Every now and then, we run into periods of financial stress.
Right now, I'm preparing to close on a home refinance.
We need to bring some money to the table (the lower rate and savings on the monthly payment mean that it will be made up in about six months), and I am feeling a little stress about the situation.
Do we have the assets? Yes. Am I worried that something will come up to interrupt our cash flow? Yes.
Financial stress can come in a number of forms, from unexpected car repairs, to high levels of debt, to wondering how you will pay for your kids' extracurricular activities.
If you are experiencing financial stress, here are 5 tips that can help you overcome it:
1. Know the Situation
You can't tackle the situation unless you know the particulars. One of the ways fear can harm your finances is when you don't want to face the situation. However, not having a handle on the situation — and the vague concerns that result — can be even more stressful.
Instead, take a direct look at the situation. Brutal honesty is required in these situations. Just knowing exactly what you face can help reduce the stress level a little bit. Once you know the situation, you can begin moving forward.
2. Make a Plan
One of the best ways to reduce financial stress is to make a plan. A financial plan can help you chart a course. With my refinance, I know how I'm going to pay the closing costs. And I have a Plan B, just in case Plan A doesn't work out. Creating this Plan B has helped me feel a little less nervous about everything.
Make a plan to pay down your debt. Have an emergency fund that can handle car repairs. Create an alternative source of income.
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Think about how you want to handle a situation, and then make a plan.
You'll feel less stress once you know what to do.
Next, you need to communicate with financial companies. This applies mostly to those to whom you have obligations. If you lose your job, and you know that it will be difficult to make credit card payments for a while, you need to communicate that as quickly as possible. From income based repayment for your student loans, to deferment and forbearance for most other types of loans, there are options.
Communicate with your creditors, and you might be surprised to find out that you can work out a payment plan. These communications can help you reduce your stress, since you know you have alternatives.
4. Turn to Your Support System
Chances are that you have people in your life that you can turn to for support. Use your support system. If your church congregation offers help to struggling members, talk to your leader. If a friend offers to babysit your kids while you look for a job, agree. If your parents invite you over for dinner, and send you home with the leftovers, enjoy the free meals.
From lending a listening ear, to lending you money with a low interest rate, your support system can be a great help in times of financial difficulty. The help of your support system can reduce your stress and improve your chances of getting through the difficulties.
But don't forget: Even as you receive support, you need to be there when your own loved ones need your aid.
5. Prepare Ahead of Time
If you are in the midst of financial stress right now, it's a bit late to prepare ahead of time. But if you want to avoid this level of stress next time there's a financial setback, you need to prepare ahead of time.
Make it a point to get ready for problems before they arise. Create an emergency fund. Cultivate income diversity. Know which items you will cut from your budget if you need to reduce your expenses. When you prepare yourself ahead of time, you can reduce your level of financial stress when setbacks threaten your peace of mind.