15 Ways to Save Money for Christmas

We know—it feels a little early to start talking about Christmas. Heck, it’s still pumpkin spice season after all and you’re trying to enjoy the fall decorations you just put up. We get it. You aren’t exactly ready to bust out the eggnog and hear carolers singing at your front door. But hear us out! While it might be too early to hang the mistletoe, it’s never too early to save money for Christmas.

When to Start Saving Money for Christmas

Now . . . yeah, like right now. The sooner you start saving up for Christmas, the better (and less brutal) it will be. Too many people wait until December to buy gifts. With no money saved up, they turn to credit cards in a panic and end up paying for Christmas until April of the next year. Not good.Start budgeting with EveryDollar today!

There’s no reason to put yourself through that kind of stress. Just take some time to think ahead and you can avoid that mess. The best way to do it? Start saving in January, put aside a little money each month, and you’ll be golden come December! But if you’re just now starting to save money for Christmas, don’t worry. There’s still plenty of time to save up a stash of cash between now and then.

So, ready or not, start playing your favorite Bing Crosby Christmas tune and curl up with a good cup of peppermint hot cocoa—we’re about to show you 15 easy ways to save money for Christmas. And the best part is, you can still use these tips year-round! Keep in mind, these are all just estimates. Depending on your specific situation, you could save a little less or a lot more!

15 Easy Ways to Save Money for Christmas

1. Cut out cable.

Save $400

Okay, it might sound a little extreme, but if you’ve already been thinking about cutting the cable cord, now’s the time to do it. The average cost people spend on TV is about $217 per month.1 Wow! So, if you ditch cable now, you could save more than $400 over the next two months.

And in case you haven’t noticed, it’s 2021! That means you don’t need cable to watch television anyway. Between Disney+, Netflix, Hulu, Amazon Prime, Roku, Apple TV, Sling, antennas and skinny cable bundles, there are plenty of ways (almost too many) to watch your favorite shows without that crazy cable bill.

2. Buy generic brands.

Save $50

If you’re an avid fan of a certain cereal, snack or yogurt brand, see if you can give the generic brand a try for a little while. Small tweaks like these can really make a difference when it comes to hitting your Christmas savings goal.

If you go completely generic for just 10 meals over the course of two months, you could cut more than $50 from your grocery bill! Even if you aren’t ready to buy all generic all the time, just buying generic staple items like milk, juice, spices, flour, sugar and produce can help you save a bundle. The small changes really add up!

3. Pack your own lunch.

Save $320

It’s time to embrace the office microwave and say hello to the leftover life! If your go-to lunch plan is hitting up the drive-thru for an $8 meal, you’re wasting $40 a week right there. And while it might not seem like a big wad of cash for just one week, that adds up to $160 a month (and $320 over two months)! Take the cheaper route and swap that out for bringing leftovers from home. Your wallet is sure to thank you. Save those calories for Christmastime treats, folks.

4. Use cold water (and less of it).

Save $100

Here’s a secret: You can wash your clothes in cold water and they’ll still get clean. Shocking, we know. Two of the best ways to cut back on the energy your home eats up is by using a cooler water temperature and less water. So just changing the temperature setting on your washer could cut each load’s energy use in half!2

Let’s say your monthly water bill runs about $100. If you go hardcore for just two months and cut your water usage in half, you could save around $100—and that’s not as tough to do as it sounds. Cut everyone’s shower time in half and turn off the faucet while you’re brushing your teeth.

5. Unplug electronics.

Save $20

Did you know that just having a power cord plugged into the wall uses up energy? Yep. It’s called phantom energy, and Americans waste about $100 each year on it.3 That’s like being charged for nothing! No thanks. Instead, go on an unplugging spree to make sure you’re not surging through precious dollars.

Make a habit to unplug things like your laptop charger, phone charger, toaster and even coffee maker when they aren’t in use. When it comes to big things like your TV, DVD/Blu-Ray player, or sound system, it can get annoying to unplug every single device. And who can even reach those tucked-away plugs anyway? The solution: Plug it all into a power strip so you can easily unplug everything in one fell swoop.

But don’t worry about unplugging major appliances like your washing machine. They tend to pack a heavy punch of high voltage. We want you to save a bundle without electrocuting yourself.

6. Sell stuff with apps.

Save $50

Believe it or not, selling all that extra stuff you have laying around can really add up. You probably won’t get a ton of money for Christmas this way, but you might be pleasantly surprised by how much cash you’ll rake in just for getting rid of things you don’t need.

Gone are the days of taking your gear to a consignment shop or praying your garage sale is a hit. Now you can snap a picture of the item, post it in an app, and sit back and wait for someone to make an offer. It’s as easy as that! Sell your used treasures on sites like OfferUp, Poshmark, decluttr, letgo and Facebook Marketplace. Of course, you can always have a good, old-fashioned garage sale too. No one’s stopping you.

7. Pause your gym membership.

Save $100

Think back to last year . . . you had every intention of going to the gym. But once the holiday madness started to kick in—how many times did you really go? Plus, if your gym still has restrictions thanks to COVID-19, you might not be using that membership much now anyway. Let’s say your gym membership costs $50 a month. If you can pause your membership for eight weeks, that’s an extra $100 toward your Christmas savings!

That doesn’t mean you have to forgo your fitness though. While the weather is still nice, take advantage of walking or jogging outdoors in the evenings after work, or team up with a coworker to walk during your lunch break. If you live in a part of the country where kids are playing sports again, use their practice time to take a walk around the building or field.

Is staying indoors more your thing? YouTube workouts make it easy to stay fit for free. If you’re an avid yogi but can’t bear the high price of going to a yoga studio, check out Yoga With Adrienne. Is high intensity interval training (HIIT) action more your thing? Try FitnessBlender and Tone It Up. Your bulked-up Christmas savings will thank you!

8. Drop the subscriptions.

Save up to $400

Subscription services are everywhere. If you aren’t careful, those things will $12.95 you into a hole. If you drop some of the more expensive subscriptions like your meal kit delivery service, you could save some serious cash right there!

Meals kits can set you back around $50 a week for three meals for two people. Sure, you think you’re being somewhat frugal. But that still adds up. If you put it on hold for the next two months and buy basic staples to make multiple meals (hello, beans and rice), you could save around $400! It’s time to get your cheap meal ideas from Pinterest or your favorite blogger.

Maybe you’re a book nerd and opted in for Audible to get through your books on the go. It’s handy, sure—but if you pause your membership for two months, you’ll have $30 to add to your Christmas budget. In the meantime, you can download Libby or OverDrive and get free e-books that you can read right from your tablet or phone. Or give the books a break and dive into the wonderful world of podcasts instead.

You can live off of basic meals and podcasts for a mere eight weeks—trust us. You probably won’t miss those subscriptions too much anyway. After all, it’s only temporary. You can sign back up in the new year if you really miss them. Or let them go for good and enjoy the savings all year long.

9. Use cash back apps.

Save $20

Disclaimer: Don’t expect to make 1,000 bucks using these apps. But after two months, cash back reward apps like Ibotta, Rakuten and Receipt Hog can start to add up.

So, how does it all work? It’s simple. Apps like these offer you rewards or points for doing certain things. Sometimes that’s buying bananas and almond milk or spending $20 at a popular store. The amount of points (aka cash) you get from each transaction depends on what you’re doing. But you can usually expect to earn anywhere from 25 cents to $3 in reward points for things you do.

Keep in mind, most of these apps make you hit a $5 or $10 minimum before you can cash out your rewards. And make sure you aren’t buying things you don’t need just to collect the points (talk about not helpful). But if you can get cash for things you buy or do every day, you’ll have $20 more to your name in no time!

10. Don’t run the air conditioning or heat (when you can).

Save $50

Temperatures can be pretty mild in the fall (depending on where you live)—so why not take advantage of it? On those nice days, see if you can get by without running the air conditioning or heat. If you have a programmable thermostat, adjust it so the AC or heat only runs when you’re actually there. Your house doesn’t have to be the perfect temperature when no one is home to enjoy it!

While you’re at it, keep the blinds closed during the day. Sure, you might feel like a vampire blocking out any shred of light creeping in—but the payoff could be worth it. About 76% of sunlight that hits standard double-pane windows enters to become heat.4 If you still want some natural light (and we don’t blame you), open the curtains or blinds that don’t let direct sunlight in.

11. Change your cell phone plan.

Save $40

You didn’t hear this from us, but there are more cell phone providers out there than just the top three you’ve always known about. You can get coverage that’s just as good for far less money too. If you want a quick way to save money for Christmas, it’s worth taking a look around at the other cell providers out there. Research which carriers offer coverage in your area and start comparing their plans to the one you have. If you aren’t ready to switch providers just yet, try cutting back on the minutes or data package you already have.

And here’s a bonus tip: Turn off the cellular service for some of your apps, especially the ones that constantly run in the background (they drain your data without you even knowing it). This eats up your data package for no reason and could land you in hot water with costly data overages.

