Practical Money Management Tips To Help Increase Your Savings & Decrease Your Stress
Money can affect almost every aspect of a person’s life, from relationships to productivity to mental health. When you’re struggling financially, it can create significant stress that may affect well-being and potentially develop into a mental health condition if left unaddressed. Adopting simple, practical money management strategies may do more than help you build savings and create a sustainable path toward financial stability. It may also help reduce stress, improve mental health, and cultivate a sense of empowerment in other areas of your life.
The link between finances and mental health
Studies indicate a significant correlation between financial stress and mental health. For example, a 2023 Forbes Advisor survey shares that 54% of respondents say they feel stress from their debt, 34% report depression, and 40% report an increase in anxiety. People in debt may also feel guilty or overwhelmed when they spend money, even when it’s necessary. Plus, debt and financial struggles might cause shame for some people due to stigma around money problems.
The same Forbes survey also reveals that 48% of participants report sleep disruptions and 38% report diminished social activity due to debt-related stress. Finally, financial stress can also impact one’s professional life. A TIAA Institute report suggests that financial stress resulted in a 34% increase in absenteeism and tardiness among study participants, and they were also five times more likely to be distracted by finances while at work.
What does “financial well-being” mean?
Financial wellness means different things to different people depending on many elements, such as income, personal priorities, and systemic factors. Studies suggest that how we think about financial wellness also tends to change with age and lifestyle factors. In general, though, financial health often means feeling more financially confident, empowered, and stable. Financial well-being typically involves feeling less stress about money and one’s ability to pay for unexpected financial challenges.
Why are money and credit card issues so stressful?
For many, money is their most significant source of stress—but why exactly does it have such a strong influence on overall well-being? The answers range from basic needs insecurity to a lack of financial literacy, depending on your level of economic difficulty.
People might have fear and anxiety over the inability to afford necessities like food, shelter, and healthcare. Anxiety over job loss, a retirement savings account, or unplanned emergencies may be caused by uncertainty and the future. Additionally, some people feel pressure to keep up with their peers or meet societal expectations regarding lifestyle and spending habits.
Money management tips for financial wellness
Financial education is often seen as the foundation of good money management and personal economic growth. You can learn about money management by seeking out free financial literacy resources, apps, or workshops. Arming yourself with knowledge may help you feel more empowered and positive about gaining more economic stability. To help you get started, here are a few basic financial wellness tips.
Set clear, achievable financial goals
Short-term and long-term goals can help you stay motivated. First, reflect on what you want to achieve, whether that’s buying a home, creating an emergency fund with specific savings goals, starting retirement accounts, becoming debt-free, or building and sticking to a budget. Write down your goals and establish a timeline for when you want to achieve them. Research suggests that writing down specific, realistic goals may make you likelier to reach them.
Create a realistic budget, including savings if possible
When setting a budget, first estimate your monthly income and monthly expenses. Compare them and factor in your priorities. For example, monthly payments for necessities such as food, shelter, and healthcare are typically at the top of the priority list, followed by insurance, debts, and other expenses.
If possible, you might also aim to set aside some money each month for savings—even if it’s only five or 10 dollars at a time—to try and save money fast. With a good interest rate in your savings account, letting this money sit and accumulate can almost seem (delete ‘feel’) like “free money” over time. If you’re having trouble setting your budget, you might explore some of the many tools available online to help you set a budget, track spending, and calculate ways to cut back on non-essential purchases.
Aim to pay off or pay down your credit card and personal loans
Managing debts like loans and credit cards can be frustrating. Whenever possible, send in extra money that’s more than your minimum payments and develop a “debt payoff strategy” to stay focused and make progress. The ”debt snowball” and “debt avalanche” methods are among the most common. If you’re feeling overwhelmed by debt, seeking out free credit counseling may help you make a plan for repayment that works for you.
Watch your interest rates when it comes to credit cards
High interest rates can present a significant challenge when trying to pay off credit cards and loans. You might choose to explore a balance transfer credit card or debt consolidation loan in such cases. Some balance transfer cards offer an introductory 0% interest rate for a set period during which you can pay off your debt without interest. Debt consolidation loans often carry lower interest rates than credit cards, allowing you to consolidate your cards and pay them off without paying as much.
Practice mindful spending habits and consider similar money management tips
It may also be helpful to identify and reduce discretionary spending, if applicable, such as eating out, buying luxury items, or paying for unused subscriptions. Align your purchases with your needs and values and avoid impulse spending by shopping with a list.
Savings and interest rates: building a long-term path to financial security
Whether you're looking to retire, splurge on a vacation, or be sure you're taken care of in your older adult years, it can help to learn how to improve your money skills and save wisely. If budget allows, consider hiring a financial advisor who can help you build wealth in the future. Free financial counseling may also be available. These types of financial advisors may help you find the best high-interest bank account for savings and retirement and can often provide guidance on investment options, insurance plans, tax refunds, and writing a will.
From credit cards to mental health: challenges achieving financial wellness
People experience different money challenges depending on many factors, and they often vary between individuals. For many, the cost of living keeps rising while wages stay the same, creating significant barriers to budgeting and saving. Rising debt and interest rates or repeated emergency expenses can also take a portion out of one’s income. Systemic factors may also make it more difficult for some people—particularly those of marginalized identities—to achieve financial health.
