In my last post I talked about how, during the process of settling your spouse/partner’s estate, you’ll have to go through all of the financial and business accounts. While doing so, it’s a good time to take stock, tally everything up, and do a check of your own net worth. It’s also a good time to do a cash flow assessment to give you an idea of how much “wiggle room” you have with your spending.
It’s possible, after completing the exercise, you’ve come to realize you have money problems. You may be feeling overwhelmed, scared, stressed out, and perhaps even depressed as money problems are apt to do.
When you are stressed, it’s easy to think there are no solutions. But, here are seven steps to help you sort out the puzzle pieces of your financial difficulties and eliminate these stressors from your life.
7 Steps for Dealing With Financial Stress
1) Be honest with yourself — A lot of financial stress comes from denial. Eliminating this anxiety starts with admitting that problems exist and identifying what the specific stress points are. Common dilemmas include:
Debt — Every cheque that comes in is consumed by paying off the mortgage, personal loans, credit card debt, or money you owe friends and family.
Cash flow — Expenses always seem to outweigh your income. Unexpected expenses punch a hole in your bank account when you can least afford it.
Lack of knowledge — Your spouse or partner was the one who managed the household money. You seem lost and unfamiliar with what you’re supposed to do.
Overly complicated — You hold accounts at several different banks and investment firms. Statements are coming from everywhere. Nothing seems organized.
You may be struggling with one or more of these issues. You may even have different obstacles. Whatever the case, clearly identify where the problem lies.
2) Recognize what you can control — Under stress, it’s easy to believe everything is beyond your control. This is rarely the case. There are always concrete steps you can take to remedy your situation. Decide what you can change. For example:
Debt — Compile a complete list of all your debts. Rank them from smallest to largest or from highest interest rate to lowest. Continue to make payments on all of them, but begin by paying a little extra on the account at the top of your list to pay it off faster. When it’s paid off, take the money you were putting on that account and add it to the amount you’re paying on the second debt on your list. As each account gets paid off, add those funds towards the next debt until they’re all cleared up. Cut up your credit cards or close accounts as you clean things up so you don’t start racking up debt again. There are other strategies for debt repayment plan, but the key is to make a plan and implement it.
Cash flow — Review your expenses and using tough love on yourself find out where you can cut spending. Set up a budget and stick to it. Track your spending to find out where your cash is mysteriously disappearing. Look for part-time work or sell some of your “stuff” to raise extra cash.
Lack of knowledge — Today it’s easier than ever to learn how to do anything. Google the financial topics you struggle with. If you’re a visual/aural learner like I am, do a search on YouTube for videos to help you . Cut out TV or social media time and dedicate a couple of hours a week to educating yourself so you can gain a sense of independence and self-confidence.
Overly complicated — With your new found knowledge, consider consolidating your accounts into a system that makes sense for you. Develop a filing system (paper or electronic) to track your statements. Set up automatic bill payments, timing them to coincide with bank deposits.
3) Get help with areas you need help on — too often, people choose not to get help when they need it. There’s no shame in getting help from a professional (or even a wise friend or colleague) when you need assistance. As for cost, consider how much letting your problems compound over the years has actually cost you. Using professional help to get your problems finally fixed could save you a TON of money in the long run consumer agencies also offer free resources for credit and basic financial counselling.
4) Set realistic, achievable goals — Most people with money problems haven’t taken the time to set “SMART” goals with their money. The acronym “SMART” stands for:
Specific — Don’t say, “I want to get out of debt”. Rather, set a goal such as “I plan to pay off my credit cards within one year”.
Measurable — Break down the elements of your goals into measurable amounts such as “I will pay off my credit card in ____ months by putting $_____ every payday against the account. I will check my account on the first Monday of every month to monitor my progress.”
Attainable — Make your goals realistic. It helps to break your larger goals into smaller, achievable steps. You want to make your goals firm enough to require effort, but not so lofty that they would need a miracle to achieve.
Relevant — Retiring in a luxury condo at a beach resort might be a desirable goal. You may have a specific one in mind, know the cost, have measured what it would take to buy it, and it may be attainable within your resources. But does the goal really fit within your values and principles? Make sure your goals are relevant to the big picture of your life.
Timely — Give yourself a schedule to achieve your goal, rather than hoping to accomplish it “someday”. Occasionally, timeframes need to be adjusted — like putting off retiring for an extra year or two — so don’t make them too rigid as to set yourself up for disappointment. But, make sure you choose a time frame to tackle your goals.
5) Develop a plan to reach your objectives — Hopefully, while setting up your SMART goals, you’ve developed a basic of a plan to attain them. To flesh it out further, do the following:
Baby steps — Break your larger goals into small steps.
Create a budget — Use a monthly/weekly budget or even a daily spending limit to meet your targets.
Track your money — Track your spending religiously to find out where every nickel and dime is going.
Set up an emergency plan — Determine what contingencies you may need if elements of your plan don’t come together. In terms of your overall plan, make setting up an emergency fund for unexpected expenses one of your goals.
Build in rewards — When you reach measurable milestones, reward yourself with a reasonable indulgence to congratulate yourself and reinforce your behaviour. Simple pleasures like going to lunch with a good friend or getting a mani/pedi don’t need to be super expensive if you plan for it.
6) Make course corrections to stay on target — Most people don’t realize airplanes almost never fly in a straight line. During virtually every second of flight, the onboard computers and pilots are making minor adjustments to ensure the plane reaches the intended destination. You’ll need to do the same to reach your goals. Don’t give up the moment you realize you’re not on target. Re-evaluate your position, and then make the necessary adjustments to get back on track.
7) Re-frame your thinking — The previous 6 steps are action steps to help you get rid of the money troubles that are creating stress in your life. This final tactic looks at the mental and emotional part of dealing with financial stress. Much of how you feel and think about money relies upon your belief system. Making a conscious effort to work towards developing a positive, confident attitude towards money will go a long way in reducing your stress levels and improving your overall financial position.
This last point is worthy of an in depth discussion of its own. In my next post, I’ll give you ideas to help you re-frame your thinking and develop a “positive money mindset”.
To help you work through these steps on your own, please see my 7 Steps for Dealing With Financial Stress Worksheets.