12. Make coffee at home.

Save $40

Do you treat yourself to a fancy latte every Friday morning? That might not seem like much, but it still sets you back about $5 each week. Just think: If you could cut the coffee habit and stash away $5 a week for eight weeks, you’d end up with $40 right there!

We’re not asking you to cut out coffee completely—we’re not heartless. But guess what? You can make your favorite drink at home. Look up copycat recipes to follow (they’re all over the internet). A lot of them surprisingly taste better than the “real deal” at the coffee shop. Enjoy your morning coffee while smiling at that extra $5 bill still hanging out in your wallet!

If you can’t bring yourself to stop your coffee trips completely but still want to pay less, here are a few Starbucks hacks you can try.

13. Look for deals early.

Save $100

The early bird gets the worm—and the deal too. There are plenty of end-of-summer, back-to-school and economy-stimulating sales going on these days, so keep your eyes peeled. You never know what you might find after a little digging. Be on the lookout for stocking stuffers, end-of-season clothing and deals on those more expensive items like electronics.

Another good reason to get your shopping done earlier this year? Shipping time. It’s no secret that a lot of people are shopping online these days (and even more thanks to the pandemic). Online holiday sales in 2020 were up 24%.5 And things will probably be like that again this year. With the virus still out there, more people than ever will be doing their Christmas shopping online, and that means you’ll have to wait longer for it to arrive at your front door. So don’t wait till the last minute to tackle your Christmas shopping—you don’t want to pay for expedited shipping.

14. Have a DIY Christmas.

Save $100

Hop onto Pinterest or Instagram to get some ideas for crafts that you can give as DIY Christmas gifts. Searching for them now gives you plenty of time to buy the materials and put the effort into creating something that has just the right touch. Even better, you have time to start over in case your first attempt looks more like a Halloween decoration than a Christmas gift—it happens to the best of us.

15. Use your “under budget” money.

Save $75 (or way more)

An easy (and sneaky) way to save money for Christmas is to use your “under budget” cash. When you come in under budget on monthly expenses like groceries or clothing, take the difference and stash it away in your Christmas savings. That $10 here and $15 there can add up in a flash. Plus, it gives you one more reason to look for bargains and check for a better deal in your daily life—like, oh, say insurance. Are you shelling out too much each month? Have one of our endorsed local providers check your insurance rates and you could save $700! That’s enough to cover plenty of Christmas shopping.

Make Sure You’re Actually Saving Your Savings

It’s super easy to say you’re going to save money for Christmas and then not actually put aside what you’ve saved. Whoops. Instead of letting your money get lost in your bank account (and then spent), be intentional about cashing it out or transferring it over to a separate Christmas savings account. It’s a great way to be extra disciplined about putting aside that money and not touching it. Check with your bank about opening a side savings account for all your Christmas needs.

How to Budget for Christmas

Take a look at how much you spent on Christmas last year to get an idea of where you might want to land this year. Where can you cut back? Once you’ve given it some thought, come up with a Christmas budget grand total for this year. Now divide it by the number of months or weeks left until Christmas (ugh, nothing bums out the Christmas spirit like math—we know). The number you end up with is how much you need to set aside each month or week for Christmas. In December, your Christmas savings will be set and you can enjoy the season instead of feeling pinched for extra money.

Let’s say your budget for Christmas is $700. If you started saving in January, then you’d only have to put away about $58 each month to hit that goal. But if you haven’t saved anything at this point, you’ve only got two months left if you want to hit your goal by December. That means you need to save $350 each month (or $87.50 a week). It might sound tough, but you can do it! And these tips will help get you there fast.

Save Money for Christmas Now

Sorry for hitting you with all the Christmas cheer before you even had a chance to taste your first pumpkin spice latte of the year. We’ll now return you back to your regularly scheduled autumn programming. But remember, Christmas will be here before you know it, so don’t let it sneak up on you. Start saving for Christmas now.

Our free budgeting app, EveryDollar, makes it easy to keep track of your savings so you can pay cash for Christmas. And you can try out the premium version of EveryDollar with a free trial of Ramsey+. The premium version connects to your bank account so everything you’re spending on Christmas streams right in. Just drag it to your Christmas budget line and you’re good to go. Plus, you’ll get our best online courses so you can learn even more money-saving tips. Bring on the holiday cheer!

ABOUT THE AUTHOR

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Source: RamseySolutions.com

Overcoming the Student Loan Crisis

Let’s be real—the student loan crisis in this country has become way too serious to ignore. Right now, the total amount of federal student loan debt in the U.S. is over $1.57 trillion.1 That’s insane.

Let’s take a look at the simple (but painful) facts so we can understand the problem and work toward getting student loans out of our lives for good.

The Stats on the Student Loan Crisis

  • At this point, federal student loan debt has way exceeded national credit card debt—by over $780 billion!2
  • Student loan debt has seen an almost 157% growth since the Great Recession of 2008 and is the fastest-growing portion of total household debt in the U.S.3
  • There are currently about 45 million student loan borrowers in this country.4
  • Sixty-two percent of students graduate with student loan debt in 2019.5
  • The average student loan debt is about $38,792.6

Still breathing after reading those facts? Good. Because we’re not done breaking down just how crazy student loans really are (more on that later).

The History of Student Loan Debt

Believe it or not, student loans haven’t been around forever. They actually started in 1957 mostly to encourage more students (especially those in the fields of science, math and foreign languages) to attend college so Americans could beat out Russians during the Space Race. And it worked. College student attendance shot up from 3.6 million in 1960 to 7.5 million in 1970.7

OUT NOW! Watch Borrowed Future on Amazon Prime Video, AppleTV and Google Play.

Know what else shot up? Student loan debt.

You might blame the crazy rise in tuition costs (up 134% from 50 years ago!) or the surge in inflation over time or all pressures from society to get a college degree—but you can’t argue with the numbers.8 And student loan debt doesn’t look like it’ll slow down anytime soon.

Student Loan Debt Totals by Age

People sometimes think student loan debt is just a young-person problem. But that’s 100% false. If you’re reading this and have been paying on your loans for years, you know what we’re talking about. Some people are still paying on their student loans when their own kids are heading off to college. It’s crazy!

Just check this out if you don’t believe it. Here’s a breakdown of American student loan debt totals by age:9

Age RangeTotal Student Loan Debt
18–24$114 billion
25­–34$501 billion
35–49$613 billion
50–61$274 billion
62+$93 billion

The group carrying the most debt is that 35–49 range. Those aren’t kids who are fresh out of college. That’s the crowd that’s sending their own kid off to college while still paying on their own student loans.

And look at the 62+ range—they’ve got $93 billion in student loan debt! Maybe it’s debt from their own degree or maybe it’s what they borrowed to put their kids through school. Either way, it’s not okay. Those are supposed to be your golden years. Retirees shouldn’t have to struggle with student loan debt.

The Economic Impact of Student Loan Debt

Crazy enough, having piles of student loan debt makes millennials less likely to be able to afford things like houses and families. Go figure.

Research from Ramsey Solutions also showed that nearly half (47%) of those who used student loans to pay for school are putting off other big life moments—like buying a home, getting married, or having kids—because of their student loan debt.

It’s pretty simple: When people have to put a huge chunk of their income toward paying their student loan debt, they have less money to spend on other things.

The True Cost of Your Student Loan Monthly Payments

There’s a reason why lenders make it pretty easy and painless to take out a loan. They know people (especially high school and college-age ones) just want to take the next step in their lives and will be drawn to the fact that student loans make college seem affordable. But really, the cost of the loan is so much more than we see on the surface. Watch our new documentary Borrowed Future for even more about the truth behind student loans.

Picture it: You’re young, so you take out student loans to major in something you’re passionate about. You’re hopeful about the future. But then, after graduating, you discover you have to make monthly payments on those loans for years—like 21 years (that’s the average time it takes people to pay them back).10

That’s a lot of life to spend being weighed down by debt.

How Are Monthly Payments Calculated?

The average monthly payment on a student loan is $393.11 But how do loan companies come up with your monthly payment anyway?

That not-so-magic number is based on things like the total loan amount, interest rate, number of years it takes to pay the thing off, and any other requirements the lender of that loan might tack on (some lenders have a required minimum monthly payment).

Let’s look at some averages and then some examples of how they affect your total payoff amount in the real world.

Average Student Loan Debt Per Borrower$38,79212
Average Student Loan Interest Rate5.8%13
Average Time It Takes to Pay Off Student Loans21 years14
Average Student Loan Monthly Payment$39315

Don’t want to crunch the numbers on a yellow notepad? Good news—you don’t have to! Just pop these numbers into our Student Loan Payoff Calculator. If you’ve got $38,792 total debt at a 5.8% interest rate and you’re making a $393 payment each month, you’ll have that loan holding you down for 11 years.

But wait, the numbers get worse (oh, great). Because at the end of those 11 years, you’ll have paid $14,052.09 in interest alone. That’s right, your $38,792 loan will actually cost you $52,844.09 when it’s all said and done. Ouch.

