Blog post - Page 18 of 21 - GoldenRules Financial Strategies

Tips to help you Reduce Financial Stress

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, “Doing the right thing is more important than doing things right.” Doing the right thing is effectiveness; doing things right is efficiency.

Sometimes stress is caused by expectations not met. We think things should go one way with our finances and they go the other. When this happens, when financial reality does not line up with our expectations, we sometimes become disappointed, and stress results. Use the following tips to help you avoid money stress and lower financial stressors.

Plan to Spend your Money

Using time to think and plan is using time wisely. In fact, if you fail to take time for planning, you are, in effect, planning to fail.

As I have written before, managing money is a job, and it takes time, so plan accordingly.

Set Financial Goals

Financial goals should provide direction to your life and determine how you spend your time and money. When setting goals, decide what you want, where you want to be, and what you want your money to do. Further, when you set goals, set goals that are SMART (specific, measurable, achievable, realistic, and have a time constraint.)

The best goals are those that cause you to “stretch” as you do your best to reach them.

Prioritize

Use the “80-20 Rule” originated by Italian economist Vilfredo Pareto. The 80-20 rule says that “80 percent of the reward comes from 20 percent of the effort.” The key to prioritizing is to identify the valuable 20 percent.

Once identified, prioritize your time to work on those items with the greatest reward. If you value managing money better, prioritize the time it takes to manage it better.

Be Flexible

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, “Doing the right thing is more important than doing things right.” Doing the right thing is effectiveness; doing things right is efficiency.

Be flexible when working your money, focus first on the urgent, effective task, then concentrate on the important, efficient task.

The tips above can help you eliminate or reduce money stress in your life. Be careful with stress it can cause mental, emotional, and physical health issues. How do you reduce financial stress? I would love to hear from you.

Plan to Spend Your Money

All the things we do with money can fit into these three categories. So, it is okay to spend your hard-earned, worked for, money; all I am saying is to plan to spend your money.

One of the reasons why we fail at managing our money is because quite often we do not plan to spend money. Now, to that you may say, it’s my money, and I will do what I want with it. I worked hard for it and it’s okay to spend it. And you are right; it is okay to spend your hard-earned money. But before you spend that money, read the rest of this.

If you really think about it, money is only good for three things, and we have all done them.

Money is good for: spending, saving, and giving, that’s it. All the things we do with money can fit into these three categories. So, it is okay to spend your hard-earned, worked for, money; all I am saying is to plan to spend your money.

So, what happens if you do not plan to spend your money? You spend money at places and on things that you did not plan to spend money on. It’s that simple. Have you ever gone into a store and spent more money than you planned to spend?

That’s it, it happens every day.

When we do not plan to spend our money, we allow others to take control and spend our money. You are not managing your money effectively because you are not planning to spend it.

When you go to the grocery or the pharmacy and you get to the checkout, do you plan to buy that magazine or that candy bar? We are visual beings and if we see something we like most of the time we will buy it.

You may think that that is not a lot, but if you do this every day, that is buy something that you did not plan to, it adds up. Let’s say that in an average month, you spend $5 a week on magazines and candy bars at the checkout. It does not seem like much but over time it grows.

Five dollars a week works out to be $20 a month and, in a year, you spent $240 on candy bars and magazines or whatever.

So what happens if you plan to spend your money? When you plan to spend your money, you have a spending plan or budget, and you know where you are spending your money. You know how much money you are spending, and you are not haphazardly spending money on things and in places you did not plan on.

When you plan to spend your money, through your spending plan, you are telling your money where to go and what to do. You have complete control of your finances.

We have already established that it is okay to spend your money, so it is okay to spend $20 on magazines and candy bars. I just want you to plan to spend that $20 on magazines and candy bars.

It is important that you plan to spend your money. When you do not, you give control of spending your money to others. When you plan to spend your money, you take control of your financial situation. The choice is yours – choose to plan to spend.

You Need an Emergency Fund

This is especially during this time of the COVID-19 pandemic. You never really know what happened. Either they lost a job due to COVID-19, or something else dealing with COVID-19 like a parent or close family member getting sick. Maybe they were not living within their means or got extended with bills, and just could not keep up.

As I sit here this morning, a car is being reposed right outside my window. Wow. It’s a nice newer jeep compass, black, with nice tires.

Boy, that happen quick.

I have had several cars reposed and I have never seen it happen, but it’s not a good feeling when it does.

This is especially true during this time of the COVID-19 pandemic. You never really know what happened. Either they lost a job due to COVID-19, or something else dealing with COVID-19 like a parent or close family member getting sick. Maybe they were not living within their means or got extended with bills, and just could not keep up.

This is why working from a spending plan and planning to spend our money is so important. A spending plan will help you keep spending in check and help us avoid negative experiences with money like repossessions.

Whatever the case, when this happened to me I did not have an emergency fund that I could turn to and most people don’t.

