Financial stress is caused by record high inflation that wrecked people’s budgets, finances, and forecasts. Many people planned for a 2% yearly inflation rate. Not a 40 decade high of 9% we saw in 2022. The best way to cope with it is by creating a budget.
I’m going through financial stress just like everyone else. I thought my spending budget in 2022 was around $25k. However, I was way off. A car accident made me spend $15k to buy a car at the worst time ever imaginable to buy a car.
Cars with 100k miles with an accident history was selling for $20k+. And people were paying those prices! They had no choice! It’s no wonder why so many people were under water on their cars by the latter half of 2022.
This isn’t even mentioning the medical bills that came along with going through a car accident. Add in a bear market that made my net worth plummet to levels I never thought I would ever see. 2022 was a demoralizing year. It was one of the worst years of my life.
I’m happy to put that behind me but I’m glad I learned what causes me financial stress to better prepare myself for the future. The worst things that could have happened to me happened and now I know what that feels like. i am much more careful throughout my life in approaching my finances.
I’ve been there before and I devised this playbook to combat financial stress.
Financial Stress: What is it?
Financial stress is when money causes you anxiety, insecurity, and all around stress about your finances. It’s making you feel uneasy about making ends meet and paying your bills at the end of the month. Everyone goes through this period of life, one way or another.
Even the really rich people. Sheldon Adelson, the billionaire casino mogul, built and lost his fortune multiple times before finding the one business that made him a runaway success. Imagine just how much financial stress he was feeling when he lost his fortune.
The good times never lasted forever. The bad times always come because we have a government who doesn’t understand fiscal responsibility to create a financially stable country. Financial stress is felt by many people, even the rich ones.
There’s not a single rich person on Earth who never failed at something. Who never lost money on their road to riches. Elon Musk almost went bankrupt and put everything he had into Tesla to make the company what it is today.
Financial stress is anything that causes you anxiety surrounding money. It could be because your income is low, expenses are too high, or you’re not doing as well when compared to your peers. Whatever it is, money stress is more common than ever due to the government’s mistakes.
What Causes Financial Stress?
There are 3 big reasons of what causes financial stress. They are as follows:
1) Record High Inflation
Reality hit 2022 like a ton of bricks. Countries across the world felt the effects of record high inflation. The United States experienced a 4 decade high inflation. I certainly felt the effects of it. I felt pain every time I went to the gas pump.
It usually costed $20 to fill up my car. Then it costed $40 to fill up my car. $20 is a large difference when it’s a regular expense I incur. It actually made me scared that I may actually not have enough money to pay for necessities if this continues. Even though I have almost a top 3% net worth of my age group.
That was the scariest thing I ever experienced. Financial stress is caused by record high inflation that crunched billions of people’s budgets across the globe. It’s one thing for luxury goods prices to go up, it’s another for necessities like food and gas to go up.
It’s a totally normal feeling because people across the world felt the effects as well.
2) Lack of Financial Literacy
The ones who don’t know how to pay their next bill do not have good financial literacy. Financial literacy solves many financial stress because you know exactly how and where to spend your money. There’s no need to chase the hottest growth stocks.
Or the next big thing. Even though I experienced financial stress, the stress levels were nowhere near had I not known financial literacy. To combat the effects of money stress, I became defensive with my finances. I saved as much paycheck as I could and stopped investing.
Anywhere I could look for coupons and savings, I went into overdrive looking for those opportunities. I waited until Black Friday to purchase goods that went on sale at record low prices. There’s nothing wrong with playing defensive with your finances.
To wait for the really good opportunities a year or two later. Bargains will come.
3) Not Saving Money Causes Financial Stress
The seed with which you create financial security is by saving money. When you have boatloads of money in your savings account, you have less financial stress than someone who doesn’t have money in their savings account.
Saving money is the cornerstone to every sound financial decision. Too many people see saving money as being cheap. That’s not true. The frugality disease is one thing but saving money is another. After 5 years of saving a record amount of money, I finally let loose in 2022.
That was the biggest money mistake of my life and now I’m living life on edge with no way of knowing if my employment will be secure. Even though unemployment was at record lows, white collar jobs were still overfilled in the millions.
Saving another year’s worth of money would have done wonders for me. I paid for the biggest money mistake of my life with financial stress.