And most college grads aren’t raking in the dough either. Recent college grads earn an average salary of $53,889.16 That means they’re bringing home roughly $3,400 a month (after taxes). So, a $393 student loan payment will eat up around 11% of their monthly take-home pay!

But what would happen if those payments didn’t exist? What could that money do? Okay, for this example, let’s run some numbers through our Investment and Retirement Calculator. Let’s say a 21-year-old graduate started investing that $393 every month with a 10% return instead of putting that money toward a student loan payment. They’d have over $4.5 million by the time they retire at the age of 67.

Don’t even get us started on what you could do with that kind of money. Talk about living and giving like no one else!

What About Refinancing Student Loans?

Now that student loan relief is ending, you might be thinking about refinancing those suckers. Student loan refinancing might sound like a quick and easy fix, but let’s face it, quick and easy is what gets folks into student loan debt in the first place. If you’re not careful, you could end up with a higher interest rate or longer payment terms than you had before.

So, before you decide refinancing your student loans is the winning lottery ticket you’ve been waiting for, let’s get clear on a few things.

With refinancing, you’re basically asking a bank or private company to take all your student loans, pay them off, and give you a new interest rate and payment terms. They fronted you the money, so now you owe them.

Student loan refinancing is the only type of debt consolidation that we recommend. But it isn’t for everyone. You can dig into this some more in our Quick Read Destroy Your Student Loan Debt, but here’s a short checklist. You should only refinance your student loans if:

  • It won’t cost you anything to consolidate them.
  • You can replace your variable interest rate with a lower, fixed interest rate.
  • Your new net interest rate is lower than your current net interest rate.
  • You don’t sign up for a longer repayment period.
  • You don’t get so relieved by the thought of a single payment that you lose your motivation to pay off your debt fast!

That last one is key. You don’t want to do anything that gets you so comfortable with your debt that you stop trying to pay it off quicker.

Why Do People Rely on Student Loans?

Now that we’ve seen the hard facts of student loans, let’s look at the thinking (or lack of thinking) behind getting one.

Right now, there’s a mindset in this country that if you don’t get a degree, you can’t win. You can’t get a well-paying job. You can’t be successful. You can’t be happy. So it’s no wonder that high school students are freaking out, thinking they won’t get a decent job if they don’t have a degree. And they’ve been fed the lie that the only way to afford their college degree is to take out a loan.

But neither of those ideas are true. Plenty of people who never went to college have “made it” with plain ol’ hard work. There are lots of opportunities out there to make good money without getting a college degree. So let’s just go ahead and bust that myth right there.

Still, sometimes you definitely need a degree to go into the field you want. But just remember: A degree is a degree no matter where it’s from—it’s 100% possible to get a degree without loans by picking a cheaper school. And if that means you choose a community college, who cares. Seriously—10 years later, it won’t even matter.

The truth is, while student loans are meant to make life easier for students, they do the exact opposite and create bad money habits that students take with them throughout life. Because once you’ve signed up for $80,000 in student loans—what’s the big deal when it comes to credit card debt, right?

The negative effects of student loan debt aren’t just financial either. In our own research at Ramsey Solutions, we found that 53% of those who took out student loans say they regret it. And 43% of those who took out student loans regret going to college altogether. That’s a lot of regret, people. And living in regret isn’t emotionally healthy for anyone.

But that’s not the only effect people deal with. Our research goes on to show that Americans with consumer debt (like student loans) are nearly twice as likely to lose sleep over their personal finances than those without. On top of that, 54% of Americans with consumer debt worry daily about money. 

Listen: Higher education is great and all, but taking out a loan isn’t the only option to get that education. Not only does student loan debt weigh you down future (and stress you out), it impacts the future of our country—big time.

Are Universities Fueling the Student Loan Crisis?

All right, let’s be clear here. We’re not saying that every university is adding to the problem, but it’s no secret that college tuition isn’t getting any cheaper. The cost of getting your degree has tripled in the last 20 years, and it keeps on rising. Private universities are especially pricey—with students spending an average of over $54,000 for the 2020–21 school year!17

Income Share Agreements: The Misleading “Alternative” to Student Loans

Rising tuition costs are bad enough, but have you heard about income share agreements? That’s a contract between a college and a student where the school loans money to the student to cover education costs (like an “I owe you”). The student agrees to pay a percentage of their income back to the school later on down the road. But whenever their income increases, their monthly payment increases too.

Some people think this is better than a student loan, but is it really? Truth is, students who do this are still in debt because they borrowed money—and they’ll have to keep making payments for years. Just sounds like another way to soften the look of something that’s still debt.

Nobody wants to graduate from college, get an exciting new job with a nice salary, and then face the fact that thousands of dollars of that salary will be going right back to their college. What a bummer. Instead, look at things like scholarships, tuition reimbursement programs, and part-time jobs to help your student fund college.

How to Get Yourself Out of Student Loan Debt

If you’re in the middle of this student loan crisis—carrying that debt around and handing over a chunk of every month’s income to slowly dig your way out—there is hope! You don’t have to stay here forever.

You can get yourself out of student loan debt for good. And you don’t have to wait around for some long-shot promise of student loan forgiveness from the government either.

You don’t have to do this on your own. Take a class like Financial Peace University where you can learn how to stick with the debt-free grind and pay off your student loans quicker than you ever thought possible. You can try out FPU today (and the premium version of the EveryDollar budgeting app) with a free trial of Ramsey+.

We know the student loan crisis seems too huge to even think about sometimes. That $1.57 trillion number is no joke.18 But that $1.57 isn’t something you have to take down yourself. Focus on how you can get out of the debt you have and teach your children to steer clear of student loans completely.

Don’t let this insane national crisis we have create a personal crisis for you. Make the choice to get out and take the steps to move forward with your life. You’ve got this!

Source: RamseySolutions.com

Coping With Financial Stress

Feeling overwhelmed by money worries? Whatever your circumstances, there are ways to get through these tough economic times, ease stress and anxiety, and regain control of your finances.

Understanding financial stress

If you’re worried about money, you’re not alone. Many of us, from all over the world and from all walks of life, are having to deal with financial stress and uncertainty at this difficult time. Whether your problems stem from a loss of work, escalating debt, unexpected expenses, or a combination of factors, financial worry is one of the most common stressors in modern life. Even before the global coronavirus pandemic and resulting economic fallout, an American Psychological Association (APA) study found that 72% of Americans feel stressed about money at least some of the time. The recent economic difficulties mean that even more of us are now facing financial struggles and hardship.

Like any source of overwhelming stress, financial problems can take a huge toll on your mental and physical health, your relationships, and your overall quality of life. Feeling beaten down by money worries can adversely impact your sleep, self-esteem, and energy levels. It can leave you feeling angry, ashamed, or fearful, fuel tension and arguments with those closest to you, exacerbate pain and mood swings, and even increase your risk of depression and anxiety. You may resort to unhealthy coping mechanisms, such as drinking, abusing drugs, or gambling to try to escape your worries. In the worst circumstances, financial stress can even prompt suicidal thoughts or actions. But no matter how hopeless your situation seems, there is help available. By tackling your money problems head on, you can find a way through the financial quagmire, ease your stress levels, and regain control of your finances—and your life.

Effects of financial stress on your health

While we all know deep down there are many more important things in life than money, when you’re struggling financially fear and stress can take over your world. It can damage your self-esteem, make you feel flawed, and fill you with a sense of despair. When financial stress becomes overwhelming, your mind, body, and social life can pay a heavy price.

[Read: Stress Symptoms, Signs, and Causes]

Financial stress can lead to:

Insomnia or other sleep difficulties. Nothing will keep you tossing and turning at night more than worrying about unpaid bills or a loss of income.

Weight gain (or loss). Stress can disrupt your appetite, causing you to anxiously overeat or skip meals to save money.

Depression. Living under the cloud of money problems can leave anyone feeling down, hopeless, and struggling to concentrate or make decisions. According to a study at the University of Nottingham in the UK, people who struggle with debt are more than twice as likely to suffer from depression.

Anxiety. Money can be a safety net; without it, you may feel vulnerable and anxious. And all the worrying about unpaid bills or loss of income can trigger anxiety symptoms such as a pounding heartbeat, sweating, shaking, or even panic attacks.

Relationship difficulties. Money is often cited as the most common issue couples argue about. Left unchecked, financial stress can make you angry and irritable, cause a loss of interest in sex, and wear away at the foundations of even the strongest relationships.

Social withdrawal. Financial worries can clip your wings and cause you to withdraw from friends, curtail your social life, and retreat into your shell—which will only make your stress worse.

Physical ailments such as headaches, gastrointestinal problems, diabetes, high blood pressure, and heart disease. In countries without free healthcare, money worries may also cause you to delay or skip seeing a doctor for fear of incurring additional expenses.

Unhealthy coping methods, such as drinking too much, abusing prescription or illegal drugs, gambling, or overeating. Money worries can even lead to self-harm or thoughts of suicide.

