Money should bring comfort and convenience to your life. However, when it becomes a source of stress, there may be something wrong with how you handle your finances.
Studies show that having too much debt, the lack of capacity to pay bills, the monthly requirement for rent, and maxed-out credit cards are among the top causes of financial stress.
So, how do you end up with the type of financial management you have?
According to experts, there are several influences on managing your finances. First, people may have spending habits based on their upbringing, especially how they see it from family members. Critical situations, such as losing a large sum of money, can also influence your spending habits.
Experts also have the concept of ‘money scripts’ or a person’s comprehensive belief system and emotional attachment to money. They develop this through their personal experiences, observations of others, and influences from their environment.
Ultimately, how you spend your money determines how comfortable you are with the idea of spending it.
What Type Of Spender Are You?
According to experts, parting with money can cause psychological discomfort. Here are the three types of spenders that can help you gauge how you view money and spending.
· Spending money stresses you out
Are you an overthinker? Then you might be someone that reasons through spending. This reasoning causes you financial stress as you navigate the decision-making stage. More often than not, you’re usually less happy. As a result, you typically end up not buying things because you feel vulnerable. However, this block also makes you have more in your bank account.
· Spending money is fun
People who love shopping and spending money are more concerned about the present. If you’re this type of spender, you take pride in your purchases and expenses, as these can help establish your social status and connect with others. It may even be rooted in the desire to be accepted. However, you may struggle to accumulate a pot of savings.
· Spending? What spending?
Are you a frugal saver? If yes, you’re keen on saving money, so you develop habits to avoid spending, such as repairing things instead of buying new ones.
Of course, if you’re this type of person, you will have lots of savings in your account. Unlike the overthinker spender, frugal savers experience less financial stress since saving becomes their lifestyle and comes naturally from them.
Evaluate Your Spending Personality And Habits
Now that you know more about your spending habits, it’s time to assess them and solve your concerns. The great thing about solving financial problems is that you develop a more responsible system of financial management which can reduce your financial stress.
It’s okay to justify your spending with the you-only-live-once mentality every once in a while. After all, short-term pleasures are an equally beneficial form of self-investment as your long-term goal. However, you must learn to draw the line between occasional splurges and excessive buying in the name of ‘self-care.’
Overspending to satisfy short-term wants might eventually lead to long-term consequences of debt and lack of financial stability, defeating self-investment and self-care. This reminder mainly targets younger individuals, who are more likely to be in these situations than older people.
Learn to live within your means. Adjust your lifestyle to match your income. Avoid unnecessary expenses and focus on your needs rather than your wants.
Build an emergency fund. Save at least three to six months’ living expenses in an easily accessible savings account. This fund will provide a safety net during tough times.
You must pay down debt. Prioritize paying off high-interest debt like credit cards. Consider consolidating loans or seeking professional advice if necessary.
Find a way to increase financial literacy. Educate yourself about personal finance through books, courses, or online resources. Understanding financial concepts will empower you to make better financial decisions.
More importantly, set financial goals. Establish short-term and long-term financial goals. Having clear objectives will motivate you to save and invest wisely.
Avoiding Financial Stress
- Build an Emergency Fund: A financial cushion will protect you from unexpected expenses and reduce financial stress.
- Seek Professional Advice: Consult a financial advisor or counselor if your financial situation is overwhelming.
- Practice Self-Care: Prioritize self-care to reduce the emotional toll of financial stress. Exercise, meditation, and spending time with loved ones can help you manage stress.
- Monitor Your Progress: Regularly review your financial goals and budget to track your progress. Celebrate your achievements, no matter how small they may seem.
Financial stress is a widespread issue, but it’s not insurmountable. By understanding its causes and developing better spending habits, you can take control of your financial situation and improve your overall well-being. Remember that financial stability is a journey, and small steps in the right direction can significantly improve your financial health and overall quality of life.