The ebb of the pandemic is leaving a residue of stress in its wake. Americans’ stress levels are running higher than their already elevated pre-COVID levels. Money is a major stressor for many people. Financial stress is real and can cause poor mental health.

People experiencing financial stress may experience anxiety about money, feel out of control financially, avoid money problems, or feel embarrassed or hopeless about their finances. The symptoms of stress can manifest in many ways; stress can cause unhealthy behaviors such as overeating.

Many people experience financial stress that they can safely manage. Others may need professional help. People experiencing extreme stress or anxiety should seek professional help. Stress can be dangerous.

There are financial steps one can take to reduce financial stress. The amount of financial stress someone experiences has many factors. Some of these factors are controllable. A major factor is uncertainty; by reducing or preparing for financial uncertainty, stress can be reduced. Here are five steps to reduce financial uncertainty, and correspondingly, financial stress.

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1. Step Back

Take a step back from the problem and breathe. It helps to approach problems from a place of calm and control. Even if you feel that you need or want to panic, that won’t improve things. Relax, take a deep breath, and approach your financial issues knowing you can make a difference.

2. Plan or Budget

Budgeting is essential to reduce financial uncertainty. A budget is simply a spending plan for a specific time period. Most people make their budget monthly, as that corresponds with major recurring expenses, such as rent or mortgage payments.

A budget shows how income will be used during that period.

For example, which paycheck or paychecks will go toward housing, how much of each check will go toward food, gas, etc.

3. Reduce Expenses

Having fewer expenses means having fewer expenses to worry about. In the debate over whether to work on increasing income or reducing expenses to make ends meet, reducing expenses has one big advantage.

Often there are expenses that can be reduced immediately, where raising income generally takes time. Reducing expenses reduces the stress or anxiety of not having enough money to pay all your bills.

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4. Raise Income

Increasing income can take time. There are short-term solutions, such as selling unneeded or unwanted possessions. That can ease the burden, but isn’t a long-term solution to an income shortage. Raising money this way can take pressure off and has helped many people through a difficult time.

Longer term, the advantage of increasing income to afford expenses is that it allows you to afford to live a better lifestyle, and there are theoretically no limits to how much you can earn. While you can reduce expenses only so far, raising income does not have such a limitation.

5. Cycle of Hope and Control

Bigger problems are solved only with bigger efforts. People who experience lower levels of financial stress understand that their actions make a difference — they have hope. They know that their financial future is at least influenced by the actions they take.

Having hope and taking action builds a feeling of control.

Feeling in control is the opposite of feeling uncertain. Feeling in control — by being in control — is the long-term solution to having excess financial stress. 

The first four steps need to be maintained on an ongoing basis, reviewed and updated as necessary to continue to build a financial future you can control and not stress over. Longer-term steps need to be put in place, such as building an emergency fund and working toward long-term goals.

The Bottom Line

People with a lot of money experience less financial stress and better mental health than those who have little money. But that’s not to say that they experience no financial stress. Financial stress can come at any income level, at any level of net worth, to any financial situation.

It is not the financial situation per se, it is the response to the situation, perhaps the response to the perception of the situation. Simply put, the situation does not need to be bad to cause stress; you can stress about it if you believe it is bad, or if you believe it will become bad.

That’s why financial literacy is such a game-changer. If you understand how your finances work and understand your relationship with money, you have a lot less to stress about.

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