The vicious cycle of poor financial health and poor mental health

A number of studies have demonstrated a cyclical link between financial worries and mental health problems such as depression, anxiety, and substance abuse.

  1. Financial problems adversely impact your mental health. The stress of debt or other financial issues leaves you feeling depressed or anxious.
  2. The decline in your mental health makes it harder to manage money. You may find it harder to concentrate or lack the energy to tackle a mounting pile of bills. Or you may lose income by taking time off work due to anxiety or depression.
  3. These difficulties managing money lead to more financial problems and worsening mental health problems, and so on. You become trapped in a downward spiral of increasing money problems and declining mental health.

No matter how bleak your situation may seem at the moment, there is a way out. These strategies can help you to break the cycle, ease the stress of money problems, and find stability again.

Dealing with financial stress tip 1: Talk to someone

When you’re facing money problems, there’s often a strong temptation to bottle everything up and try to go it alone. Many of us even consider money a taboo subject, one not to be discussed with others. You may feel awkward about disclosing the amount you earn or spend, feel shame about any financial mistakes you’ve made, or embarrassed about not being able to provide for your family. But bottling things up will only make your financial stress worse. In the current economy, where many people are struggling through no fault of their own, you’ll likely find others are far more understanding of your problems.

Not only is talking face-to-face with a trusted friend or loved one a proven means of stress relief, but speaking openly about your financial problems can also help you put things in perspective. Keeping money worries to yourself only amplifies them until they seem insurmountable. The simple act of expressing your problems to someone you trust can make them seem far less intimidating.

  • The person you talk to doesn’t have to be able to fix your problems or offer financial help.
  • To ease your burden, they just need to be willing to talk things out without judging or criticizing.
  • Be honest about what you’re going through and the emotions you’re experiencing.
  • Talking over your worries can help you make sense of what you’re facing and your friend or loved one may even be able to come up with solutions that you hadn’t thought of alone.

Getting professional advice

Depending on where you live, there are a number of organizations that offer free counseling on dealing with financial problems, whether it’s managing debt, creating and sticking to a budget, finding work, communicating with creditors, or claiming benefits or financial assistance. (See the “Get more help” section below for links).

Whether or not you have a friend or loved one to talk to for emotional support, getting practical advice from an expert is always a good idea. Reaching out is not a sign of weakness and it doesn’t mean that you’ve somehow failed as a provider, parent, or spouse. It just means that you’re wise enough to recognize your financial situation is causing you stress and needs addressing.

Opening up to your family

Financial problems tend to impact the whole family and enlisting your loved ones’ support can be crucial in turning things around. Even if you take pride in being self-sufficient, keep your family up to date on your financial situation and how they can help you save money.

Let them express their concerns. Your loved ones are probably worried—about both you and the financial stability of your family unit. Listen to their concerns and allow them to offer suggestions on how to resolve the financial problems you’re facing.

Make time for (inexpensive) family fun. Set aside regular time where you can enjoy each other’s company, let off steam, and forget about your financial worries. Walking in the park, playing games, or exercising together doesn’t have to cost money but it can help ease stress and keep the whole family positive.

Tip 2: Take inventory of your finances

If you’re struggling to make ends meet, you may think you can ease your stress by leaving bills unopened, avoiding phone calls from creditors, or ignoring bank and credit card statements. But denying the reality of your situation will only make things worse in the long run. The first step to devising a plan to solve your money problems is to detail your income, debt, and spending over the course of at least one month.

A number of websites and smartphone apps can help you keep track of your finances moving forward or you can work backwards by gathering receipts and examining bank and credit card statements. Obviously, some money difficulties are easier to solve than others, but by taking inventory of your finances you’ll have a much clearer idea of where you stand. And as daunting or painful as the process may seem, tracking your finances in detail can also help you start to regain a much-needed sense of control over your situation.

Include every source of income. In addition to any salary, include bonuses, benefits, alimony, child support, or any interest you receive.

Keep track of ALL your spending. When you’re faced with a pile of past-due bills and mounting debt, buying a coffee on the way to work may seem like an irrelevant expense. But seemingly small expenses can mount up over time, so keep track of everything. Understanding exactly how you spend your money is key to budgeting and devising a plan to address your financial problems.

List your debts. Include past-due bills, late fees, and list minimum payments due as well as any money you owe to family or friends.

Identify spending patterns and triggers. Does boredom or a stressful day at work cause you to head to the mall or start online shopping? When the kids are acting out, do you keep them quiet with expensive restaurant or takeout meals, rather than cooking at home? Once you’re aware of your triggers you can find healthier ways of coping with them than resorting to “retail therapy”.

Look to make small changes. Spending money on things like a morning newspaper, lunchtime sandwich, or break-time cigarettes can add up to a significant monthly outlay. While it may be unreasonable to deny yourself every small pleasure, cutting down on nonessential spending and finding small ways to reduce your daily expenditure can really help to free up extra cash to pay off bills.

Eliminate impulse spending. Ever seen something online or in a shop window that you just had to buy? Impulsive buying can wreck your budget and max out your credit cards. To break the habit, try making a rule that you’ll wait a week before making any new purchase.

Go easy on yourself. As you review your debt and spending habits, remember that anyone can get into financial difficulties, especially at times like this. Don’t use this as an excuse to punish yourself for any perceived financial mistakes. Give yourself a break and focus on the aspects you can control as you look to move forward.

When your financial problems go beyond money

Sometimes, the causes for your financial difficulties may lie elsewhere. For example, money troubles can stem from problem gambling or a mental health issue, such as overspending during a bipolar manic episode.

To prevent the same financial problems recurring, it’s imperative you address both the underlying issue and the money troubles it’s created in your life.

Tip 3: Make a plan—and stick to it

Just as financial stress can be caused by a wide range of different money problems, so there are an equally wide range of possible solutions. The plan to address your specific problem could be to live within a tighter budget, lower the interest rate on your credit card debt, curb your online spending, seek government benefits, declare bankruptcy, or to find a new job or additional source of income.

If you’ve taken inventory of your financial situation, eliminated discretionary and impulse spending, and your outgoings still exceed your income, there are essentially three choices open to you: increase your income, lower your spending, or both. How you go about achieving any of those goals will require making a plan and following through on it.

  1. Identify your financial problem. Having taken inventory, you should be able to clearly identify the financial problem you’re facing. It may be that you have too much credit card debt, not enough income, or you overspend on unnecessary purchases when you feel stressed or anxious. Or perhaps, it’s a combination of problems. Make a separate plan for each one.
  2. Devise a solution. Brainstorm ideas with your family or a trusted friend, or consult a free financial counseling service. You may decide that talking to credit card companies and requesting a lower interest rate would help solve your problem. Or maybe you need to restructure your debt, eliminate your car payment, downsize your home, or talk to your boss about working overtime.
  3. Put your plan into action. Be specific about how you can follow through on the solutions you’ve devised. Perhaps that means cutting up credit cards, networking for a new job, registering at a local food bank, or selling things on eBay to pay off bills, for example.
  4. Monitor your progress. As we’ve all experienced recently, events that impact your financial health can happen quickly, so it’s important to regularly review your plan. Are some aspects working better than others? Do changes in interest rates, your monthly expenses, or your hourly wage, for example, mean you should revise your plan?
  5. Don’t get derailed by setbacks. We’re all human and no matter how tight your plan, you may stray from your goal or something unexpected could happen to derail you. Don’t beat yourself up, but get back on track as soon as possible.

The more detailed you can make your plan, the less powerless you’ll feel over your financial situation.

Tip 4: Create a monthly budget

Whatever your plan to relieve your financial problems, setting and following a monthly budget can help keep you on track and regain your sense of control.

  • Include everyday expenses in your budget, such as groceries and the cost of traveling to work, as well as monthly rent, mortgage, and utility bills.
  • For items that you pay annually, such as car insurance or property tax, divide them by 12 so you can set aside money each month.
  • If possible, try to factor in unexpected expenses, such as a medical co-pay or prescription charge if you fall sick, or the cost of home or car repairs.
  • Set up automatic payments wherever possible to help ensure bills are paid on time and you avoid late payments and interest rate hikes.
  • Prioritize your spending. If you’re having trouble covering your expenses each month, it can help to prioritize where your money goes first. For example, feeding and housing yourself and your family and keeping the power on are necessities. Paying your credit card isn’t—even if you’re behind on your payments and have debt collection companies harassing you.
  • Keep looking for ways to save money. Most of us can find something in our budget that we can eliminate to help make ends meet. Regularly review your budget and look for ways to trim expenses.
  • Enlist support from your spouse, partner, or kids. Make sure everyone in your household is pulling in the same direction and understands the financial goals you’re working towards.

Tip 5: Manage your overall stress

Resolving financial problems tends to involve small steps that reap rewards over time. In the current economic climate, it’s unlikely your financial difficulties will disappear overnight. But that doesn’t mean you can’t take steps right away to ease your stress levels and find the energy and peace of mind to better deal with challenges in the long-term.

