Have you ever met someone who didn’t have money stress? (If you haven’t…please…it’s time to leave the house and start talking to human beings again. Enough is enough.)
According to a recent Pew Poll, more than 30% of us worry about money most of the time. And by the way, that poll was taken before the current financial crisis. If you’re worried about money now, chances are you worried about money before the recent crisis too. Why?
It’s not for lack of information that you and I have financial anxiety. There are plenty of good free sources of information. I believe the main reason you and I stress is because we are all fogged up inside. You’re not quite sure about what you should be doing and which problem you should be addressing first. Should you focus on just enjoying life today? Should you put that off and focus on saving for retirement? Should you change careers? Go back to school? Move? Focus all your energy to get out of credit card debt? Start saving for the kids’ college? Refinance? Buy more life insurance?
It can overwhelm you quickly and, if you’re like me, you shut down and get stuck. Your brain gets fogged out.
How can you clear that fog?
In my experience, you can de-fog your finances and eliminate money stress by asking yourself three questions:
1. What’s important about money to you?
This was a question originally posed by David Bach of “Smart Women Finish Rich.” I’ve been asking people that question for 12 years. Do you know what I hear most of the time? Money is important because it helps you take care of yourself and your family. It’s important because it provides security. It allows you to help others. It also allows you to enjoy life’s pleasures. But when push comes to shove, money is probably important to you because it provides food, shelter and clothing. Beyond that, it’s all gravy. So before you do another thing, sit down and ask yourself what’s important about money to you? Write your answers down. If you have a partner, invite him or her to join you in this exercise.
Having done that, we’re ready for Stage Two of the de-fogging exercise.
2. How are you living?
In other words, are you living in a way that is consistent with what you value most about money? If you say that money is important because it provides security but you find yourself overspending every month, you are not living in a way that is consistent with your values. If you are retired and aren’t sure if you’re using the right retirement withdrawal strategies, you are also living inconsistently.
I used to say that money was important because it allowed me to take care of my family – but I became a workaholic and I was never home. I was lying to myself. Here’s a tip. As long as you continue to behave in a way that is inconsistent with what is most important to you, you’ll never be happy. You’ll always be under stress. So, as long as you have that paper and pen handy, write down how you live financially. Do you work too much in order to afford a lifestyle that’s so hectic you are miserable? Do you need to make more money yet you settle for a low-paying career because you are too lazy to go back to college? How are you living financially and is it consistent with your higher values? I’m talking about your work, spending, saving and investing.
3. What are you willing to do differently?
If you seriously want to rid yourself of the stress, you have to be brave. Are you willing to go back to school? Maybe look into getting a second job. Are you willing to get a smaller home so you can work less and be home more? What are you willing to do for yourself? When are you willing to do it? Can you make a plan right now to map out what you will do and when?
Don’t miss this opportunity to take action. Call a friend. Share this article and get an accountability partner. If you’ve read this far, you’re probably serious about getting rid of your stress – before it gets rid of you.
I don’t know if this exercise will banish 73% of your stress. But you tell me, if you seriously undertake this exercise, do you think you will get rid of a significant part of that anxiety? What are you going to do today to get rid of your financial stress?
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Great article Neal – let’s close the remaining 27% gap of eliminating stress by establishing the following personal financial management concepts:
1) let’s first get an emergency fund of $1000 in place per person / family. This needs to be the #1 priority – so let’s go… get moving – and get that $1000 emergency in fund in place. That way you don’t have to use what every other American is using as their emergency fund – THE CREDIT CARD!
2) once the $1000 emergency fund is in place, now start working toward having a 3 – 6 month living expenses reserve. This means, if your income stopped today, you would have 3 – 6 months of SAVINGS to meet your living expenses, and give you enough time to find work.
3) establish a budget based on communication with your spouse – not commanding and dictating. Meeting a common grounds, realistic budget that meets both of your objects, and one that you are both willing to commit to and become a team effort on meeting that budget.
4) for every dollar you earn, allocate 10% for giving, 10% to savings, and the remaining 80% to paying your bills. Ideally, that 80% be broken down into 40% for spending and 40% to your budget.
So with those 4 last steps, we can go from 73% to 100% stress free living – at least stress caused money.
YES YES YES. I love it
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