4 Financial Stress Triggers and How to Manage Them
Money can help catapult you closer to larger life goals, making rewarding milestones, like buying your first home or retiring early a reality. On the flipside, the lack of money can also feel like a setback keeping those very goals away from arms reach.
According to a 2018 Northwestern Mutual study, 44% of Americans claimed that money was a source of stress. In that same study, an overwhelming nine out of 10 respondents said “nothing” makes them happier or inspires more confidence than having their finances in balance.
Knowing what the most common triggers of financial stress are — and ways to manage them — can help you feel more empowered about your financial health.
1. Rising medical bills
Overcoming health challenges is difficult enough from a physical and mental perspective. Add to this the sky-high medical bills that inevitably come and it’s easy to understand how health-related bills are among the top of the financial stressors list.
The Urban Institute, a nonprofit research group, found that 33% of all U.S. debt in collections was medical debt. When faced with financial hardship during a personal health crisis, medical bills can feel like an extra burden.
What might help: If you are fortunate enough not to have the burden of a costly emergency room bill or multi-thousand-dollar treatment needing to be paid, a health savings account (HSA) can offer some relief. Dollars socked away in an HSA are tax-free. Reach out to your health insurance provider or local bank or credit union to see if they offer this helpful savings vehicle.
Already overwhelmed with medical debt? Reach out to your healthcare provider to negotiate a lower bill or reduced monthly payments. With the high level of medical debt that goes to collections, your provider might be willing to accept a lower amount for its services, based on your financial circumstances.
2. No retirement in sight
Retirement planning is years in the making, which is why it’s so easy to deprioritize it if your retirement years are decades away. However, as Americans work longer workweeks and endure higher costs of living, the goal of retiring — at all — can feel less accessible, and less realistic.
What might help: The great part about saving for retirement is that, because it’s a long-term game, even a little savings goes a long way. If your employer offers a 401(k) retirement account, participate ASAP even if it means you’re only contributing 2% of your income. As the opportunity arises to increase your contributions, you’re always welcome to kick it up.
Of course, if you’re able to maximize your allowable contributions, that’s ideal. This is especially valuable if your employer offers retirement matching. Matching is essentially free money that your employer offers to incentive you to save toward your future retirement. Some companies offer a match up to a certain percentage. For example, it might match what you contribute to your retirement account, up to a maximum of 5% of your paycheck.
3. Overwhelming debt
Average household debt in 2018, according to LendingTree, was at $144,100. With six-figure debt looming over your head (plus interest), paying it off can feel like you’re putting in 10-times the effort, but only inching forward to being debt-free.
What might help: It goes without saying (but we’ll say it anyway!) — hitting the stop button on additional credit card expenses and other lines of credit is essential for any debt repayment plan.
One way to help make debt more manageable is through debt consolidation. You can either consolidate multiple debts into one low-interest loan or zero-interest credit card, or lower monthly payments by extending your loan term (though, doing so may cost you more in interest over time).
Take an audit of your debt accounts, including credit cards, car loans, and even personal student loans. Tally your balances for each account, along with interest rates and fees, to see which debt makes sense to consolidate. Make sure to shop around and compare rates and terms from different lenders before taking the leap.
4. Unplanned emergencies
The old saying does, “Expect the unexpected”, but it’s hard to do so when you’re not financially prepared to withstand life’s surprises. Instead of being blindsided by a large emergency expense and having to turn to credit cards or a personal loan as a financial crutch, chip away at an emergency savings account of your own. Generally, an emergency fund to cover at least six months of household expenses is a good goal to start with.
If that feels too difficult, don’t get discouraged — reaching for even a small goal, like your first $1,000 emergency fund, is enough to build your momentum.
What might help: When it comes to the act of saving money, automating the process can set you up for success. But putting your savings contributions on auto-pilot you can focus your mental energy on other financial goals, like retirement or paying off debt.
You can automate your savings by diverting a percentage or set dollar amount of your paycheck directly into your savings account. Talk to your employer’s human resources to see if you can have them direct a certain amount of your paycheck to your savings while the rest goes into your checking account.
If your company doesn’t offer this, you can set up automatic deposits from your checking account to your savings through your financial institution.
These are just a few of the major causes of financial stress. You may resonate more strongly with one financial stress trigger or feel the burden of many, simultaneously. If the thought of sorting out a plan for each of these areas feels too overwhelming, you don’t have to figure it out alone.
Reach out to a financial coach to explore the financial areas that are causing you the most anxiety and create a plan that you can feel confident about.