From the outside looking in, Americans appear to be wealthy and fiscally independent. And while we might be comparatively wealthy in terms of income, we certainly don’t feel the freedom that comes from earning big salaries.
Research shows that Americans are more stressed about money than anything else in their lives – including work, health, and relationships. In fact, it’s the number one source of stress!
An estimated 44 percent of people experience financial anxiety on a regular basis – and much of this stress is due to the fact that 63 percent of Americans don’t have enough savings on hand to cover a $500 emergency.
If you’re experiencing financial stress, you aren’t alone. But it’s time to break away from the pack and put an actionable plan together. There’s no magic wand you can wave to suddenly experience financial bliss, but you’ll benefit from simplifying your approach, removing friction where possible, and streamlining the assets and debt that you have on hand.
5 Tips to Simplify
We all have our own financial skeletons in the closet. And while you’ll have to make a plan for dealing with your unique circumstances, here are some overarching steps anyone can take to simplify the big picture and find a greater sense of peace.
1. Create a Spending Plan
Create a spending plan so that you know where every single dollar of monthly income is going. Start with your income at the top and then list out your essential expenses, starting with housing, food, utilities, insurance, and transportation. Then move on to savings and investments. Whatever is left falls into a discretionary fund – which is basically fun money you can use to eat out, shop online, go to the movies, etc.
The problem is that most people begin with their discretionary expenses and then proceed with everything else. By realigning your priorities, you put the right foundational building blocks in place to grow.
2. Switch to a No-Fee Bank
Please stop paying money to the bank just to access a checking or savings account. You’re already letting them use your money to lend out to other people and collect interest. Why would you pay them a monthly fee for this right?
Switch to a no-fee bank (preferably an online one) that gives you one debit card to track and spend. Your financial life will instantly become clearer!
3. Consolidate Debt
Debt is stressful enough on its own. Having it spread out across multiple different lenders and categories exacerbates the issue. Try consolidating it!
Rather than owing money to a car dealership, two different credit card companies, and a community college, what would life look like if you could consolidate all of those amounts into one lump payment with the same interest rate? That’s what debt consolidation does. If you wish to pay off your student debt sooner, do some research on how to consolidate private student loans to make it more manageable for you.
4. Set Up Reminders
Is your mind swirling with different payment dates, tax deadlines, and other financial requirements? Try setting up recurring reminders on your phone or calendar to let you know when it’s time to pay your credit card or make a tax payment on your car. This eliminates the fear of forgetting and frees you up to focus on constructive thoughts.
5. Rent Rather Than Own (For Now)
People have told you your entire life that you should buy a house as soon as you can. They’ve also told you that renting is like throwing money down the drain – you’ll never get it back! But if your goal is to simplify your finances, home ownership is the last thing you want or need.
When you own a house, expenses are unpredictable. Yes, you can benefit from appreciation and building equity, but you also have to pay for that leak that floods the basement, the new roof, or the HVAC repair bill. There are also taxes and mortgage interest – it’s a whole mess.
By renting, you have a fixed amount that you pay each month. When the basement floods, the landlord pays for it. There’s no taxes or mortgage interest, either. And while you won’t build any equity, you can benefit from less stress and greater control.
Gain Control Over Your Money
Simplifying your finances can be a big undertaking, but there’s freedom on the other side. Implement the aforementioned tips and tactics to get a grip on your financial situation and experience the peace that comes from knowing you’re in control.