Elusive financial peace
There was a time when I had my financial house in order. Written goals, savings, no credit card debt, healthy 401K contributions, college funds … then it all unraveled as jobs changed and children grew and suddenly I became the poster-child for financially unprepared people everywhere. The lean years “ate up” the fat ones, and I found myself for the first time with consumer debt, a mortgage that was bigger than I could afford and insufficient funds to help my kids with college expenses. I had to begin a long climb out of a very stressful hole.
It turns out that financial stress affects just about everyone at one time or another. It cuts across all classes and categories, with those making more than $100,000 per year just as likely to experience high financial stress as those who make less than $60,000 per year, according to a 2014 survey from Financial Finesse. (1) There are very few who are so financially comfortable that they report no stress at all.
Money is stressful (can we go back to shells?)
Nearly three quarters (72%) of all Americans experience financial stress at least some of the time, according to a report by the American Psychological Association (APA) in 2015. (2) That means that well over 200 million of us feel financial stress at times. This could be the one unifying factor in our country: money stresses us out.
Financial stress looms large among issues that affect our health. Chronic stress results in sustained high levels of cortisol and adrenaline being released, which negatively affects blood pressure, heart rate, immune system function, mood and even memory. (3) In addition, according to the APA report, when we stress about money we are more likely to manage that stress in unhealthy ways, such as excessive TV watching and internet surfing, sleeping too much or too little, drinking and smoking. (2)
Debt alone can be a crippling financial stressor. An Associated Press-AOL poll found that 27% of people with stress due to high debt had ulcers and/or digestive tract problems, compared to 8% of people with low levels of debt stress. Severe anxiety was reported by 29% of participants with high debt stress compared with only 4% of the low debt stress group. (3)
Some steps to getting your finances in order
Wait, are your eyes glazing over already? These steps to fixing personal finances may be older than your grandparents, but they still ring true. Getting on financially stable ground is a bit like losing weight. You know the only way to get there is to eat healthily and exercise, but it is hard work and also less interesting than, say, the Grapefruit Diet. It is the same with finances. We know we have to spend less and save more, but that is not as cool as the new flat screen TV that would make our lives complete.
Nevertheless, it must be done for our financial health as well as our physical health. We will never regret the work we do to reach financial peace.
- Pay off debt. Start with student loans and credit card debt and make a debt repayment schedule. As soon as one debt is paid off, double down and use that money to chip away at the principal of another debt. See a debt consolidation counselor if the task seems too big or overwhelming.
- Start building an emergency fund. Conventional wisdom is cash to cover three months of living. Start building it in a separate bank account. That emergency fund is it’s own kind of life insurance: when life happens in the form of layoffs, illness or natural disaster, you can breathe easier.
- Live on less than you earn. Track your spending. Budget. Some banks offer spending tracking/budgeting software online. If yours does not, Quicken and Mint.com are two other great options. Start cutting stuff – cable, Starbucks, eating out – whatever you can give up so that your numbers stay in the black. Need versus want.
- Save. Beef up your 401K or invest in a retirement account. Save for your kids’ college. Even if you want your children to invest in their own educations, being able to help them out when they otherwise would have to burden themselves with debt is worth cutting cable or making meals at home for a few years.
Remember to take baby steps. Neither Rome nor your healthy bank account will be built in a day. Start with one measurable and attainable goal at a time.
Baby-step goal ideas to get you on the path to financial peace
- Give up cable and rely on the internet for entertainment and use the savings to pay down a debt
- Set up automatic savings withdrawal
- Call human resources and up the amount withdrawn for your 401K
- Refinance your house to a 15 year mortgage, which will save you a shocking amount of interest expense
- Pack your lunch four out of five work days (This will also help with weight-loss goals if you have any, as a bonus!)
- Sign up for an app like Acorns or Digit, which transfer small amounts to your savings account. Acorns rounds purchases up and saves the difference. Digit evaluates your spending habits and transfers small amounts to a savings account.
- Increase your deductible for auto insurance and use the savings to start your emergency fund.
31 days to fix your finances
Financial goals for every decade of your life
Rich Dad, Poor Dad
- How financial stress can harm your health. Fox News Health. Published Feb 4, 2015.
- Stress in America: Paying with our health. A report of the American Psychological Association. Released Feb 4, 2015.
- Choi L. Financial stress and its physical effects on individuals and communities. Community Development Investment Review, Federal Reserve Bank of San Francisco, 2009, p.120.