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Personal Finance

How Do I Stop Stressing About Money?

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Do you often lie awake at night worrying about how you're going to pay your bills? Do you obsess over every penny you spend, or go on spending sprees and ignore the credit card bills that follow? Do you and your spouse often argue about money? Any of these behaviors could be a sign you're suffering from money anxiety.

It may feel overwhelming, but the good news is that setting financial goals and creating a plan for your finances can help you stop stressing over your money. Here's how to tell if you have money anxiety and how to ease it once and for all.

What Can Cause Money Anxiety?

Feeling anxious about money is a perfectly rational response in certain situations. For example, if you've recently lost your job or your employer has announced a coming round of layoffs, it's natural to be concerned about your financial future and how you'll make ends meet. If you have a healthy relationship with money, however, these worries won't be paralyzing, and will pass when the problem does.

But when your money anxiety gets out of hand, it can cause behaviors that prevent you from making the most of your money and may even cause you financial harm. Actions often linked to money anxiety include:

  • Overspending: If you regularly use shopping as a way to relieve stress, you might go on a spending spree to relieve your anxiety about money. Unfortunately, this is a vicious circle, because spending too much will only serve to worsen your money stress.
  • Hoarding: While some people overspend, others hoard money. They may feel like they never have enough, and may become workaholics in their need to have more and more money. This can mean less time spent with your family and on your own, which can take a mental toll.
  • Excessive frugality: Being penny-wise can help you avoid unnecessary spending and build up savings, but it's possible to take frugality too far. If you find it difficult to spend money even on necessities, such as critical home repairs or dental visits, you might be suffering from money anxiety.
  • Dysfunctional family finances: The ways your family deals with money can also reflect or cause money anxiety. For example, one partner in a couple may handle all the finances and use money to control the other. Parents may enable their adult children by supporting them financially, removing the child's motivation to become independent. Couples sometimes hide their purchasing habits from each other, run up credit card debt without telling a partner, or even maintain secret bank accounts.

What You Can Do to Help You Stop Stressing

Ignoring your anxiety about money won't make it go away—but taking a proactive approach to the problem can. Here are some strategies that can help you stop stressing about money.

Build an Emergency Fund

An emergency fund is a pool of money set aside to handle true emergencies, such as job loss, essential home or car repairs, or a steep medical bill. Building an emergency fund is an important step in getting rid of financial anxiety. You'll feel more secure knowing you can handle a financial crisis without taking out a loan, relying on credit cards or otherwise getting into debt.

In general, it's wise to have three to six months' worth of living expenses tucked away in your emergency fund. Stashing the cash in an account not connected to your checking account—ideally, an interest-bearing account—will make it harder to tap into for non-emergencies and may even earn you a little extra.

To build an emergency fund, go over your budget and look for expenses you can reduce or eliminate. For instance, can you cut spending on clothing, takeout food, streaming services or other discretionary purchases? Set up automated deposits to your emergency fund each month to keep you on track.

If you're having trouble finding much to trim from your budget, consider getting a second job or selling unused possessions to earn extra cash. You can also put any "found money"—such as tax refunds, gifts, overtime pay or bonuses from your job—into your emergency fund. Since the money isn't part of your normal budget, you won't even miss it. (Don't have a budget? Keep reading.)

Create a Budget and Stick to It

Creating a budget can help you live within your means, get out of debt and build up savings so you're not living paycheck to paycheck. Ultimately, budgeting can help you achieve bigger financial goals such as investing or saving for retirement. A budget tracks how much money you make each month and where it goes, giving you a sense of control over your finances that helps reduce stress.

To create a budget, start by calculating your monthly take-home pay and your monthly expenses. If your income varies each month, look at three to six months' worth of income to come up with an average. Break expenses into categories that make sense to you, such as "home" for rent and utilities, and "food" for grocery purchases or eating out. Some expenses, like rent, will be the same every month, while others may vary; for the latter, review the past three to six months' worth of spending to come up with a monthly average.

If you discover that you're spending more than you make every month, review your budget for places to cut back. Do you have extra money left over each month? Allocate some of it for discretionary purchases, and budget the rest for long-term financial goals such as building your emergency fund, paying down credit card debt or saving a down payment for a home. To keep your budget working for you, be sure to track your spending every month and make adjustments as needed.

Work With a Financial Advisor

When you think about planning for your financial future, such as saving for retirement or your children's college education, it's easy to get overwhelmed at the scale of the undertaking. If you suffer from money anxiety, you may feel too intimidated to do anything at all. A professional financial advisor can provide the guidance you need to take action on your financial goals with confidence.

You don't have to be wealthy to work with a financial advisor; there are plenty who cater to middle-class clients or young adults just starting out in life. No matter what shape your finances are in, a financial advisor can help you identify your goals and develop a step-by-step plan to get where you want to go. Taking control of your money will help you feel better prepared for the future, reducing your anxiety.

Many financial advisors offer initial free consultations, so you can make sure the advisor is a good fit before you pay any money. You should also carefully investigate an advisor's background, education and credentials before working with them. The Consumer Finance Protection Bureau has a useful guide to choosing a financial advisor.

Similarly, if you have trouble managing your debt and want help from a professional, seek the guidance of a certified credit counselor with a nonprofit agency who can help you find strategies to reduce your debt.

Stay Up to Date on Your Credit Score and Report

Keeping an eye on your credit can reveal which aspects of your finances are causing money anxiety. It's human nature to fear the unknown, and not knowing your credit score can add to your money stress. Behaviors often caused by money stress, such as piling up big credit card bills or paying your bills late, can hurt your credit score.

Don't have a recent copy of your credit report? Visit AnnualCreditReport.com to get a free copy from all three consumer credit bureaus (Experian, TransUnion and Equifax). Checking your credit report will also help you spot any errors that could be hurting your credit. You might also detect possible signs of identity theft, such as someone applying for credit in your name. If you find a mistake, disputing it to get the record corrected can improve your credit score.

Checking your credit score can also ease your mind, especially if it turns out to be better than you expected. A good score could help you save money by helping you get better interest rates and terms on new debt and refinance debt you may be paying too much for. In many states, a good credit score can even save you money on insurance. If your score is lower than you expected, checking it can show you where you need to improve your financial habits.

Staying on top of your credit score can help you prevent unpleasant surprises when applying for credit, such as being turned down for a mortgage or car loan. You can sign up for free credit monitoring to be alerted to activities on your Experian credit report, such as missed payments, high credit card balances or hard inquiries, that could hurt your credit score or warn of identity theft.

Say Goodbye to Money Anxiety

When you suffer from money anxiety, it can feel like the stress will never end. But taking a few basic steps, such as setting a budget, building an emergency fund and monitoring your credit score, can help reset your attitude about money. By taking charge of your finances, you can shake off the money stress and start down the path toward achieving your financial goals.

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