We’ve all noticed it. Your coworkers are talking about it. Things are expensive right now—and financial stress is rising.
At the end of April, US food prices had risen 9.4% year over year. Gas prices were up 43.6%. Inflation reached 8.6% in May, its highest point in 40 years. Many factors are fueling the rising cost of living including the fallout of the COVID-19 pandemic and oil supply issues resulting from the war in Ukraine. In an effort to keep prices down, the Federal Reserve recently hiked its benchmark interest rate by 0.75%, the biggest increase in almost 30 years. Rising costs are hurting our wallets and our emotions—and jeopardizing the ability of some to provide for their basic needs.
A recent survey shows 77% of adult Americans are feeling anxious about their financial situation. That stress has ripple effects. It impacts our relationships with our coworkers and family members. To cope, many people eat more, drink more, and work out less. Without intending it, they stop taking care of themselves. We saw this during the early pandemic lockdowns when people leveraged alcohol and other harmful habits as coping mechanisms.
Unfortunately, stress can also harm workplace engagement. Highly stressed individuals are more likely to experience presenteeism or absenteeism. They may collaborate less effectively with others and have trouble focusing on their assignments.
Thankfully, with the help of a few practical tips, anyone can reduce financial stress and make more confident financial decisions. The following expert insights represent just a few highlights from the financial wellness section of the LifeSpeak platform. Share them with friends, family members, and coworkers who might benefit from them.
Think about your budget
A good financial plan is one key to staying calm when times get tough. According to certified financial planner Shannon Lee Simmons in her LifeSpeak video, Setting up a budget, a budget is the most important part of a financial plan. To create an effective budget each month, she says there are only four numbers a person needs to know.
- Fixed expenses
- This includes rent and telecommunications bills. Fixed expenses are predictable. They don’t change from month to month. Some people include groceries in this category, but Simmons advises against it. Grocery bills can fluctuate dramatically.
- Meaningful savings
- These are savings that go toward securing a person’s future financially. Meaningful savings either increase savings or pay down debt—as long as the money being put down is higher than the minimum payment, which would be a fixed expense.
- Short term savings
- Otherwise known as a vacation fund/slush fund, short-term savings are glorified spending money. It’s money a person puts aside with the intent of spending it in the short term. Short-term savings also help avoid debt; if there’s money set aside and something happens, it can help.
- Spending money
- This is where a person lives their life. Spending money is for groceries, gas, clothes, and going out. These expenses aren’t predictable and so spending money has to be flexible.
Simmons says the goal of a budget is to keep fixed expenses at 55% of take-home pay, meaningful savings at about 10% and short-term savings at 5%. That leaves 30% left over for spending money.
“And that’s how you live within your means,” Simmons says.
Separate emotions from finances
Investing can cause both incredible highs and incredible lows. When the stock market soars, it’s fun to hop along for the ride; when it crashes, as it has several times over the past few years, we can feel incredible stress, fear, and uncertainty.
As certified financial planner Bob Gavlak says in his LifeSpeak video, Emotions of investing and how to avoid them, it’s human nature to want to join in on the upswings and get out when things are scary. However, even basic investing advice would tell us this is the opposite of how we ought to behave: sell when the market is high and buy when it’s low. As with most circumstances, our emotions tend to get in the way despite our best intentions. How can we prevent feelings from ruling our investing and financial decisions? According to Gavlak, develop a plan and stick to it.
“If you develop a plan, you develop a strategy and you say, I need to get this rate of return over the long term, or I want to take on this much risk over the long term,” Gavlak says. “What that does is it allows us to keep grounded and say, you know what, I’m not going to get too excited when the market is going up and up and up because I don’t want to over-extend myself and have too much risk out there.”
At the same time, he says a plan helps us manage fear when the market is going down. That way we don’t change our investment philosophy hastily. Having a plan helps us weather these emotional highs and lows so they don’t cloud long-term financial objectives.
Accept the role of money in our lives
This can be a big emotional obstacle for people who are stressed about their finances. They want to make more money, but deep down feel guilty about it.
As personal finance coach Dominque Broadway explains in her LifeSpeak video, How to start thinking wealthy, we grow up inundated by depictions of greedy wealthy people in popular culture, like Mr. Burns or Scrooge. As a result, many of us end up believing that wanting more money is greedy.
But there’s nothing wrong with wanting more money. Especially when we consider the higher cost of living these days, it’s totally normal.
“What we need to realize is that we all have to have and make money,” Broadway says. “To eat, live, get around, feed your kids.”
She says that when we start to think about building wealth, the first thing we need to do is accept that it’s ok to make money. In fact, contrary to the stereotypical image of the greedy rich person, Broadway says most people want wealth just so they can help their family, friends, and community. Or so they can create some greater change in the world. Not so they can take an exotic trip or hoard their wealth for themselves.
“When you’re thinking about building wealth,” Broadway says, “don’t think about you being Scrooge or being you know Mr. Burns and being this greedy person. Think about all the different ways that if you’re able to shift your mindset to start building a wealthy one how it will impact your family, your friends, your community and everyone else that’s surrounding you.”
Looking for more expert financial wellness guidance?
The LifeSpeak platform features hundreds of expert-led micro-learnings on financial wellness for individuals at all stages of life. If you’re already a LifeSpeak client, simply log in to the platform and type “Finance” into the search bar to access your selection of our content.
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