12 ways to break through the barrier of financial inertia

Published
  • November 30 2016, 11:23pm EST
Financial stress rates in the U.S. are among the highest they’ve been during the last five years, according to the findings of PricewaterhouseCoopers’ 2016 Employee Financial Wellness Survey. More than half of respondents report stress about finances and 45% report their stress increased over the prior 12 months.

Financial stress is a very personal experience, and can be challenging even for experts. This is why many people deal with their financial stress a lot like they deal with their health; that is, they ignore it for as long as possible and hope it works itself out. To make matters worse, “education” is rarely the solution. Great financial advice may help with knowing what to do, but the key is doing it. Since dealing with money is so personal and emotional, even individuals who know what they should do are often unable to overcome the barriers that keep them from taking action.

Here are 12 tips to help break through the barriers that keep individuals from taking action to relieve their financial stress provided by Carla Dearing, CEO of SUM180.

Overview

Financial stress rates in the U.S. are among the highest they’ve been during the last five years, according to the findings of PricewaterhouseCoopers’ 2016 Employee Financial Wellness Survey. More than half of respondents reported stress about finances and 45% report their stress increased over the prior 12 months.

Financial stress is a very personal experience, and can be challenging even for experts. This is why many people deal with their financial stress a lot like they deal with their health; that is, they ignore it for as long as possible and hope it works itself out. To make matters worse, “education” is rarely the solution. Great financial advice may help with knowing what to do, but the key is doing it. Since dealing with money is so personal and emotional, even individuals who know what they should do are often unable to overcome the barriers that keep them from taking action.

Here are 12 tips to help break through the barriers that keep individuals from taking action to relieve their financial stress provided by Carla Dearing, CEO of SUM180.

Set a goal

Whether your goal is as simple as socking away six months of expenses in an emergency fund to protect against the unexpected or as big as putting your kids through college debt-free, having a clear purpose for your efforts will help you stick with them.

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Don’t know all the answers? It’s okay to ask for help

When it comes to dealing with our money, many of us are so afraid of making a mistake that we would rather not act at all. Of course, this only worsens the stress. The best way to deal with financial stress is to seek help from a trusted resource who can understand your specific concerns and show you the steps needed to address them. Having an expert at your back will give you the confidence to move forward, knowing you can course-correct as needed.

Start wherever you are

Many people do not make progress on their savings because they feel it is hopeless; that they have no chance of saving enough to secure their future. On the contrary, it’s never too late to start. When you walk into Weight Watchers with 80 pounds to lose, no one is going to talk about that. Instead, they’ll say, “Let’s talk about how to have a healthier lifestyle and begin to lose the first five pounds.” Dealing with money is just like that. Focus on your own situation and start taking baby steps to save more, pay down debt and begin to invest — no matter where you’re starting from.

Take it one step at a time

How do you eat an elephant? One bite at a time. It is important to manage your own expectations to recognize that it will take time to save and build step by step. When it comes to financial security, each step adds up.

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Get your emergency fund squared away

Unexpected expenses happen all the time, but if you have a cushion of savings, these unexpected expenses don’t have to derail you. How much should you set aside? Your cash reserves should cover six months’ worth of expenses. After you have this six-month cushion, you should also set aside a separate emergency fund, enough to cover 24 months’ of expenses, for longer-term situations such as an extended illness. The small spending sacrifices you make as you build your cash reserves will be well worth what you gain in peace of mind.

Pay off your credit cards like it’s your job

To ease financial stress, pay off all your credit card balances, then once they are paid off, continue to pay off your credit cards every month. Why? Interest on credit card debt is usually many times more than that of other kinds of debt, and also many times more than what you could make if you put this same money in a savings or investment account. So every penny you pay down on your credit card saves you a lot of money in the long run.

Save 10% of your income every year

If you develop the habit of saving 10%, no matter how much you earn, you will always have the confidence of knowing you are living within your means. This step is also what makes many other key steps possible. For example, saving a down payment for a house, setting aside a college fund for the kids or saving for retirement. Think of saving 10% as the way you ensure that you will be able to make ongoing investments in your financial health, year after year.

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If you’re married or have a child, make sure you have enough life insurance to protect your loved ones

To calculate the amount of the policy you need, figure out how much support your family needs annually and multiply that by the number of years the support will be needed. It’s a good idea to ensure that the policy term covers children well through college, so a 20- or 30-year policy is usually best.

Maximize your retirement savings contributions; no more excuses

You can rationalize putting it off, but deep down, you know how important it is to save for retirement, and the longer you delay, the more anxious and stuck you feel. How to break through the paralysis? Focus on your dreams for the future, not your fears. Imagine the life you want for yourself and be inspired by that. Saving for retirement will feel less like a sacrifice, and more like an empowering gift to your future self.

Downsize

The flip side of boosting your savings is streamlining your expenses — and the beneficial effect on financial stress can be just as powerful. You can downsize your home, your car, your wardrobe, your lifestyle. As you reexamine your assumptions about your “needs,” you may discover that you need far less than you thought. This will liberate you to put your resources and energy toward more important things.

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Once a year, do an insurance checkup to make sure your assets and future are adequately protected from liability

Review your home, health and auto insurance policies to make sure you have enough coverage to protect your savings and your family in case of a medical, legal or other emergency. Other types of insurance to consider: identity theft coverage, which reimburses you for the costs of repairing your credit history if you become a victim, and umbrella liability coverage, which protects your assets beyond what your homeowners and auto policies already cover.

Realize you are far from alone

Every day there are more stories about how individuals have used knowledge and perseverance to overcome their financial challenges. Many of us still do not want to discuss money details openly, but there are safe, supportive communities where people can open up about their specific problems and learn what has worked for others.