If you spend time worrying about your finances, you are not alone. According to the American Psychological Association, 72% of adults recently reported feeling stressed about money some of the time, and 22% reported experiencing extreme stress related to financial concerns.[1]
One major cause of stress can be feeling like you have lost control of your finances. Fortunately, there are several important steps you can take to regain control, lower your stress levels and feel more confident about your financial future.
#1 – Pay off debt.
One of the best ways to take control of your financial life is by paying off any outstanding debt. Start by paying down consumer debts, such as credit card bills, as these tend to have the highest interest rates. From there, focus on making extra payments to any outstanding student loans, car loans, etc. Once you have tackled shorter-term debt, consider finding room in your budget to make an extra payment or two toward your mortgage principal. Even a few extra payments can help you knock years off your mortgage repayment.
#2 – Save for emergencies.
Another way to feel more financially confident is by establishing an emergency fund to cover unexpected expenses. Consider saving at least three to six months of expenses in a liquid emergency savings account. Doing so gives you the peace of mind of knowing you can cover unexpected expenses without disrupting other aspects of your financial life.
#3 – Establish a long-term investment portfolio.
Taking control of your financial life is about feeling more secure today while also taking steps to plan for the future. An important step in planning for the future is developing a diversified, long-term investment strategy. Work with a wealth advisor to establish an investment allocation that is in line with your current financial situation, time horizon, goals for the future, and risk tolerance — as well as any challenges that may prevent you from achieving a more secure financial life.
#4 – Follow a budget.
A budget is an important tool that can help guide your decision-making and keep you on track toward achieving your financial goals. Start by tracking your spending over the course of a few months, then look for ways to cut back on non-essential expenses.
Once you have an idea of your spending and saving needs, establish a realistic budget that allows you to cover your necessary expenses while also saving for the future.
#5 – Protect against risk.
If you are not taking steps to protect your assets, you could be putting yourself and your loved ones at risk. Based on your particular financial situation, it may make sense to implement a combination of the following types of insurance:
- Life insurance
- Homeowners/renters insurance
- Long-term disability insurance
- Auto insurance
- Umbrella insurance
- Health insurance
#6 – Automate your savings.
Putting your savings on autopilot can be a great way to consistently save for the future without much effort. Consider setting up automatic transfers from your paycheck to your savings account, and establish regular 401(k) deferrals.
You can also set up automatic debits with your credit card company, utilities companies and loan servicers, which can save you the hassle of remembering to make payments each month. Just be sure to regularly review all transactions to ensure all payments are correct.
If you could use some help taking control of your financial life, we would love to have a conversation. To learn more about how United Capital Financial Advisors can help you plan for the future, please contact us.
[1] https://www.apa.org/news/press/releases/stress/2014/financial-stress