[Read: Stress Management]

Get moving. Even a little regular exercise can help ease stress, boost your mood and energy, and improve your self-esteem. Aim for 30 minutes on most days, broken up into short 10-minute bursts if that’s easier.

Practice a relaxation technique. Take time to relax each day and give your mind a break from the constant worrying. Meditating, breathing exercises, or other relaxation techniques are excellent ways to relieve stress and restore some balance to your life.

Don’t skimp on sleep. Feeling tired will only increase your stress and negative thought patterns. Finding ways to improve your sleep during this difficult time will help both your mind and body.

Boost your self-esteem. Rightly or wrongly, experiencing financial problems can cause you to feel like a failure and impact your self-esteem. But there are plenty of other, more rewarding ways to improve your sense of self-worth. Even when you’re struggling yourself, helping others by volunteering can increase your confidence and ease stress, anger, and anxiety—not to mention aid a worthy cause. Or you could spend time in nature, learn a new skill, or enjoy the company of people who appreciate you for who you are, rather than for your bank balance.

Eat healthy food. A healthy diet rich in fruit, vegetables, and omega-3s can help support your mood and improve your energy and outlook. And you don’t have to spend a fortune; there are ways to eat well on a budget.

Be grateful for the good things in your life. When you’re plagued by money worries and financial uncertainty, it’s easy to focus all your attention on the negatives. While you don’t have to ignore reality and pretend everything’s fine, you can take a moment to appreciate a close relationship, the beauty of a sunset, or the love of a pet, for example. It can give your mind a break from the constant worrying, help boost your mood, and ease your stress.

Authors: Lawrence Robinson and Melinda Smith, M.A.

Why Your Financial Health Matters

Like physical health, financial health is fundamentally key to leading a happy and successful life. Creating a sound financial present does more than alleviate current stress – it lays the foundation for a stable and secure financial future.

While there’s no specific number or score that measures your financial health, people with good financial health pay close attention to things like credit, debt, savings, retirement planning, and insurance.

Here’s an in-depth look at what makes up your financial health, why your financial health matters and some ways to get it in shape (if it’s not already).

In this article, we’ll break down:

What’s financial health and why does it matter?

Basically, financial health measures your ability to meet your financial needs and prepare for unexpected financial emergencies.

For example, can you cover your financial needs if you experience an unexpected expense or loss of income? People with good financial health have financial resiliency and don’t have to worry about their money on a day-to-day basis.

But that’s far less common than it should be.

Poor financial health, which includes symptoms like low credit scores and little to no savings, can be bad for your physical and mental health. It can also put you and those who rely on you at risk.

Financial stress is very common. According to a 2017 study by CareerBuilder[1], 78% of Americans live paycheck-to-paycheck. That means nearly four in five U.S. households couldn’t cover the bills after an unexpected job loss.

The 2020 coronavirus crisis and economic downturn highlight the need for people to focus on their financial health. If you want to focus on your financial health in 2020 and beyond, the next section outlines some important places to start when improving your financial health.

What does it mean to be financially healthy?

While there is no single number that measures your financial health, you can look at the numbers of your financial life to assess where you stand. With good financial health, you’re able to relax and put much of your financial life on autopilot.

Here are some different areas of your financial life that make up your overall financial health:

  • Credit
  • Debt
  • Savings
  • Retirement
  • Insurance

Let’s take a closer look at each…

Credit

Those with great financial health pay attention to their credit. Good credit gives you the ability to borrow when you want or need to. It can help you get quickly approved for new credit cards and other loans with the best interest rates available.

Your credit report and credit score are good measures of your credit health. Learn how to read your credit report.

Debt

It’s easy to take advantage of high credit card limits and rack up tons of debt buying new TVs, clothes, and gadgets.

However, borrowing more than you can afford is a sign of lifestyle inflation and can lead to a growing spiral of debt payments that can consume your entire income.

A low relative portion of your monthly income going to debt, measured by your debt-to-income ratio, is a good measure of your debt health.

Savings

Households with good financial health have both emergency savings and long-term savings for important financial goals.

Emergency funds should cover a minimum of three to six months of expenses if you have a stable job. Self-employed and contract workers should double that to at least six to 12 months of expenses in savings.

Retirement

Few people want to work forever. A good retirement plan gives you a targeted date to stop working and live the retirement of your dreams.

Most financial experts suggest you save at least 10% to 15% of your pre-tax income for retirement to maintain the same standard of living during your golden years.

Insurance

Insurance is a financial backup plan for the unexpected. Major medical expenses, car accidents, or fires at home would bankrupt many people without good insurance.

Popular and important insurance includes health, auto, home or renters, and life insurance.

What are some signs you’re financially healthy?

Few people have so much money they can treat it with a carefree attitude, but people with good financial health don’t have to worry about their money regularly. They pay attention to different parts of their finances and make sure needs are met with room to spare.

In a 2019 report, the Federal Reserve[2] found that 39% of adults couldn’t cover a $400 financial emergency from savings.

After millions lost their jobs in March 2020 and the following months due to COVID-19, this number almost certainly grew.

If your car broke down during your morning commute or your furnace gave out on a cold Saturday night, could you afford the expense?

If you were one of the tens of millions of unemployed Americans who lost their jobs in the COVID-19 economic downturn, you would likely need a lot more than $400 saved.

In a real emergency, you could also look to credit. But that’s only an option if you have a good credit history and a good credit score, also indications of good financial health.

If you have confidence you can meet financial uncertainty and are on track to meet your long-term financial goals, you are financially healthy.

What are some red flags you might need to work on your financial health?

If financial stress is dragging down your physical or mental health, it could be a sign you don’t have good financial health.

Here are some red flags you should work on improving your financial health:

  • You can’t afford a common financial emergency from savings.
  • You have high credit card balances you can’t afford to pay off in full.
  • You’ve been turned down for a credit application, rental home, or job because of your credit report or credit score.
  • You worry or stress about money several times per week.
  • You’ve been forced to use expensive financial products like payday loans or check-cashing shops.
  • You don’t know how much you spend each month and don’t have a budget.

These are just a few ways poor financial health might rear its head. But nobody is stuck with a bad financial situation forever.

You can take steps to improve your financial wellbeing and feel empowered to upgrade your finances over time. For examples, see our 30-day money saving challenge.

How can you measure your current financial health?

There is no single measurement that shows your financial health, but here are some good indicators to consider:

How many months of expenses you have saved for emergencies

Your budget should tell you how much you typically spend per month. Compare that to your emergency fund to find how many months of savings you have on hand. Strive to save a minimum of three months of expenses.

Ultimately though, start with saving whatever you can.

Your debt-to-income ratio

Look at your credit report to see how much you owe each month in debt payments. Compare that to your monthly income to calculate your debt-to-income (DTI) ratio.

One popular rule says you should never have a DTI higher than 36%, but lower is always better.

Your credit score

Your credit score is a number between 300 and 850 that tells lenders how likely you are to pay back a loan or credit card balance. Good credit scores start at 650, above average scores start at 750, and excellent scores start at 800.

How many years of income you have saved for retirement

Young professionals likely have scant retirement savings while people closer to 65 or 70 should have more saved up. This Nerdwallet calculator can give you a high-level view of whether or not you’re on track.

Total life insurance coverage

In a worst-case scenario where you’re no longer around, would your family be able to stay in your home and pay the bills?

While one estimate for life insurance coverage recommends 10 times your annual income, how much you need really depends on several factors – like whether you have dependents, a spouse who works, etc.

For example, someone who is young and single might have very different life insurance needs than someone with a stay-at-home spouse and 3 young kids.

If you’re doing well on all of these categories, congratulations! You’re doing a great job of planning for the future and managing your finances. If you’re short of where you want to be, follow the steps in the next section to level up your finances.

How can you take better care of your financial self?

Most people wish they had an extra zero or two at the end of their bank account balance, but the lottery isn’t a solid retirement plan.

Instead of gambling your future, try one of these strategies to improve your financial health:

Pay off high-interest debt

High levels of credit card debt and other debt with high interest rates can eat up a big portion of your income. Pay off these types of debt and avoid them if you can. Learn more about the high cost of bad credit.

Improve your credit score

Paying your credit cards and other debt on time every month is the biggest factor in your credit, followed by your credit balances.

If a focus on these areas doesn’t improve your score enough (or fast enough), consider a credit builder loan or secured credit card as other tools to help build your credit.

Automate your savings

It’s hard to remember to move money from checking to savings every payday. Instead, set up an automatic recurring transfer or split your direct deposit from work between two accounts to fund your savings without thinking about it.

Increase retirement savings

If you can afford to, save at least 10% or 15% of your income in a 401(k), IRA, or another retirement account. If you get an employer retirement plan match, always take full advantage.

Grow your income

Getting a promotion at work is one of the most common ways for people to grow their income. You can also consider a side hustle like delivery driving, rideshare driving, or selling a product online as a way to increase what you bring home every month.

Anyone can achieve financial health

You don’t have to be rich to be financially healthy. You don’t need a six-figure income or C-suite job for a stable financial future.

