How to Handle Financial Stress in Tough Times

June 22, 2024 - By Fred

Welcome to ftalk, Today, we will be tackling a major issue: financial stress. Many Nigerians face the pressure of managing money, unexpected expenses, and planning for the future. In recent times, inflation, unemployment, and currency devaluation have increased financial stress especially among low income families.

Financial stress impacts your well-being and people around you. It limits you in more ways than one. So, it is crucial to tacle it heads on before it gets worse.

Whether you’re struggling to make ends meet, saving for a big purchase, or looking to plan your future, this blog post offers practical tips and solutions to navigate the landscape of financial stress.

At ftalk, we believe everyone can achieve financial stability with the right knowledge and tools. Today we will be sharing tips to help you cope with financial stress and take control of your financial future as a Nigerian.

What we will discuss

What is Financial stress
How Financial stress affects you
Where to get started on fixing this problem
How to manage/ break free of financial stress

What is Financial Stress

Financial stress is an emotional unease that is specifically related to money. Anyone, irrespective of their financial class experience financial stress, but it may occur more often in households with low incomes.

Financial Stress can result from not making enough money to meet your needs such as paying rent, paying the bills, and buying groceries. It can also come from not able to manage and keep what you make in an efficient manner.

How Financial stress affects you

Most people stress about money from time to time, but financial stress can become problematic if it disrupts everyday life.

If not kept under control, financial stress can have profound negative impacts on various aspects of an individual’s life. It can affect mental and physical health, relationships, and the overall well-being of a person or household

Impact of financial stress on Physical health

People often turn to substance abuse or develop eating disorders as coping mechanisms for financial stress.

Heart problems, such as hypertension and strokes, are also known to stem from stress, including financial stress.

Impact of financial stress on relationship

Individuals experiencing financial stress tend to have more conflicts in their relationships. This can lead to increased arguments, dissatisfaction, and even divorce.

Financial stress also causes people to avoid social gatherings, leading to increased isolation compared to those who are financially stable.

Impact of financial stress on Mental health

Financial stress can cause anxiety, insomnia, depression, and in extreme cases, cognitive impairment. For instance, you might find it difficult to focus on or enjoy other parts of your life because your money-related stress causes constant worry.

People with lower incomes might experience additional stress due to their jobs. They might work in unsafe environments but feel unable to leave because they can’t support themselves financially while searching for another job.

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Financial stress can have profound impacts on various aspects of an individual's life, affecting both mental and physical health, relationships, and overall well-being.

Where should I start?

If you realize that you are in a financial mess and it is causing you a lot of grief, the next step is to understand your financial situation and determine how severe the problem is.

Know where you stand financially

The first step in managing your money is to conduct a financial assessment. You can do this by reviewing your balance sheets and income statements to understand your financial standing.

A typical balance sheet lists your assets, such as savings, cars, houses, investments, and stocks, as well as your liabilities, such as bank loans, credit card debt, student loans, and mortgages.

An income statement shows your income, such as your paycheck, and your expenses, allowing you to see how much money you have each month.

Understand where all your money goes.

Next, you need to understand all your expenses. Write down all your fixed and flexible expenses and estimate how much they will cost each month. Use your previous month’s statement to understand your spending habits.

There are two major types of expenses:

Fixed Spending: Fixed expenses are costs that stay the same each month. You pay the same amount every time, such as for a mortgage or rent, car loans, and insurance premiums. Including these in your budget is important because tracking them every month helps you see how much of your income goes to these costs. This way, you can understand how much money you have left and plan accordingly.

Flexible Spending: Flexible expenses are costs that you can adjust or save on, such as food and clothing. For example, you don’t have to buy new clothes if you already have enough. In this part of your budget, you track costs you can control.

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Tips on managing financial stress

The following tips will help you ease the burden of financial stress if you are in one and also prevent you from getting into one if you are not.

For financial stress-free life, having a clear plan is essential, let’s take a look at some of them

Budget

A budget is a financial plan that outlines expected income and expenses. Essentially, it estimates your earnings and expenditures over a specific timeframe, such as a month or a year.

Budgeting isn’t about restricting yourself; it’s about managing your money effectively. This approach helps you achieve your short-, mid-, and long-term financial goals more easily.

It sounds ridiculously simple, but this is where you need to start: create a budget and stick to it.

Cut down your expenses

One of the hardest parts of managing money is figuring out what you truly need versus what you want. Review your spending and ask yourself if each purchase is essential or just something you want. If it’s something you want, consider cutting it out temporarily to help meet your short-term savings goals.

It’s important to review where you can cut costs, such as using cash instead of credit cards and canceling unused subscriptions. Assessing your finances helps you find ways to reduce monthly expenses.

Look for better deals! Some utility providers offer rewards for switching. Make sure to switch only after your current contract ends.

Are you getting the best value from your TV package? With the increase in monthly subscriptions, assess if each one is worth the cost, and consider pausing some temporarily to save money.

Know the difference Between ‘Needs’ and ‘Wants’

Save

Your goal should be to shrink unnecessary spending while increasing your savings. Nowadays, it is a good practice to save money. Make your savings goals easier by breaking them into smaller steps.

Save for special events like birthdays or family gatherings by determining how much you need and planning how to reach that amount.

If you notice that your spending is growing, it means you need to watch your spending more carefully.

Manage Debt Load

If you’re tackling loans either mortgage or student loans, it’s important to assess the best way to pay them off efficiently.

Managing your overall debt load is crucial for improving your financial situation. Lowering these payments is a key step toward enhancing your financial health.

Focus on paying off high interest loans first, Try and avoid credit card debt that you cant pay off by the end of the month.

Focus on paying off high interest loans first, Try and avoid credit card debt that you cant pay off by the end of the month.

Build an Emergency Fund

Once you’ve set up your budget, it’s crucial to safeguard the money you’re saving for the future. Have you set aside funds for unexpected large expenses?

Building a solid emergency fund, enough to cover three to six months of living expenses, is essential for financial stability.

When reviewing your finances, prioritize adding to your emergency savings to ensure you’re ready for any unforeseen costs. Consider ways to regularly allocate funds to your savings to begin or enhance your emergency fund.

Choose carefully where to keep your money

A smart approach is to store your money where it’s not easy to access. Consider placing it in a separate savings account. Remember the piggy banks you used as a child? They helped keep your money safe and reduced spontaneous spending.

You might need to check this post on how piggyvest help me save a Million within short time.

Avoid all forms of ponzi scheme investment, they might seems like an easy way out, but they are going to put you into more financial stress. Only put your money in legitimate investments like stocks, bonds or even treasury bills when starting out.

Avoid all forms of ponzi scheme investment, they might seems like an easy way out, but they are going to put you into more financial stress.

Stay dedicated and track your progress

Stick to your savings goals and avoid distractions. Monitor your progress by recording it on your phone or a note on your fridge. This tracking can help you stay motivated.

Conclusion

Financial stress can severely impact your physical, mental, and spiritual well-being. By effectively managing it, you can not only improve your financial situation but also maintain your overall health.

Follow the tips mentioned earlier to better handle financial stress and move closer to achieving both financial stability and freedom