How to Overcome Common Money Worries
Money worries: We all have them. Some of us lose sleep over credit card debt. Others are more concerned about “what-if” scenarios like getting laid off or getting hit with an unexpected – and costly – emergency. And still others wrestle with income-related feelings of envy or inadequacy.
Unfortunately, there’s no way to really prevent the occasional bout of finance-related fear. Everyone worries, after all. But there are some healthy ways to ease some of that anxiety and reduce the likelihood of your worst money fears becoming reality.
Your money worry: What if (insert expensive emergency) happens?
When you don’t have a lot of extra cash, few things are as frightening as the thought of an unexpected, expensive emergency. A broken-down car. A refrigerator that stops running. A sick pet. A nasty toothache that needs a root canal. The list goes on (and on).
No matter how careful you are with your money on a day-to-day basis, all it takes is one emergency to wreak havoc on your finances.
What you can do about it: Unfortunately, you can’t predict most of these types of expenses. But you can take steps to make sure that when emergencies happen, they don’t take as big of a bite out of your wallet. One great way to do this is to start an emergency fund to help you handle unexpected expenses. Finance folks typically recommend that you have enough money in your emergency fund to cover three to six months of living expenses – but even a few hundred dollars is a step in the right direction. For more information and strategies for starting an emergency fund, check out this video.
Your money worry: What if I lose my job?
Nearly everyone worries about job security at some point – and with good reason. The job market hasn’t exactly been booming lately. What happens if you get laid off or downsized? What if your company goes under?
What you can do about it: This is another scenario where it helps to have an emergency fund in place – but an emergency fund is a temporary fix and not a long-term solution to job loss. The key here is to channel the anxiety and worry of being laid off into something more productive and proactive. For example, if it’s been a while since your last job search, start by updating your resume to reflect your newest skills. Spend an afternoon looking at job listings that match your interests and experience. Then, do a little networking: Join a few professional groups. Create a LinkedIn profile and start building connections. Depending on your goals and industry, it might be helpful to update certifications or enroll in a few continuing education classes.
Your money worry: I’ll never pay down my high interest credit card debt.
One reason that credit card debt is so upsetting is that there’s no “quick fix” solution: If you have debt, you have to pay it off. But with the right approach, you can work toward reducing your debt and your stress levels.
What you can do about it. The very first thing you should do is stop using your credit cards – immediately. Then, decide on a debt reduction plan that works for you and your debt situation. If you’ve got multiple credit cards to pay off, consider using the “snowball method,” which helps you prioritize which card to pay off first – and helps you keep the momentum going until the last card is down to a zero balance. If you’ve got a decent credit score, you may be eligible for zero-percent balance transfer offers that help you pay down your principal balance quickly by moving your debt to a card with no interest for an introductory period (usually around a year). You might also consider a debt consolidation loan. Debt consolidation loans tend to take a while to pay off, but many folks find that the single monthly payment of a debt consolidation loan makes it easier to stay on track.
Your money worry: I’ll never be able to own a home.
Home ownership has long been viewed as the measure of “true” financial success. Transitioning from renting to owning has traditionally been viewed as a rite of passage; a way to mark the move from the early “just starting out” stage of adulthood to more stable financial ground. But today, several factors – including an uncertain economy, sky-high student debt, and a less-than-ideal job market – have made home ownership seem like an unattainable goal.
What you can do about it: First of all, think about why you want to own a home: Is it about proving you’ve “made it”? Keeping up with friends who all own homes? If that’s the only reason you want to be a homeowner, it might be better to rent for a few more years – especially if you’re not financially prepared to buy. There are other ways to measure success.
But if you’re ready to buy a home – as in, you’ve got a steady income, you plan to stay in the same city for several years, and you’re sure you can handle the challenges (financial and otherwise) that come with being a homeowner – it may be time to start laying the groundwork. Your first step: Visit your bank or credit union and talk to a mortgage specialist. They can help you decide how much home you can afford, and they can also give you an idea of what kind of loans and interest rates you can get. They can also help you decide how much of a down payment you should save up – and how to start saving.
Your money worry: I’ll never repair my credit.
Credit problems, such as late or missed credit card payments and out-of-control spending, can ruin your credit score. And the worst part is that, even if you’ve decided to get your finances under control, you past behavior lingers in the form of a bad credit score, which can make it extremely difficult to do normal things like apply for a loan, get a credit card with a decent interest rate, or buy a home.
What you can do about it: While there’s not a whole lot you can do about your past credit hiccups, there are a lot of things you can do to recover. Simply making payments on time is a huge step in the right direction. Beyond that, you can focus on paying down your existing debt, paying attention to your credit report, or using a secured credit card to help improve your credit score. It won’t happen overnight, but you’ll eventually see an improvement.
And if you need debt advice or have questions about spending, saving, budgeting, or credit cards, you can always reach out to Debt Guru. Contact the Debt Guru team today for a free debt consultation.