But your finances won’t fix themselves if you don’t pay attention. A consistent focus on your budget and other financial matters is essential, particularly if you are trying to turn around financial struggles.

Here are some more statistics on how the average American household is faring with their finances:

Ways we are failing at financial health

Sadly, the average American’s financial status has fallen ill these days – with more than half of the U.S. population struggling financially. (And that was pre-COVID).

The Great Recession may have ended years ago, but most households still face stagnant wages and increasing debt. Many Americans are actually considered to be poorer than they were a decade ago.

Why might that be?

It could be because, according to the 2015 Stress in America Report[3] by the American Psychological Association,18% of adults say money is a taboo subject in their family and 36% say talking about money makes them uncomfortable.

On top of this, the 2016 Money Matter on Campus report[4] found that from 2012 to 2015, college students showed a significant and steady decrease in nearly all fiscally responsible actions.

From following a budget to building an emergency fund to paying credit card bills on time, the incoming rush of new grads was concerning.

Couple an awkward topic with what we can only assume is a lack of personal finance education for our youth – it’s no wonder adults aren’t taking their financial futures more seriously.

Here are 6 ways Americans are failing at financial health.

1 – More than half the U.S. population is struggling financially.

According to the Center for Financial Services Innovation 2015 Understanding and Improving Consumer Financial Services in America report[5], 57% of American adults struggle financially.

Worse yet, this challenge primarily affects those who have the greatest impact on our economy. While 64% of all Americans report money as a very significant source of stress, those stats raise sharply when looking at:

  • Parents (77%)
  • Millennials (75%)
  • Gen Xers (76%)

2 – 72% of Americans are experiencing financial stress at least some of the time.

Regardless of economic climate, money and finances have consistently topped American’s list of stressors since 2007.

In some cases, people are even putting their health care needs on hold because of financial concerns.

While in 2007, stress levels were universal regardless of income, today, lower-income households report higher overall stress. In fact, lower-income households are twice as likely as higher-income households to feel financial stress all or most of the time (36% vs. 18%).

The top sources of financial stress reported include:

  • Paying for unexpected expenses (54%)
  • Paying for essentials (44%)
  • Saving for retirement (44%).

3 – More than half of adults (54%) say they have “just enough” or not enough money to make ends meet at the end of the month.

Sadly, many American adults barely scrape by each month – and if you’re a young female, the odds are even worse.

Nearly 49% of women and 57% of millennials say that paying for essentials is a significant source of stress (only 38% for men).

While this applies to both lower-income and higher-income households, 30% of adults who make less than $50,000 a year report that they don’t have enough money to pay their bills at the end of the month, compared with 11% of adults who make over $50,000.

Even more scary is that parents make up the majority of this category with a whopping 71% reporting they have “just enough” or not enough money to make ends meet.

More than half of parents (58%) say that paying for essentials is a significant source of stress.

4 – Nearly one-third of Americans (32%) say their finances prevent them from living a healthy lifestyle.

There are lots of tips and tricks for living healthy on a budget, however, 55% of adults in lower-income households say they handle stress through sedentary or unhealthy habits such as watching TV, drinking alcohol, smoking, and stress eating.

People who report having extreme financial stress are also more than twice as likely to rate their health as fair or poor than those who report low financial stress (44% vs. 17%).

5 – One-third of college students say financial stressors have negatively impacted their academic performance or progress.

With almost 64% of college students using loans to help them pay for college, it’s no surprise that the estimated student loan debt in America is around $1.2 trillion.

The average Class of 2016 graduate racked up $37,172 in student loan debt, up 6% from the previous year.

Thankfully, according to the National Student Financial Wellness Study by Ohio State University, more than three-quarters of students still think college is a good investment for their financial future.

Of the students surveyed:

  • 32% reported neglecting their studies at least sometimes because of the money they owed.
  • 3 out of 10 students had to reduce the number of classes they took
  • 16% had to take time off and 13% had to transfer to another school because of the money they owed.

While this may not seem like a huge amount, only 40% of college students finish their bachelor’s degree in four years according to the National Center for Education Statistics.

The cost of taking one extra year to finish a degree is:

  • At a public college: $18,600.
  • Two extra years at a public college total $37,500.
  • At a private college: $54,000.

When NerdWallet ran their analysis[6] – students who take six years to finish a bachelor’s degree, for example, can miss out on six figures of lifetime retirement savings.

6 – Nearly 1 in 5 Americans say they either considered skipping or skipped going to the doctor because of financial concerns.

As we said before – physical health and financial health are fundamentally key to living a happy and successful life.

However, nearly 3 in 10 lower-income adults have either skipped (20%) or considered skipping (9%) necessary doctor visits because of finances.

When looking at financial health, 44% of lower-income Americans cite out-of-pocket healthcare costs as a significant source of stress, as opposed to only 34% of higher-income adults.

Couple this with 29% of lower-income adults reporting a sense of loneliness and isolation in the past month due to stress (vs. 21 in higher-income adults) and you’ve got a recipe for a whole host of health concerns.

So why is financial health so important?

Your financial health impacts nearly every facet of your life – from affording a yoga class after work to how long you’ll need to keep working before retirement.

While many people have taken steps to live more economically and improve their financial health, there’s still more to be done.

As with any exercise, financial health isn’t something you can achieve through a one-time intensive workout. You must cultivate your present financial health and consistently look to the future in order to persist through times of economic hardship.

By managing day-to-day finances as well as seizing opportunities for financial security, you’ll be able to create resilient and lasting strategies to carry you through the ups, downs and everything in between.

By Eric Rosenberg, MBA and Cara Herbert
Reviewed by Lauren Bringle, AFC®

9 Tips Anyone Can Use to Achieve Financial Success

It’s not too hard to find stories in the media about seemingly ordinary people finding great financial success. You hear about what seems like an ordinary guy or gal who worked in what seemed like an ordinary career path and somehow they’ve got $1 million in the bank. How did they do it?

Unfortunately, many of those stories have additional details that you don’t read about in the headlines. Often, you’ll find that those people practiced a level of frugality that seems like complete misery to you. They live in a very tiny home or they eat a very strange diet or they never leave the house or they homestead for all of their food needs. Sometimes you’ll find that although their job title is ordinary, they’ve actually earned a ton of money through either a higher-than-average salary or some other financial benefit (like receiving an inheritance of some kind).

At that point, the walls come crashing down. Rather than giving the idea that anyone can do this, they again reinforce the idea that financial success is something that only occurs in exceptional circumstances.

It’s actually quite possible to achieve financial success without extreme frugality and without a lot of wealth already in the bank and without a huge salary.

Since the start of our professional lives, my wife and I have never earned more than about 25 percent above the average American salary with the exception of one year where I almost worked myself into a mental breakdown (never again…). We don’t make a ton of money.

At the same time, we’re not extremely frugal. I try different things for experiments in my writing, but in our day to day lives, I don’t consider us to be insanely frugal in any way. We eat normal meals, have normal hobbies and have normal lives.

Yet, over the past decade, Sarah and I have paid off two car loans that measured in the five figures, then eventually replaced those cars and paid for them in full. We paid off our student loans, which was in the five figures for each of us. We also paid off a ton of credit card debt, also measuring in the five figures. We bought a four bedroom home and then paid off the entire thing in about four years. Right now, we have no debts — not even a mortgage — and are saving for actually retiring early.

How is that even possible? It’s possible thanks to using a handful of very smart strategies along the way. The rest of this article is a basic blueprint for what we did.

Focus your frugal efforts on things you don’t care about (or barely care about)

People have this false impression that frugality is all about deprivation. When people think about being frugal, about cutting back on their spending, the first things that their mind flashes to are the expenses in their lives that they really care about.

Think about it yourself. When I suggest cutting back on your spending, what do you think about? It’s incredibly likely that most of your immediate thoughts come down to things that you get a lot of personal pleasure out of (with a few of your worst spending mistakes sprinkled in there for good measure).

That’s a completely backwards approach to frugality. That’s an approach that’s virtually guaranteed to be miserable and guaranteed to fail. You’re simply not going to succeed in terms of cutting your spending if your image of cutting your spending is taking away the things you most enjoy in life.

The truth is that the actual success of frugality comes from cutting away things you barely notice and then not spending that money you save but instead using it for something financially positive. It comes from doing things like air sealing your home so that you’re not wasting warm air during the winter months. It comes from things like buying store-brand hand soap and store-brand laundry soap. It comes from things like making a grocery list before you go to the grocery store. It comes from negotiating for a better insurance package. It comes from moving closer to work so you don’t have to drive each day.

It doesn’t come from eliminating a stop at a coffee shop if you truly love that perfect morning coffee. It doesn’t come from completely abandoning your favorite hobby. It doesn’t come from sitting at home by yourself while your friends have fun. Those are unrealistic visions rooted in a fear of change, a change that has nothing to do with an effective approach to frugality that will actually earn dividends.