An emergency fund or contingency fund, what I like to call it, is just what the name implies, it’s a pool of money that is used for emergencies. A fully–funded emergency fund could equal whatever you wanted it to be, but most would suggest an emergency fund of 3 to 6 months of living expenses.

If you do not have an emergency fund or contingency fund, start today, start where you are, and start building yours.

If you do not have any financial goals, make it your first financial goal…a fully-funded emergency fund, and then save toward the goal.

Did you know if you saved $83 a month in 12 months, you would have $1,000 saved in your emergency fund.

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Four Strategies to Help You Start Saving

Pay off high-cost debt. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example, if you have a $3,000 credit card balance at 19.8 percent, and you only pay the required minimum payment of 2 percent of the balance or $15 whichever is greater, it will take 39 years to pay off the loan.

The personal saving rate in America in June of 2021 was 9.4%, which is a good rate of saving. However, some families are not saving adequately for retirement, and lower-income households do not have adequate emergency savings for unexpected expenditures such as car repairs or medical bills.

Saving must become a Priority

The mindset of saving needs to change. Saving is an important part of financial security and a spending plan or budget can help you save.

This can be done by setting saving goals and then developing a plan to meet the goal.

Here are four saving strategies that may help get you started in the right direction:

Pay off high-cost debt. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example, if you have a $3,000 credit card balance at 19.8 percent, and you only pay the required minimum payment of 2 percent of the balance or $15 whichever is greater, it will take 39 years to pay off the loan.

With accumulating interest, you will pay more than $10,000 in interest charges.

Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once these families have made their last mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed against in emergencies or converted into cash through the sale of the home.

Participate in a work-related retirement program. If you participate in a work-related retirement program such as a 401k plan, with a dollar-for-dollar match, you will likely receive an annual yield of greater than 100 percent of your investment. You save $100 and get $200 or more with the employer match.

Outside of work, save monthly through an automatic transfer from checking to savings. These savings will provide funds for emergencies, home purchases, school tuition, or even retirement. What you don’t see, you will probably not miss.

Once you realize that you need to save, develop a saving goal. Then develop a plan to meet the goal.

If you do not have an emergency fund, that should be your first goal. Build up a $1000 emergency fund.

By using the strategies above, you could, in no time, be on your way to meeting your goal and improving your financial situation.

Money Attitudes and the Family

People look to an increase in income as the way to solve their financial difficulties. If there is one thing that poor money managers have in common, it is the idea that they do not earn enough. Rarely does it occur to them that the real cause of their financial trouble is that they spend on things that do not fit with their financial goals and objectives if they have goals and objectives at all.

One of the major battlefields in families is the issue of handling finances. Fully one-half of couples that seek professional counseling report severe money problems as a major issue. Only a small percentage of these couples are in financial difficulty because of inadequate income or too little income. Many are in financial difficulty because they have been immature and unrealistic in their attitudes about money.

While we must recognize that money does constitute problems in many families, we must remember that for every problem there is a solution. The following are some items that can help:

We must realize that money is a resource and not the source. It is a tool to help you reach your financial goals.

Track the expenses of everyone in the family. Even the small expenses. You cannot effectively manage money if you do not know where it is being spent. Once you know where it is being spent, you will see where changes can be made in spending.

Be realistic in making financial decisions. Figures do not lie. If the numbers do not support a new digital TV, why are you buying one?

Set both long- and short-range goals for your families’ finances. Write them down make them plain and refer to them often. Make your goals SMART. (Specific, Measurable, Attainable, Realistic, and within some designated Time frame)

Keep in mind that the family income is our income, the families, and should be treated as such.

Discuss your attitudes and emotions about money and expenditures openly and honestly as a family. Listen to your mate and children…communicate!

Both husband and wife should understand every intricate detail of the family finances. We are all unique individuals and the attitudes we have about money can contribute to a solution to a financial problem. All the spending plans in the world will not compensate for the ignorance of a partner in financial matters and communication.

Credit buying should not result in payments of more than 15% of your income. This means for everyone hundred dollars you earn, you should not have more than a fifteen-dollar dept payment excluding rent or mortgage and car.

Do not acquire new debt until you have paid off the old debt.

Remember the amount of your income is considerably less important than the way you handle it.

This is true on every economic level!

People look to an increase in income as the way to solve their financial difficulties. If there is one thing that poor money managers have in common, it is the idea that they do not earn enough. Rarely does it occur to them that the real cause of their financial trouble is that they spend on things that do not fit with their financial goals and objectives if they have goals and objectives at all.

Many times, the relief is short-lived and the real cause of their financial difficulties, bad spending habits, failure to plan, lack of discipline, money attitudes, eventually catches up with them and they are right back in the same position they were in.

When you make deliberate choices about money, with full awareness of the consequences and a willingness to accept them, you are acting in a mature way concerning money.

Keep in mind that money is good for three things: spending, saving, and giving. If you do this right, with your financial goals and plans in mind, you will have the right attitude about money and begin to win with your finances.

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