It seems that life has become stuck with this pandemic. We all are in a long dark tunnel and yet to see the beam of sunlight. We will see it but will have to walk a little bit more.
In this situation, it is not surprising to have financial anxiety.
Not only this pandemic situation, but it is also quite common to have financial anxiety at some point in our life. It can be due to a pay cut, job loss, a life-changing event, or simply to plan for a better financial future.
However, whatever be it, we need to curb our financial stress and anxiety and plan our finances effectively. Or else, it might sabotage our overall financial health.
Here’s how to do it…
1. Know where you stand
Before taking steps to manage your finances to curb anxiety, it is quite important to know where you stand. Analyze your savings and checking accounts along with your credit card bills, debts, investments, etc. to know your exact financial situation.
While analyzing these things, do not focus only on negatives. Accept where you stand. Focus on the good aspects, too. Whatever positive things you have done, it is because of your hard work. Check out how much you’ve saved in your retirement account, the emergency fund you have to take care of your rainy days, your investments, insurance policies, and so on.
Only focusing on debt repayments and reduced income, if any, or other financial problems will make you more stressed.
Well, focusing on positives also won’t reduce your debts; but, it can calm your mind a bit.
2. Modify your budget and plan a new one
Assess your existing budget; you may need some adjustments to it. You might be overspending on some categories that may be the reason for your financial stress.
The key point is ‘reduce’. We will discuss this in the next point.
Get the help of your partner, your family members, and your grown-up children, if required, to plan a realistic budget. Share your anxiety with your family. They are the pillars of strength during a difficult time. Also, understanding your financial situation, they’ll help you to make your budget success and help you save more.
Another thing, do set goals with a definite time in mind within when you want to achieve it. Then, make a plan and include it within your budget to attain the goals. Also, check from time to time, how far you’ve achieved, and modify the goals, if required.
3. Reduce expenses as much as you can
This is the key strategy to cope with any financial anxiety during difficult times. Distinguish between your needs and wants, and cut expenses.
Follow the good rule of thumb; not to spend more than 25% of your gross income on rent or mortgage payment. If required, downsize your home.
Try to keep your monthly debt obligations within 40% of your gross monthly income.
Do you know that most lenders want your debt-to-income ratio to be within 43% or less to grant your mortgage request? So, try to maintain this by paying back debts, if required.
4. Repay existing debt and don’t incur anything new
How will you repay existing debts? First, calculate how much you have to pay off.
Your debt-to-credit ratio needs to be within 30%. That is, you shouldn’t use more than 30% of your available credit.
Keeping within this limit helps to have a good credit score, which is good for your financial life.
Knowledge about debt-to-income ratio and debt-to-credit ratio helps to have a better financial future.
So, getting back to the point, if you have credit card debt or payday loan debt, how will you pay it off?
Well, you can try to pay it yourself or get professional help. At this time of pandemic, if the reason for your financial anxiety is a huge debt, you can settle your debts by paying less than what you owe. Once you get rid of your debts, you can focus on more important things for your financial life.
5. Repay existing debt and don’t incur anything new
Have you experienced a pay cut recently? Can you manage with your reduced income? If so, don’t use your emergency fund. Experts say to save about 5-6 months’ worth of your living expenses in your emergency fund.
If you have to use your emergency fund, try to replenish the amount as soon as your financial crisis is over. Perhaps, if paying down debt is your main concern, then, after you pay it off, deposit more in your emergency fund to save your target amount. Doing so, you’ll be relieved of anxiety as you can meet your daily necessities for about 6 months at least.
The more, the better for your financial future; in turn, your stress will reduce a bit.
6.Look for opportunities to earn more
Earning more always helps to reduce financial anxiety. So, irrespective of whether you’re getting your regular paycheck or faced a pay cut, look for extra earning opportunities.
You can do so even without stepping out.
Browse through the Internet for earning opportunities during your leisure time. You can fill out a survey, review a website, offer online tuitions, etc. as per your liking. Every cent helps when you’re struggling with finances.
7.Have adequate insurance coverage
One of the primary reasons for our stress is the security of our family members. Especially if you’re the breadwinner, it may be your primary concern.
So, first of all, have adequate insurance coverage. Talk to an insurance agent and purchase a life insurance policy. If you have one, review whether or not you have adequate coverage.
Also, review your home insurance, car insurance, and health insurance coverage, and add or reduce as per requirement. It will reduce your financial anxiety to some extent.
8.Spend time for yourself
Even if you’re going through a difficult time, have some time for yourself. Do something that makes you happy. It might be watching a good movie, reading a book, or listening to relaxing music and doing nothing.
It helps to unwind and focus more on important things in life.
To conclude, I would like to mention that do not neglect your physical and mental health as well. Fight with this pandemic; do not let yourself succumb to it. Every day, do something that you enjoy while staying indoors as much as possible. It will keep you mentally healthy. And, do not compromise with having healthy food. You need to stay healthy at this time. Seek emotional support if required. Talk to friends over the phone. Why don’t you nurture a hobby that you’ve always wanted to do?
The bottom line is, you will have to overcome stress and anxiety and be happy.