Use this approach when you look through big lists of money-saving tips. Don’t do the ones that sound like they’d make your life substantially less enjoyable. Instead, focus on the ones that seem like they’d feel almost effortless and the ones that, when you think about it for a second, you realize that it wouldn’t be much of a change. Focus on ones that involve doing one big thing up front and then having it permanently reduce a bill. That’s effective frugality. That’s the kind that will last. And, honestly, it’s pretty fun, because you realize you’re making a low-impact change to your life that will have better long-term results.

Learn how to cook well enough so that it’s more convenient to eat at home

Food is such an enormous drain on the budgets of so many families simply because of the huge cost difference between restaurant food and meals prepared at home. The difference between the two is astronomical, and when you keep repeating that cost difference several times a week, it really adds up.

Believe it or not, the average American family eats out more today than they eat at home, even with that huge price difference. Why? There’s this perception that eating out is simply way more convenient than preparing food and eating at home.

In my experience, that perception is borne out of a lack of comfort that many people have in the kitchen. Cooking a decent meal seems intimidating. Even cooking a simple meal can seem intimidating. When you’re intimidated, your mind amplifies the challenge of the work involved, and when your mind starts to amplify the work involved, it makes eating out seem so much easier that it makes up for the cost difference.

How do you beat that perception? You beat it by actually getting experienced in the kitchen, and you do that by actually making yourself cook lots of meals at home.

Every time you cook a meal at home that you would have otherwise consumed at a restaurant (or takeout or delivery), you’re going to save a little money, but more importantly, you’re going to become a little more skilled in the kitchen.

Something like poaching eggs and making coffee, which might have seemed like an enormous chore in the morning, becomes something you can whip out while getting ready for the day. Something like beef stew might have seemed like a huge challenge, but soon you begin to realize that you can just chop up the ingredients the night before in about ten minutes, dump them all in a slow cooker in the morning, and come home to finished beef stew after work.

As that transition occurs, the intimidation factor of cooking at home will become lower and lower. It won’t seem overwhelming to come home and make even a fairly complicated meal. And, believe it or not, it will actually seem easier to just go home and make something simple like a pot of pasta and sauce than it will to go out to a restaurant.

Doing this transforms eating out (a relatively expensive endeavor) from a crutch that you have to rely on to get through the week to an occasional treat that you use to enjoy an unusual meal.

Don’t waste food

I’m often stunned at how much food many households simply waste. They’ll buy something at the store, let it sit in the fridge or on the counter until it goes bad and then toss it. They’ll buy a food item, stick it in the pantry and then when they discover it again they judge it to have “gone bad” and just toss it. They’ll pack up leftovers from a meal, stick them in the fridge and discover them several days later with a thick coating of mold.

All of that is wasteful.

Here’s a new approach. At the start of each day, look in the fridge and see if there are any leftovers you can eat today instead of prepping a meal. Doing that turns one of your meals into a freebie and guarantees you won’t be tossing food in the trash. At the start of each week, when you’re planning meals (something we’ll get back to in a minute), look in your pantry and freezer and use that stuff as the basis for your meal plans. That way, you really don’t have to buy all that much at the grocery store. If you’re looking for a snack, look at what’s in the fresh food areas of your home–are there fresh fruits in the fruit bowl? Are there fresh veggies in the crisper?

Those steps alone take care of a lot of the food waste that a family undergoes. Remember, whenever you toss food in the trash, you’re literally throwing away money. That food cost something to get it into your home and now you’re just tossing it. Try to avoid doing that.

Scale back treats until they become treats again

Humans are routine-oriented creatures. We often fall into daily routines and weekly routines that we just repeat over and over again. Usually, we do them without thinking or feeling — they’re just the norm.

Every time you spend money as part of that daily routine or that weekly routine, you should be questioning whether or not it’s worth it. Are you really getting real value from that expense?

What you might notice if you ask that question seriously is that there are many things in people’s daily routines that aren’t really necessities at all. They’re basically treats. Think of a morning cup of coffee from Starbucks instead of from the coffee pot at work. Think of a regular stop at a store that caters to your hobby.

When you repeat such a thing often enough, it ceases to be a treat. It becomes routine. When something becomes routine, not only does it become a required expense in your life, it also loses a lot of the pleasure. It ceases to be a treat and just becomes “normal.”

One of the best “frugality secrets” out there is that life is actually much more enjoyable if you make your normal routine as inexpensive as possible and then spice it with treats with enough intervals in between so that they really feel like treats.

So take your daily stop at Starbucks and spread it out to become a weekly thing or even an every-other-week thing. Instead, get your morning coffee from the shared pot at work.

Here’s the weird part: you’ll actually start to find that drinking it once every week or two reinstitutes it as a treat. It will make the cup much more of a pleasure than before, when it had become a dull routine.

Make your routine bare-bones, then add treats sparingly so that they’re actual treats instead of just a boring routine. You’ll spend a lot less money and the treats will actually bring you more joy and pleasure than before.

Be organized in your thinking and planning every time you would spend money

This one’s simple: Whenever you are thinking of spending money, give it some advance thought and plan for it a little bit.

When you go to the grocery store, make a meal plan first and make a grocery list from that plan. That way, when you do go to the store, you have a list to follow.

When you go to the bookstore, give it some advance thought and decide on what exactly you’re looking for as precisely as you can. That way, when you go there, you’re not just wandering around.

Don’t put yourself in situations where you would spend money without thinking about it in advance, and that means far enough in advance that you’re not caught up in the moment of the purchase. Think about your grocery list at home and write it down rather than thinking about what you’ll buy on your way into the store.

This doesn’t mean that you can’t ever be spontaneous with your money. It just means that, if you’re going to be in a position to be spontaneous, you’ve already put some reasonable boundaries on it so that you’re not wrecking your finances by doing so.

For example, if I’m going out with friends on an unplanned evening, I’ll think about that evening in advance and take only enough cash to handle a reasonable evening out on the town rather than a credit card which can open the door to a huge amount of impulsive spending, far beyond what I can reasonably afford. If I take $40, that means I’ve thought about it in advance and I know that I can feel completely fine spending that $40 however I please and still know that everything in my life is still right on track.

Intentionally move your hobby time away from accumulating and towards doing instead

When you’re passionate about a particular hobby, it’s easy to fall into the trap of accumulating stuff related to that hobby rather than actually doing things within that hobby.

For example, if you’re an avid book lover, you can often find yourself building up a huge book collection rather than actually, say, reading books.

This is a reflexive trap that many people fall into as their lives become busy. They begin to get a sense that they don’t have time for hobbies that they once loved, so to fight off that perception, they buy items instead as a substitute for that hobby time.

Here’s a much better approach: schedule blocks of time to actually practice your hobbies. Put them in your calendar first, before other appointments, and actually keep that time sacred.

Give yourself time to read if reading is your passion. Give yourself time to play board games if tabletop gaming is your passion.

That way, when you’re tempted to make a purchase, instead you can look at that block of time and think about the activities you’re actually going to do instead of the things you’re just accumulating.

You’ll find that when you do this, your desire to accumulate stuff actually melts away. For example, that time you might have spent thinking about all of the books you wish you had time to read instead becomes time you spend thinking about that book you’re going to read this weekend. Actually owning that book becomes secondary, and that makes things like stopping at the library much more appealing because the library is focused around using rather than accumulating.

Always question every purchase

The last few entries are actually just specific instances of this overall strategy, which really sums up what a frugal mindset really is. You just question every single purchase.

That doesn’t mean that you cease spending money. It just means that when you’re about to spend money, you ask yourself critically whether this purchase really makes sense, and after you’ve made a purchase, you again reflect on that purchase critically and see whether it really made sense looking back on it.

A financially responsible mindset takes those situations and constantly runs them through their head. When you’re driving or sitting at the doctor’s office or whenever idle thoughts are running through your head, you just parse through a few recent buying decisions or some buying decisions that might be coming up. Do they make sense? Is there a better way to do it? Can I just borrow that item? Can I buy the store brand instead?

What you find is that you start to whittle away a lot of your expenses. You start to see unnecessary expenses as being unnecessary.

At the same time, what you find is that you’re not cutting away at the things that are really important to you. If you spend time considering a purchase, it really becomes clear after a bit which purchases really bring value into your life (and you don’t cut them) and which purchases do not.

That’s the purpose of such reflection. It cuts your spending down to the stuff that really matters.

Treat your career as an opportunity, not an obstacle

Many people look at their career as drudgery. It’s something that life forces them to do and they hate every minute of it. They try to avoid actually doing much work and try to get by doing the minimum needed to keep their job.

That’s the wrong perspective, and it’s one that needs to be thoroughly replaced if you want to see lasting financial success.

Instead, see your job as an opportunity. Don’t live to work, work to live. The time you spend at work is time invested so that you can do the things you want in the other areas of your life. The time and energy you invest there is returned to you in terms of financial security and the ability to do all kinds of things in life.

Not only that, it’s an opportunity to open up even more freedom.