Financial Stress: 9 Ways to Cope With it
So then how do you cope with financial stress? The 9 strategies below are ones I personally use myself to better my finances. It was time to get back to the basics to get out of the financial vulnerability I experienced.
1) Create a Budget
The best antidote to financial stress is to create a budget. Budgets are awesome because it tracks how much you’re allowed to spend without feeling guilty. One of my friends wanted to buy a vintage Mustang for $7k. I told him to keep a fun budget throughout the year.
If the car falls within the year’s fun budget, that’s money he can spend without feeling guilty. He went ahead with the purchase and was actually happy with it. No buyers’ remorse or guilt here. The best way to cope with financial stress is to create a budget.
A budget is freeing because you know exactly just how much you’re allowed to spend for the month. When I was poor, I used to count the pennies to how much I could spend. That was exhausting and I still do at times but I’m glad my finances are advanced enough to where I don’t have to do that.
Enjoyment should come out of money. Not money stress.
2) Learn Financial Literacy to Cope with Financial Stress
The ones who don’t know what they should be doing with their money have the most financial stress. The best way to learn financial literacy is to read personal finance blogs on a daily basis, like mine. That’s how I got my start and that’s how I learned the tips and tricks to get my net worth to multi six figures by 20s.
You can’t afford not to learn financial literacy because it’s literally the reason you put food on the table. The thought of having no financial security by 30 scared me so much that I sacrificed everything I could to get there. Money stress isn’t as bad if you are financially literate.
Too many people go about their day to day lives without learning financial literacy. They think everything just works out and the government takes care of them. Or the company is going to employ them forever. Once you are in your 20s, recruiters flood you with calls, reach-outs, and offers.
Once you are outside of your 20s, less and less people want you. Nothing good lasts forever.
3) Make More Money
The best way to solve financial stress is to simply make more money. When you just have unlimited amounts of money coming in that’s enough to pay for your bills, then everything works out. Now’s not the time to goof off. Now’s the time to use weekends to get ahead.
There are millions of people working any and every waking moment to take your place. Are you doing everything you can to earn your seat at the spot? Why wouldn’t companies just get rid of you and replace you with a cheaper and more productive employee overseas?
If you’ve been providing value to your employer, now is the time to ask for a raise or a promotion, if you deserve it. Obviously, you have to read the room and see what kind of feedback your bosses give you. The macroeconomic environment matters as well.
You just know whether you deserve a raise or a promotion for the value you bring.
Every year, you should strive to earn more money. Then the compound effort effect kicks in and each year you end up earning more money than the last.
4) Start a Side Hustle
Now’s the time to start a side hustle. There’s nothing wrong with picking up an additional weekend job. One of my prior HR coworkers worked a full time job on the weekdays and proctored SAT exams on the weekends. That’s a nice little way to earn a little extra money.
Money stress shouldn’t exist in the richest country in the world. You have unlimited opportunities to earn more money. There are high schoolers starting side hustles that earns at least $5,000 per month by the time they start college.
Financial stress shouldn’t exist when there are literally unlimited opportunities to start a side hustle. There’s YouTube, blogging, vending machines, and the like. There is an unlimited opportunity to learn the skills it takes to get good at those side hustles.
Money stress can be solved with a little extra work on the weekends. Trust me, it’ll be worth it.
5) Avoid Expensive Gatherings
My friends love to go out to weekly dinners. Their bills came out to be $100 per meal every Friday night. I would partake but I would never buy anything of value because I don’t eat that much to sustain myself. However, if you have financial stress, there’s nothing wrong with skipping invitations here and there.
Social gatherings are great but they should only be attended if you can afford them. If you can’t afford them, then there’s no point in partaking in those activities. Too many people think they can afford their lifestyles until the bill comes.
Living is just more expensive than ever before. Gatherings become that much more expensive, more so recently. Dinner bills easily run up $100+, for just one person! There’s nothing wrong with declining invitations here and there.
It’s nothing personal, you need to appease your financial stress first and foremost.
6) Diversify Your Income Sources
Too many people depend on their 9-5 income source and call it a day. That’s not good! No wonder they have financial stress. 2022 taught us anyone, no matter how valuable, can be let go in a second. There was a flooding of employees who needed to get jobs after the rude awakening.
