenses and stay comfortably within your budget every month. You should also make sure you leave room in your budget for savings. Having a healthy savings account can give you valuable peace-of-mind in case of an emergency or temporary loss of income, thereby reducing your worry and stress.
Organize your financial documents
In my experience, most people’s personal and financial documents are surprisingly unorganized. Trust me: in times of trouble, you don’t want to be scrambling around looking for important documents when they are needed most. Things like medical records, insurance information, stock certificates, and property deeds need to be well organized. I suggest that the first step you take is to place all of your important documents in a logical filing system like my organizer, The Everything Binder. This will ensure that when you or a trusted family member needs to access this information, it can be easily found. Second, make sure you keep your files in a secure location. Home safes are a good idea or a bank safe deposit box. Once this is done, you won’t have to worry about them being misplaced.
Not having control over your finances can leave you feeling uneasy and unsettled. However, by using the simple strategies above, you can begin to achieve more balance in your financial life. You’ll experience less stress and be more comfortable on a daily basis once you’ve gotten control of your finances.
Maloon, Powers, Pitre & Higgins, LLC is a Registered Investment Advisor. Securities offered through Financial Telesis Inc. (Member FINRA/SIPC). Financial Telesis Inc. and California Financial Advisors are not affiliated companies.