How to Overcome Your Financial Stress and Improve Your Finances

Guest Post by good Nelly

Many of us experienced financial constraints last year. We won’t gain anything by reminiscing about what has happened. But we can take lessons from the past and plan for a better financial future. The New Year is the perfect time to start with new hopes, aspirations, and dreams to plan the financial future the way we want. Many of us make financial resolutions and post them on social platforms, only to forget about it after a few months. But, let’s make it happen this time. Here are a few tips to overcome your financial stress and improve your finances in 2021.

Plan a budget that you can follow

Planning a realistic budget is the first and foremost step you need to take to improve your finances. You won’t be able to plan your finances if you don’t have an idea where your money is going and how much you spend on what. Therefore, plan a realistic budget that you can follow with ease. Do not be too harsh initially. First, get into the mode of following a budget and saving at least 15% of your income. Gradually, increase the amount to 20% - 30% of your overall monthly income.

Reduce your expenses

The primary reason for planning a budget is to find out the loopholes where you’re spending more. It helps to reduce your expenses. However, do not look at it from the point of view of compromising in life; rather view it in this way - you can save for purchasing or using the amount for something you value in life. For example, you can reduce your monthly expenses to buy a home, plan a nice annual vacation, save for retirement, and so on. Motivation matters when you want to save.

Set clear and realistic goals

Now that you’ve planned a realistic budget and can save a substantial amount every month, it’s time to set short and long-term financial goals. After you set goals with timelines, break them into short time frame milestones. It will help you track whether or not you’re able to achieve your goals.

Establish a good rainy day fund

You can ask how an emergency fund can help you improve your finances? Well, such a fund can help you protect your financial footing. Suppose you are following a budget and have been able to save every month. But suddenly there’s a financial emergency and you have to swipe your credit cards. And, if you’re not able to pay the amount within that billing cycle, you will incur debt problems and will have to pay interest. But, how much emergency fund is enough? Well, according to the experts, you should try to save about 5-6 months worth of the amount you need to sustain. So, calculate and save accordingly. Also, have that amount in an account that you can assess fast when you need it. And, do not use this fund for any other purpose. When you need to use the funds to tackle a financial emergency, make sure you save the amount soon.

Try to increase your income

When you are trying to overcome financial stress and improve your finances this year, extra income always helps. You can save either by cutting down expenses or increasing your income. So, if you can’t cut down expenses and you have experienced a pay cut since last year, try to diversify your income sources. How will you do that? You can browse through the internet to look for such additional income opportunities. You can also rent out an extra portion of your home or garage. However, make sure it’s not hampering your privacy and security.

Assess your previous money mistakes

It is quite important to assess your previous mistakes. It will help you avoid such mistakes in the future. For example, if you had the habit of swiping your credit cards for every purchase and not paying back the outstanding amount in full at every billing cycle, then it can be the reason for falling into debt. You are the best person to analyze your mistakes and avoid them.

Repay your unsecured debts as soon as possible

This is one of the major reasons for the financial stress often faced by people. Therefore, try to repay your high-interest credit card debts as soon as possible; the more you delay paying back your debts, the more interest you will have to pay. Therefore, eliminate debts fast. You can consolidate debts if you can pay them in full. However, settlement can help you overcome your financial stress if you can’t repay your debts in full. Along with it, you need to be current on your secured loans like home loans and car loans. If required, you can refinance your home and car loans to make them more manageable and reduce your monthly loan payments. It can help you save some amount that you can use to invest and improve your finances.

Do not wait to save until you become debt-free

You should try to repay the debt as fast as possible, but that doesn’t mean that you will wait to save and invest until you become debt free. Especially if you have a huge debt amount, you can’t repay it in a couple of months. It will take a little longer. However, you will lose valuable time if you wait to save until you repay all your debts. The magic of compound interest is that the earlier you start, the more you will gain over the period of your investment. The financial advisers always advise to save for retirement from your 20s. If required, talk to a financial adviser who can help you plan your debt payoff strategies along with advising you where and how to invest to achieve your goals. It always helps to get answers to your queries before you can plan your financial future.

Happy New Year and all the best for a great financial future!

Author’s Bio: Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She has

started her financial journey long back. Good Nelly has been associated with Debt

Consolidation Care for a long time. Through her writings, she has helped people overcome their

debt problems and has solved personal finance related queries. She has also written for some

other websites and blogs. You can follow her Twitter profile. and her website My Way of Viewing.