Dear Rich Lifer,
Think about the last five years…
Can you recall an unexpected event that led to financial stain? Maybe a health crisis, layoff, leaky roof, or unexpected car repair.
You’re not alone. Approximately two-thirds of U.S. households experience an unexpected event that negatively impacts their financial wellbeing, according to Pew research.
So it’s no wonder the most common cause of money stress is the feeling that you’re just one financial shock away from disaster.
What’s even more depressing, reducing financial stress when you don’t make enough is nearly impossible.
“Even the kind of frugality that will theoretically bring you some relief will often require an investment of time or finances — and lacking money and time is exactly why you’re feeling overwhelmed,” says Emily Birken, author of End Financial Stress Now.
So what can you do if you’re stressed about money?
Birken recommends building some slack into your budget, which is possible at any income. Here is Birken’s five-step plan to help relieve some of your financial stress:
Step 1. Adjust Your Tax Withholding
The average tax refund in 2018 was $2,895, which works out to more than $200 per month. One way to increase your monthly net without having to earn more money is to adjust your withholding.
Birken recommends requesting a new W-4 from your Human Resources department and figuring out the right amount of allowances you should claim using the IRS calculator.
Just remember, the tradeoff here is come tax time you won’t be receiving a big pay day from Uncle Sam. But if it relieves some of your monthly financial worry, the adjustment could be worth it.
Step 2. Start A Surprise Fund
Different than an emergency fund, a surprise fund is slightly less robust and meant to help get you through small hiccups in your budget.
The easiest way to start building a modest surprise fund is to set up automatic savings with your bank.
Even if you sock away $5 a week, that’s $260 you can tap into should the need arise. If you up your weekly auto-save amount to $10 a week, that’s an extra $520 per year. You’ll be surprised how quickly your surprise fund grows and how you won’t notice the small amounts missing.
Step 3. Negotiate Your Bills
Easy wins in creating some slack in your finances include negotiating your bills, suggests Birken. It’s considered easy money because you typically only have to do it once. And if you’re successful, expect to save yourself an extra $20-40 every month.
Even saving $20 per month on your cable bill works out to $240 a year. Think about all the recurring bills you have now that are negotiable.
“Internet, cable, cell phone, and auto insurance are service providers that are willing to adjust their pricing in order to keep customers,” says Birken. “It costs them far more to land a customer than it does to keep a current one happy.”
There are several ways to go about negotiating your bills, do some research on Google and you’ll find scripts and other tactics that can walk you through the process for specific providers.
Step 4. Cancel Unused Subscriptions
Subscriptions you set on auto-pay are easy to overlook. One easy thing you can do is set subscriptions so they don’t auto-renew. When you receive notification that your subscription is about to expire, that’ll give you a chance to gauge whether you need it or not.
For current subscriptions, look through your credit card and bank statements to determine which services you’re signed up for and decide whether you want to cancel or not.
Also identify services you’re doubling up on. Maybe one TV streaming platform is enough or you can drop the gym membership if you’re playing in a hockey league three nights a week.
Step 5. Check Your Bank Balance Daily
It’s easy to leave bills and bank statements unopened to avoid the pain of reality. If you’re serious about adding some slack to your budget, you need to check your bank balance on a regular basis.
I suggest setting a reminder on your cell phone to check once a day. Start extreme and get in the habit of checking daily so you’re more mindful of how much you’re spending and where your money goes every week.
The added benefit of daily checks is if you’re running low on funds, you can catch it before you get dinged on overdraft fees.
You’ll also see your spending habits and know if you have a particularly spendy month. If you’re spending a lot, you can make sure you slow down next month.
These are just a few of the ways you can lessen your financial worries without having to get a big raise or take on a new side hustle to up your income.
Be diligent about saving and keep a close eye on where your money goes and you’ll build enough slack to keep your mind at ease.
To a richer life,