Look, if you’re going to be at work for eight hours anyway, why not use that time intentionally to maximize every possible dollar you can earn from your job? You can do that by simply taking on the difficult tasks. Look for situations to challenge yourself at work. Look for opportunities to get free education. Look for things that can bolster your resume and produce a great work review.

If those things aren’t appreciated in your workplace in terms of better pay, so what? They make for great resume material and you can always look for a job elsewhere when your resume starts to look really good. You may even find opportunities for independent work, like taking on a gig as a freelancer in your spare time or setting up a small business.

Just look at those hours you’re investing in your career as, at worst, an exchange for the things you have in life and, ideally, as an opportunity to improve your income and make your path to financial success move along that much faster.

Treat these changes as your new normal

All of those changes seem doable on their own, but for most people, they’re different than the habits and routines that they currently have. These things represent a behavioral shift, a different way of approaching day-to-day life.

The thing is, it requires a permanent shift to these kinds of behaviors in order to make them work. These aren’t things that you try on when you think of them. These need to become statements that describe normal life for you — to do things differently than this needs to become the “strange” or unusual pattern.

Without that change in your sense of normal behavior, these changes won’t stick. They won’t become permanent alterations in your behavior and without that permanent change, they won’t bring about the financial results that you desire.

It’s like the old adage goes: The definition of insanity is to keep doing the same thing and expect different results. If you don’t change something — and by change, I mean change it permanently and establish it as the new normal in your life — then you’re going to keep getting the same results in life. There’s no way around it.

For some people, adopting a lot of changes at once is the best approach. For those people, making all of these changes in one swoop is what they need to do. For others, gradual change works best and they should focus on adopting new changes one at a time and letting them settle.

Remember, the key is to be on guard with these life changes until they truly become normal and the old way of doing things becomes strange. It isn’t until you wake up one morning and realize that your sense of normal now includes those things that financial success will really start pouring into your life with little apparent effort.

A Few Things to DO to Improve Your Finances

Whether you’re stuck in a cycle of debt, earn too little to maintain your desired standard of living, or simply want to get a jump start on saving for a major financial goal such as buying a home or investing, you may need help to get on track with your objectives. Follow these strategies for taking control of your finances right now.

Read Books About Personal Finance

If you need help with your finances but aren’t sure where to start, seek financial wisdom from books written by experts.

There are many books out there on taking control of your finances, from how to get out of debt to how to build an investment portfolio. Books offer a great way to change your approach to managing money.

To boost your savings, buy used financial books online or borrow them for free at your local library. Consider audiobooks if you would rather receive the advice by ear.

Start Budgeting

If you are struggling to handle your finances, then you likely need to create a budget—a plan for how to spend your money each month that is based on how much you typically earn and spend. A budget is your best tool to change your financial future.

To start, write down your income and all your expenses, and then subtract the expenses from the income to determine your discretionary spending. At the start of each month, set up a budget to allocate how discretionary funds get spent. Track the spending over the course of the month, and at the end of the month, determine whether you stuck to the budget.

If you spent more than you made, fix your budget by cutting unnecessary expenses or earning more. Implement the revised budget the next month to start living within your means.

Reduce Monthly Bills

One of the easiest things you can do to take control of your finances is to cut your monthly expenses.

While you may not be able to reduce certain fixed expenses, such as rent or a car payment, without drastically altering your lifestyle, you can reduce variable expenses, such as clothing or entertainment, by being flexible and thinking frugally.

You can, for example, reduce electricity consumption to lower your utility costs, choose different providers for your home or life insurance, or buy your food at a discount at bulk stores.

Cancel Cable

Speaking of cutting monthly bills, there’s likely one bill that you could cut right now and potentially save hundreds of dollars every month: your cable bill. If you need a little help with your finances or you just want to reach your financial goals more quickly, you should consider cutting cable.

You don’t even have to give up TV altogether. “Cutting the cord,” that is, eliminating costly cable services in favor of low-cost streaming services such as Netflix and Hulu, allows you to watch the shows you love without spending a ton each month.

If, after reviewing various streaming options, you’re still determined to stick with your cable provider, downgrade to a cable package with fewer channels to save a little money every month.

Stop Eating Out

Looking for an easy way to take control of your variable expenses every month? Curb your habit of eating out. The occasional splurge at a nice restaurant is fine, but the savings can add up if you start cooking at home or bringing bagged lunches to work instead of eating out each day.

Start small by cooking at home at least once a week. The next week, start taking your lunches to work. You may be surprised at just how much you can save. Over a 40-year period, brown-bagging it can save you $1,300 per year, or more than $50,000 over a 40-year career.1


7 Steps to Financial Freedom

7 Steps to Financial Freedom

Achieving financial fitness requires discipline and determination over the long term, just like running a marathon. CFA Institute believes that becoming financially fit means feeling good and confident about your financial situation. It means being able to manage your money in order to meet your current and long-term needs. As with any type of training, becoming financially fit requires learning the principles and best practices that others have used to achieve their financial objectives.

• You can’t reach your goals if you don’t set them • Planning how to use savings and investments to reach your goals is key • Determine how much you need to save over time to finance your dreams • Include an emergency fund in your financial goals • Create a budget that includes necessities, required expenditures, discretionary items, and the periodic savings necessary to finance long-term financial goals • Track your spending. Compare it regularly against your budget and make changes to your spending habits where necessary • Use the knowledge and skills you gain over time to spend less where possible and save more

• Curtailing the use of debt to consume is crucial when trying to optimize savings and investment capital

• Avoid high-interest rates and potential fees by minimizing the use of credit cards

• Build a debt management strategy to reduce and eliminate high-interest debt and to accelerate the payment of debts like student loans and your mortgage if they are a priority

• Put money in your savings account using direct deposit so that you don’t spend it.

• Make sure regular contributions make it into retirement and other investing accounts

• Use autopay to manage and pay recurring bills like mortgage or student loan payments.

• Use a money management application to help track payments and other expenditures

• Spending does not have to grow at the same rate as income

• Growth in income, bonuses, and other windfalls can increase savings and investment accounts

• Keeping expenditures relatively constant over time is a key method in achieving a secure financial future

• Establish a low-cost, globally diversified portfolio that’s appropriate to achieve both short- and long-term goals

• Use a broadly diversified portfolio of global stocks and bonds to obtain a proper return in regards to your attitude about, and ability to take, financial risk

• Where appropriate, think long-term and don’t be overly focused on the short-term performance of your investments. Stick to your investment plan and review your portfolio periodically to stay on track

• Being financially fit means understanding and utilizing the main principles and best practices in saving and investing • When needed, get help from an accredited investment adviser that can help you build an investment plan and portfolio to meet your financial needs Maintain a steady lifestyle To begin your training toward a more secure financial future, follow these 7 Steps to Financial Fitness: Like any type of training, taking the steps to financial fitness isn’t easy. It takes time, energy, and the discipline to obtain and hone the necessary skills over time. The best part of the 7 Steps to Financial Fitness is that they apply to anyone, regardless of how old you are, where you come from, or how much money you earn. These principles work because they are proven to help people optimize their savings, which can then be utilized to meet current financial needs and build long-term wealth.

How to Set Goals for 2021

The new year is right around the corner, and you know what that means . . . time to give 2020 the boot for good. And after you tell it “don’t let the door hit you on the way out,” get ready to welcome 2021 with open arms.

People love the whole “fresh start” that a new year brings. That’s no secret. But this year—more than ever—we’re all ready to embrace the fresh, new year with hope of what could be. And a huge part of that is goal setting.

We know you’re probably thinking: Goal setting? Ha! My goals went out the window in 2020. I was just trying to survive, and now you want me to think about goals? Yeah, right.

Whoa there, Negative Nancy. We get it. We really do. But having goals in life is essential—especially when things look chaotic. So this year, take some time to really think about those goals.  And remember, just having good intentions alone changes nothing. Nada. Zilch. You can make resolutions all you want—but a resolution without a plan is just plain old wishful thinking. It’s time to rethink how you see goal setting.

Read More Here!

Financial Relief – Break Free

How do you balance debt, save and enjoy the life you’ve earned?

This is such an important part of everyone’s true well being. Yet, most of us do everything we can to avoid the discomfort of truly facing our financial health.
Are you just trying to make it for now and put off all of those”big” decisions until you get on better footing?
Learn strategies to get you to the financial dignity you crave and have earned.
Finances are such a struggle to get under control for most of us . It seems like everything from education to basic living expenses like food and clothing have gotten so unmanageable. You have and they have. We live in a fascinating time to be alive. Smart phones, computers, technology in every field is evolving to make our lives easier, right? Then why is is so tough to make it? Why do so many people have anxiety and why does so much of it stem from financial worry?
Even if you make a high income, you still have elevated housing costs, food and likely those crazy student loans! It seems like everywhere you turn , you can not escape getting deeper and deeper into the hole. But what if there is a better way? What if there was a way to get you out of debt so that you do not have to feel out of control or embarrassed again? Simple steps can get you on track to have the abundant life you deserve.