Ask someone what causes them the most stress and chances are money will be right at the top of the list. Whether it is making ends meet on a day-to-day basis or long-term financial planning and investing for retirement, there is no doubt that many of us fret over money.
That’s the bad news. The good news is that more Americans are recognizing that attaining financial stability needs to be a primary focus and are planning on tackling the issue head-on. In fact, earlier this year as part of the Allianz New Year’s Resolution Study, for the first time ever more people named financial stability (71 percent) over health and wellness (67 percent) as their main focus for 2018.
The research also found that if given the opportunity to have free access, more Americans would pick a financial professional (28 percent) over a therapist (19 percent) or nutritionist/dietician (18 percent), and nearly a third (32 percent) claimed they are more likely seek the help of a financial professional in 2018. So hopefully we are turning the corner with giving financial planning and investing the attention they are due.
[See: 10 Investing Themes to Remember for 2018.]
But what’s behind this sudden focus on finances? It certainly appears that Americans have had it with financial stress. The proverbial breaking point has been reached and the expectation is that by getting on track financially, the corresponding stress will hopefully dissipate or go away altogether.
Financial stress starts with bad habits which fall into the most familiar and basic of behavior patterns — spending too much and saving too little.
Americans’ most common admission of a bad financial habit in our research is “spending too much money on things I don’t need” (32 percent), the highest percentage since 2012, followed by “not saving any money” (29 percent), “saving some money, but not as much as I could” (24 percent), and “not paying down debt fast enough” (23 percent).
Social media and the fear of missing out — where people spend needlessly because they feel they must keep up with the fun they see others having on social media — may be driving these bad habits. This modern day “keeping up with the Joneses” can wreak financial havoc on even the most conscientious investor.
So what can a person do? Start by taking small steps. Don’t try to solve every problem at once. That might only serve to increase stress and anxiety. Anything that gets the ball rolling can help. Some key actions to consider:
Create and stick to a budget. While the temptation to buy the latest gadget or to go out more often is always there, the simple act of creating a monthly or even weekly budget will go a long way. Make a point to track expenditures as it is a tangible reminder of how quickly those extra expenses such as a daily latte or going out to lunch every day can add up. Those extra dollars can be used for saving and investing. And the return on long-term investments will always trump the immediate satisfaction of that $5 latte. Last, and importantly, write down or document your overall budget in some manner. Whether it is using an online tool or simply writing it down on a sheet of paper, once it is documented, the likelihood of sticking to the plan increases.
[See: 9 Investing Steps From Warren Buffett’s Playbook.]
Save and invest. Whether it is setting up an emergency savings fund, saving for something special, or saving for retirement, just save. It does not need to be a painful process. For example, have $100 auto deducted from every paycheck. Moving it into another account or investing it is quick and easy and you will not have those funds readily available to spend. In the case of longer-term investing for retirement, consider notching up the percentage of your 401(k) or individual retirement account contribution, particularly if your employer will match it. Not taking advantage of the full employer match is basically turning down free money. Last, while it might be difficult in the moment, try to think longer-term. For those who are approaching retirement, do not forget the value of income planning. Setting up a plan to ensure enough funds are available for what will likely be a lengthy retirement will alleviate potential future stress within retirement.
Reduce debt. If possible, pay down high interest credit card debt first. Getting rid of high interest debt begins the process of reducing what can be a vicious cycle of making minimum monthly payments that do not keep pace with accruing interest and additional debt. (Also, by sticking to a budget, there is less chance of adding on the existing debt, which only makes the situation that much worse.)
Create an overall financial plan. All of the above tips are great to implement alone, but tying them all together as part of an overall financial plan will make the efforts that much more successful. Whether working with a financial professional or doing it on your own, a comprehensive (and documented) plan gets the ball rolling in a big way. Seeing the progress being made can certainly help alleviate financial stress.
Get started now and stick to it. While procrastination is always an option, there is no time better than now to take even a small step toward gaining greater financial stability. And when it comes to stress, consider the three A’s — the Antidote to Anxiety is Action.
Importantly, don’t let the temptation of what you might see others doing on social media derail your efforts. In fact, pay closer attention to those on social media who are setting good examples and use the opportunity to learn from their success.
[See: 13 Ways to Take the Emotions Out of Investing.]
Stress is something that all of us need to deal with and it will likely never go away completely. However, taking a few simple steps now toward creating a more solid financial future can help alleviate financial stress in the years to come.
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5 Ways Investing Can Relieve Your Financial Stress originally appeared on usnews.com
