Even before we were in a deep recession, financial stress was a threat across the nation: 44 percent of Americans were more stressed out about money than any other issue, according to a 2018 study conducted by Northwestern Mutual.

Here’s how you can combat financial stress in your own life.

What is financial stress?

Financial stress takes different forms but the common theme for it is concern about your money situation. The specific stressors might change over time, such as a job loss or a mounting debt burden. But the result is that you are worried about making ends meet.

Financial stress can put a strain on other aspects of your life. It can affect relationships and your physical health.

Let’s consider a few action steps that you can take to breathe easier when it comes to money.

1. Take stock of your finances

Before you can move forward with your finances, you’ll need to dig into your specific money issues.

“The best way to start eliminating this stress is to make sure it’s understood,” says Joseph Polakovic, CEO and owner at Castle West Financial. “Things tend to be a lot scarier when they are left vague and uncertain, so a crucial step to escaping financial stress is to accurately frame the problem.”

Once accurately defined, Polakovic says problems tend to feel more manageable and solutions can begin to form.

2. Determine what needs the most attention

“Once you have a clearer picture, brainstorm ideas, big and small of how to move forward — actions that you control that can help better your financial situation,” says Betty Wang, CFP, founder and president at BW Financial Planning.

Instead of trying to tackle all aspects of your finances at one time, create a plan to tackle the most critical type of financial stressor first.

For example, let’s say your most pressing financial concern is your mounting credit card debt. Then, focus on paying that debt down first. If you don’t have credit card debt, then work on building an emergency fund.

3. Take a closer look at your expenses

You might need to adjust your spending habits to meet a financial goal. Take a close look at where you’re spending your money.

“Now is the time to reassess monthly expenses, starting with necessary living expenses such as mortgage/rent, utilities, health insurance premiums and groceries,” says David Kilby, financial wellness expert and CEO of FinFit.

You may need to consider cutting out “extra” expenses to reach your financial goal. Even little cuts can add up quickly. For example, cutting out a $50 cable bill each month may not sound like a lot; however, that decision would save you $600 in a year.

4. Eliminate debt

Debt can be a major burden for anyone, and it comes at an emotional cost.

“Excess debt is like a millstone hanging around your neck,” says Scott Schleicher, senior financial advisor at Personal Capital. “If not brought under control, debt can sink your personal finances by eliminating any flexibility in your monthly budget.”

A general recommendation is to lower or even eliminate all high-interest debt first. “You should start by whittling down credit card debt, paying off the cards with the highest interest rate first,” Schleicher says.

Without the weight of debt on your shoulders, you may start to feel less stressed about money.

5. Build an emergency fund

With an emergency fund, you are essentially preparing for the unexpected. Whether you run into a medical emergency, job loss or something else, a cushion of cash can help you survive the extra expenses with minimal financial difficulties.

“A common rule of thumb is to save between three to six months’ worth of non-discretionary living expenses in an emergency fund,” Schleicher says. “This includes expenses like your mortgage or rent, utilities, insurance, groceries and transportation.”

6. Consider a side hustle

In order to meet some of these financial goals, you might need to boost your income. That’s where a side hustle can come in handy. With a modest boost to your income, you can save more money for the things that matter to you or you can use the money to pay off debt.

There is no shortage of side hustle options. Consider starting one that fits into your lifestyle.

7. Set aside some retirement savings

More than half of Americans are behind on their retirement savings. If you need to get back on track, start by taking advantage of tax-advantaged retirement savings options, such as your employer’s 401(k).

“While striving to reduce debt and maintain your emergency savings fund, it’s also important to not lose sight of your long-term financial goals — especially saving for retirement,” Schleicher says.

8. Take small steps

After taking a closer look at your finances and walking through your options, you’ll have a better idea of your overall financial health but you may feel overwhelmed. Instead of focusing on the magnitude of the task before you, take small steps forward, like putting $20 into savings.

“Too often, we try to do too much at once and burn out on our goals,” Polakovic says. “It’s important to embrace the journey and have little wins along the way. Once we stop feeling like we’re always behind and start feeling like we can make progress, it creates a totally new psychological effect within us.”

Bottom line

By creating a plan and regularly taking small action steps toward your goal, you can build a solid financial foundation that will help reduce or alleviate this source of stress with time.

As you work toward a place of financial stability, be kind to yourself along the way.

“Pretend the finances you are digging through are the finances of someone you love and want to help, not judge and condemn,” Wang says. “This tends to mitigate some of the roadblocks of stopping to judge and criticize yourself.”

Featured image by fizkes of Shutterstock.

Learn more: