If financial stress has been weighing you down, you aren’t alone. Around 43% of Americans cite money as a factor negatively impacting their mental health, according to a recent Bankrate survey.
January is the perfect time to reset your financial mindset and create routines that bring peace of mind all year long. By building good money habits now, you can take control of your finances and feel more confident about your future.
Whether it’s automating your savings or mastering the “24-hour rule,” taking control of your finances will help you feel more confident about your future.
Key Takeaways
- Awareness is the foundation of control: Track spending to understand your habits and make informed choices.
- Protect your financial reputation: Review your credit report regularly to catch errors and prevent identity theft.
- Consistency builds stability: Set up automatic savings and bill payments to stay on track.
- Mindful spending prevents regret: Use the 24-hour rule to avoid impulse spending.
- Prepare for the Unexpected: Create sinking funds for irregular expenses like car maintenance.
5 Money Habits to Reduce Financial Stress
1. Track your Spending
One of the most impactful financial habits you can adopt is tracking your spending. While it might sound tedious, the benefits are substantial. By reviewing your expenses each week:
- You gain a clear understanding of where your money is going
- It allows you to catch overspending early and
- Gives you room to make necessary adjustments before it spirals into a bigger issue like overwhelming credit card debt.
How to get started:
- Leverage Technology: Use budgeting apps to categorize transactions automatically.
- Use a Spreadsheet: A simple Excel or Google Sheet is perfect for those who prefer manual control.
- Identify Patterns: Look for “leaks” in your budget (e.g., unused subscriptions or frequent dining out) and adjust accordingly.
2. Check your credit report
Your credit report is a vital component of your financial healt. This is why you need to start regularly reviewing your credit report. It can save you from potential headaches. Checking your credit report a few times a year helps you:
- Spot errors that could negatively impact your credit score
- It allows you to monitor your credit health and
- Protect yourself against identity theft.
Can I get my credit report for free?
Yes, take advantage of the free annual credit reports available from major credit bureaus. When reviewing your report, look for inaccuracies in personal information, unfamiliar accounts, or suspicious activity.
By staying vigilant, you can address any discrepancies promptly and maintain a solid credit standing.
3. Automate savings and bill payments
Decision fatigue is a real contributor to stress. Automation is your ally when it comes to managing finances with ease.
Why Automation Works:
- Savings: By setting up automatic transfers to your savings account on payday, you ensure consistent contributions without “feeling” the loss of cash.
- Bill Pay: Schedule bill payments to avoid late fees and penalties.
Most banks offer recurring payment options. This minimizes the mental load of remembering multiple deadlines, allowing you to focus on other important aspects of life.
4. The 24-hour rule: stop impulse purchases
According to Ryley Amond, CNBC, “An impulse purchase is made in the spur of the moment without any forethought or planning.” It’s easy to fall into the trap of impulsive spending, especially when bombarded with enticing deals and advertisements.
To combat this, implement a 24-hour rule for nonessential purchases. When you come across something tempting, wait a day before making the purchase. This pause gives you time to reflect on whether the item aligns with your priorities and fits within your budget.
How it Works
- Pause: When you see something you want, do not buy it immediately.
- Wait: Leave the item in your cart (physical or digital) for 24 hours.
- Reflect: Ask yourself if it aligns with your budget and priorities.
Over time, this mindful approach can save you hundreds of dollars and reduce financial regret. You’ll find that this practice also fosters a more mindful approach to consumption.
5. Plan for irregular expenses
Irregular expenses can catch even the most organized individuals off guard. Whether it’s car maintenance, insurance premiums, or holiday gifts, these costs can disrupt your budget if not planned for in advance. To avoid this, set aside money each month specifically for these types of expenses.
“Some expenses come up every month, but others may be due on a non-monthly basis. These one-time bills might be expected or take you by surprise. Either way, it’s possible to prepare your budget for whatever lies ahead. Creating a buffer, using sinking funds and building your savings can help you get there.” – Marianne Hayes, Experian
The Strategy
List all anticipated irregular expenses for the year and tally the total cost. Divide that number by 12 to determine how much to save monthly. Keep this in a separate “sinking fund” savings account. When the bill arrives, the cash is ready, preventing financial stress.
5 Money Habits That Lead to Financial Peace of Mind
By incorporating these five money habits into your routine this January, you set the stage for a year of financial stability and peace of mind. While it may require a bit of effort initially, the long-term benefits are well worth it.
Remember, the key to financial success lies in consistency and mindfulness. As you embark on this journey, know that every positive step you take brings you closer to a future where money is a source of empowerment, not stress.
If you’re struggling with debt or need personalized guidance, ACCC’s certified counselors can help you create a plan that fits your goals. Schedule a free credit counseling session today.
Frequently Asked Questions:
Q: What should I do if I find an error in my credit report?
A: If you find an error, file a dispute directly with the credit bureau and provide documentation to support your claim.
Q: What’s the safest way to set up automatic payments and transfers without risking overdrafts?
A: Schedule payments a few days after your paycheck is deposited to ensure funds are available. Keep a small buffer in your checking account and monitor your balance regularly. Many banks also allow you to set alerts for low balances or upcoming withdrawals.
Q: How do I calculate how much to save each month for irregular expenses?
A: Estimate the total annual cost of irregular items (e.g., $600 for car insurance + $400 for holiday gifts = $1,000). Divide by 12 ($1,000 / 12 = $83.33). Set aside ~$84 monthly into a specific savings bucket.
Q: How can I reduce financial stress quickly?
A: The fastest way to reduce immediate stress is to write everything down. List your income, expenses, and debts. Getting the numbers out of your head and onto paper reduces anxiety and helps you see the clear next step.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.
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