Wednesday, August 10, 2022
Economy and AnalysisHow to Avoid Financial Stress

How to Avoid Financial Stress

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What is the number one thing you stress over? If you are like most Americans, it’s money and your personal finances.

Two recent reports show that Americans are under more financial stress than ever. According to a CreditWise survey released by Capital One, 73% of Americans rank finances as their number 1 stressor.

And a Fidelity study revealed 79% of women are burdened by job and stress issues. That’s up from 67% a year ago. The majority of participants were worried about their ability to manage day-to-day expenses and save for goals beyond retirement.

The studies confirmed what many Americans already knew: Dealing with personal finances can be stressful.

But it does not have to be that way. Here are three great ways to help you better manage financial stress, as compiled by the Motley Fool.

Park your money somewhere smart

A 2020 report by the Federal Reserve notes that 30% of Americans would not be able to cover a $400 emergency expense. Worry that you can’t handle an emergency is the type of thing that can keep you up at night. Try parking some cash in a high-yield savings account, which will make it easier to build up your reserves.

Use credit cards wisely

Depending on how you use them, credit cards can be a major source of financial stress or contribute to your sense of financial freedom. Interest charges are the downside to credit card spending. Credit card companies tend to charge relatively high-interest rates, so charges can easily pile up. If you struggle with your credit card balance, it might be a good idea to look into some alternatives. For example, you may find it easier to use a debit card that doesn’t accrue fees.

Take small steps and gamify your finances

Personal trainers and physical fitness coaches use something knowns as  “gamification” to help clients reach their health and fitness goals. It is the process of setting small, achievable milestones so that each time one is achieved, it encourages you to move on to the next, to the next, etc., until you get where you want to be.

Financial advisors are taking a page from that playbook and are recommending that you use “gamification” to reach your financial goals. The idea is that people are more likely to meet their savings goals and stick to a budget if they can tap into their brain’s reward circuitry via small, incremental, and easily achievable “wins.”

The point of building healthier financial habits is to add to your overall well-being, not increase your stress levels. Small changes in how you save and spend money can help you take better control of your finances — and improve your overall mental health.

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