Imagine if you have passive income and side hustle income that pays for all of your expenses. Would you stress as much that you lost your biggest income source? I would think not. You can take your time finding the right opportunities.
I actually saw firsthand of someone being a “Managing Director” at a bank to end up as a “Senior Vice President” after the brutal downturn in March 2020. It took him 2 and a half years to get back to Managing Director again, after switching companies.
When you have diversified income sources, there’s less need to experience money stress. Dependency is not good for you.
7) Get Out of Debt
Debt is one of the worst things in the world. It’s one thing to have mortgage debt but it’s another to have consumer debt. I took advantage of consumer debt in 2021. I took on $15k of debt at 0% interest rates. Although it was very cheap debt, I still didn’t like it.
The debt was worth less each year because inflation was so high. Yet, I still didn’t like it. I became completely debt free in February 2023 and it feels amazing. I don’t feel beholden to anyone else. Debt is one of the worst things you can have on your balance sheet.
Mortgage debt is different because it’s like paying rent. But any type of consumer debt is completely off limits. Even at low interest rates. Even if you can “earn more money than the interest you pay”. The additional psychological burden that comes with consumer debt just isn’t worth it.
I personally went through the psychological financial stress to find the answer so that you don’t have to. Debt is not good for you.
8) Cut Back on Eating Out
Too many people just can’t give up eating out. There’s nothing good about eating out! We need to eat way less calories than we think to keep ourselves alive. Studies show that we overeat on a daily basis. I personally only need to eat 800 – 1,000 calories a day.
The 2,000 calories a day the government recommends is malarky. It assumes you do heavy exercise on a daily basis. That’s not true. We have too many obligations throughout the day to do enough heavy exercise to justify a 2,000 calorie a day diet.
Financial stress is because too many people eat out at expensive restaurants. If you’re eating out at fast casual restaurants to save time and keep expenses low, then that’s a good choice. However, if you’re eating out at Olive Garden every weekend or at a sushi restaurant, then there’s something wrong.
There’s no need to put in additional calories in your body you’re not going to use anyway. Everybody’s caloric needs are personal.
9) Avoid Big Purchases to Stop Financial Stress
The big purchases are anything you require debt to purchase. Things like cars, houses, TVs, and the like. There’s nothing wrong with purchasing those things once in a while. But if you purchase them once every 3 years, then that’s bad. These days, companies design cars to last decades.
I talked to a 26 year old recently and he was thinking about getting another car. A 2018 car he’s been only using for 4 years then. Wow. No wonder people are financially stressed out! Big purchases should last you eight to ten YEARS.
My MacBook Pro that I bought in 2022, I expect to use until at least 2028. Computers are built to last years and I don’t want to waste the money or resources that went into making the computer. Big purchases should never be made often.
Once in a while is OK. Too many people don’t take care of their long lasting assets.
Financial Stress Can be Dealt With
Financial stress can easily be solved. The ones who feel the anxiety is because they don’t take care of their finances even when they have the choice to do so. Everyone can easily read personal finance blogs. Everyone can easily save money.
However, few put in the work. It takes effort to save as much money as you can. It takes effort to create a budget. Once you master the game of money, you’ll be much happier as a result. When you have a margin of error in your budget, then your life becomes infinitely better.
There are many people who live just one paycheck away from living out on the streets. That’s the ultimate risk that people are living on. The savings rate reached an abysmally low rate of 2.2% in October 2022. Consumers just are not financially healthy.
Millions of Americans can’t even afford a $400 medical emergency. That’s just too dangerous of a way to live life. It’s time to take back financial literacy and lower our financial stress as much as we can. Money is a very serious subject that many people just do not like talking about.
The great news is that you can take back your financial life and forge on ahead through any financial challenges. As long as you put in the work. It took me a solid 4 years before I started feeling great about my finances. I no longer have to look at the price tags when I go to the grocery store.
It’s a freeing feeling to have that margin of safety with your finances.
Financial Stress: 9 Ways to Cope Shortlist
- Create a budget
- Learn financial literacy to cope with financial stress
- Make more money
- Start a side hustle
- Avoid expensive gatherings
- Diversify your income sources
- Get out of debt
- Cut back on eating out
- Avoid big purchases to stop financial stress
