Many of us are worried about money. According to a 2022 study, 66% of people said their finances are a major source of stress. Of that group, 57% worry about having the money to pay for their rent, bills, and food. And 43% are afraid they might not be able to save enough for the future.
But you don’t have to let your money fears control the way you save or spend. In fact, you can learn to face these fears head on, which could help you conquer them.
Here are five common fears about finances, and potential ways to overcome them.
Drowning in Debt
American household debt hit $16.90 trillion at the end of 2022, according to the Federal Reserve Bank of New York. And while that number is scary, also frightening are the interest and late payment charges you might accrue if you don’t pay off your debt.
While you might be tempted to avoid thinking about your student loans or credit card debt, they’ll still be there month after month. What’s worse, neglecting debt can adversely affect your credit score, haunting you long after that late credit card payment is resolved.
Exploring Debt Repayment
Instead of ruminating, it’s best to take action. These are a few strategies for debt repayment you may want to consider:
• Avalanche or snowball method. The avalanche method to pay off debt involves making minimum payments on all your debts while putting as much extra money you have, like your tax refund, toward tackling the debt with the highest interest rate. Once that debt is paid off, you use the same strategy on the debt with the next highest interest, and so on.
The snowball method uses a behavioral approach. You pay off the smallest debts first, while continuing to make the minimum payments on all your other debts. Once you pay off the first debt, it may give you the confidence and motivation to approach the more daunting ones.
Regardless of which strategy you use, adopting a plan to pay down your debt can give you a clear course of action, outweighing monthly dread when payments come due.
• Consider a personal loan. If credit card debt has you overwhelmed, you might consider taking out a personal loan to consolidate debt from multiple credit cards into a single monthly payment. This could even lower your interest rate, which could also decrease your stress.
• Ask for a lower APR. Sometimes, simply asking for help can bring relief. If you’re struggling with credit card debt, call the financial institution or credit card company and request a lower APR (annual percentage rate). If they agree, it would mean lower interest on the debt you carry, which could get you debt-free faster.
If you don’t feel solid financially, worrying about your job can cause major stress. The fear of losing your paycheck could even lead to ignoring your savings account balance.
Instead of avoidance, work on giving yourself a financial cushion. Preparing for the worst could offer relief.
Face Your Fear: Building an Emergency Fund
Establishing an emergency fund can be a good place to start. Setting aside even a small amount of money each month can create a sense of security — and accomplishment.
Many experts recommend putting away three to six months worth of living expenses. But you can start smaller than that, if necessary, and work your way up.
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Preparing for Retirement
With monthly bills looming, it can be difficult to think ahead for the long-term. Retirement seems far away, while your rent is due right now.
Understanding retirement funds may be intimidating, but opening an account may be easier than you think. And saving for your future is undeniably important.
Face Your Fear: Filling Your 401(k) or IRA
If you haven’t started saving for retirement, don’t beat yourself up. Direct your energy toward saving what you can each month, no matter how small.
See if your employer offers a 401(k), and sign up for it. Or consider opening an IRA. Though it may feel insignificant, putting away even a small sum each month may make a large difference over time.
Fear of Spending Money
Anxiety around spending may make some people fret over the smallest purchases. If you fear overspending, a dinner out could lead to cold sweats as you calculate the cheapest menu item. Or it might keep you from going out altogether.
Face Your Fear: Sticking to a Budget
Knowledge is power. By creating a budget, you can alleviate the stress that comes with everyday purchases.
Knowing exactly how much money enters and leaves your account each month can be empowering. With an automated app like SoFi Insights®, you can track all your spending in one place.
It’s Too Late
You might think you’re too far along in your career to start saving for retirement, or too busy to keep up with an emergency fund. Finances, especially when you’re afraid, can seem complicated, intimidating, or overwhelming.
Face Your Fear: Getting a Fresh Look at Your Finances
Sometimes just pushing yourself to start is all you need. It’s never too late to adopt good personal finance habits like paying off debt, budgeting, and saving.
While you’re at it, consider an easier way to earn while you’re saving, such as opening a high-yield online bank account, so that your money might grow even faster.
Worrying about money is common for many people, but it’s possible to overcome your fears. Paying down debt, setting up an emergency fund, contributing to a retirement fund, and putting money into a bank account where it can earn interest, could help you take charge of your situation — and your future.
If you’re ready to open a new bank account, SoFi Checking and Savings® has a competitive APY and no account fees. It’s convenient, too, since you can save and pay your bills all in one place.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
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