In addition to these immediate, practical challenges, human nature can present some challenges too. For example, budgeting can seem emotionally overwhelming to some. A need for instant gratification or the desire to fit in and keep up with others can make it hard to stay financially disciplined. In addition, advertising often influences our spending behaviors in ways we may not realize.
Sometimes, mental health challenges can also impact how we think about money. For example, people experiencing depression may neglect their daily responsibilities—including those involving money—due to symptoms. Risky behavior like reckless spending is sometimes a symptom of certain conditions like post-traumatic stress disorder (PTSD) or borderline personality disorder. Reckless spending can also serve as an unhealthy coping mechanism for trauma or mental health symptoms. Being mindful of your mental state and seeking help when needed may improve your ability to stay mindful of your spending and keep you on a steady financial course.
Money management as self-care
Saving and budgeting can be a part of self-care. Here are some ways that managing your money may improve your mental state and vice versa:
Budgeting can help you cultivate gratitude
When you have to make financial sacrifices, you might appreciate the things you can afford more. You may also become more selective about your splurges, allowing you to feel greater appreciation for those things you spend your hard-earned money on.
Skillful money management can shift you from scarcity thinking to abundance thinking
A healthy financial plan can foster a sense of control and security that you’ll have enough money to meet your needs. This awareness (delete – ‘feeling’) may free you to focus on growth instead of a fear of scarcity.
Eliminating unnecessary spending can be a practical lesson in how to draw boundaries
In addition to setting boundaries for yourself, you may have to say "no" to family or friends when they want you to spend money on things that aren't in your budget. Setting boundaries may not only help your financial well-being but might also help you sharpen this key life and relationship skill.
Budgeting can encourage self-reflection and understanding
Identifying the factors that cause you to engage in impulse spending can be eye-opening. For example, some people use shopping to cope with challenging emotions (hence the term "retail therapy"). Recognizing any such underlying causes and seeking mental health support if needed may help you on the road to managing your spending more effectively.
Seeking support
Support from others along the journey to better fiscal health may help boost success. For example, sharing financial goals with trusted friends or family can help keep you on track and accountable. A financial advisor can help guide you in making wise choices about your spending patterns so you can start saving money, achieve your goals, and plan for the future. Some experts offer free or reduced-rate options based on factors like income.
Seeking mental health support for financial stress
In addition, a mental health professional may be able to help you manage financial stress, understand why you spend money the way you do, and learn how to cultivate healthy coping mechanisms. Some people experiencing financial challenges assume they can’t afford counseling, but there are lower-cost options. For example, some therapists offer sliding-scale therapy sessions based on income. Or, you might consider online therapy, which is typically more affordable than traditional therapy without insurance.
Research suggests that, in many cases, virtual therapy can be highly effective in addressing financial worry and other life stressors. One 2022 study published in Frontiers in Public Health suggests that people participating in online therapy for financial stress experienced “statistically significant improvements in symptoms of depression, anxiety, and perceived financial well-being.” The same participants continued to show improvement when re-evaluated at four- and eight-week follow-up sessions.
Takeaway
Finances are a common source of stress, but the right plan for managing money may help improve financial security. Effective money management may help reduce stress and support you in other areas of life too, like in relationships and at work. If you're struggling with financial stress, help is available from financial counselors and mental health professionals.
What is the best way to manage my money?
Managing money effectively often involves making a budget and prioritizing saving over spending. Paying off credit card debt by making credit card payments on time, ensuring you have a financial cushion to cover unexpected expenses, and using a mobile banking app to keep up with bank statements in real time can be helpful.
What is the 50-30-20 rule for managing money?
The 50-30-20 rule states that 50% of your after-tax income should go to needs, 30% to wants, and 20% to savings. This system can ensure that you cover your expenses and prioritize savings while still having money for non-necessities.
How can I improve my money wisely?
Practicing good financial habits like saving more money than you spend, using credit responsibly, and avoiding late fees by paying utility bills and other expenses on time can contribute to long-term financial success. You can also contact your bank to see if they offer financial counseling services. These services may provide more individualized strategies for money management.
Why do I struggle with money?
Insufficient monthly take-home pay, a poor credit history, overspending, excessive debt, and mental health concerns can all contribute to financial struggles. Consider speaking to a financial counselor or mental health professional to address your money concerns.
How do you budget properly?
To make a proper budget, look at your income, expenses, and spending habits. Determine how much of your income must go to expenses and savings, and how much you will have left over to spend on non-necessities. Setting up automatic savings to come out of your direct deposit paychecks, as well as automatic bill pay for your financial obligations, may be helpful.
How do I control my income?
Taking control of your finances and achieving financial freedom usually involves creating a budget and sticking to it. Keeping an eye on your checking account and investment account to monitor your finances means you’ll always know where you stand financially.
Why am I bad at managing money?
There may be many reasons why you struggle to manage your money. Not earning enough income to cover your expenses, having too much debt, overspending, and other factors can play a role.
How can I manage my money smartly?
Managing your money in a smart way often requires you to identify your priorities and stick to a budget. Having a savings account can be very helpful for situations like making a down payment on a house or paying for unexpected car repairs.
Who is the best person to manage your money?
Working with a financial advisor can help you manage your money effectively. They can ensure you pay taxes on time, take advantage of any company match 401(k) contributions, and make smart investments.
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