Seven Ways to Manage Your Financial Stress

Financial stress isn’t a new concept. From high levels of debt to living paycheck-to-paycheck and not having retirement plans on hand, financial problems have become one of the most notorious, if not the most notorious, cause of increasing stress levels worldwide.

With financial stress being a leading cause of physical and mental health problems, finding ways to manage financial stress is important now more than ever. If you’re unsure where and how to start, don’t worry. The fact that you’re reading this right now is already a good start.

In this article, we will discuss the impacts of financial stress, how to manage stressful financial situations and ways you can deal with your financial circumstances.

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Financial stress and its impact

According to a 2023 CNBC survey of 4,000 U.S. participants, 74% indicated that they are stressed about their personal finances, and 61% said they are “living paycheck-to-paycheck.”

In a 2024 survey by Bankrate, 65% of the participants said that money problems caused by economic factors negatively impact their mental health — with the top cause being “having difficulties in meeting everyday expenses.”

The impact of financial stress is evident in every survey and study. One after another, we hear news of rising inflation levels, increased housing costs and rising costs of basic commodities, driving the prices of nearly everything else up as well.

Albert Kim, vice president of talent at Checkr, says, “People’s wages cannot keep up with how fast everyday costs are rising anymore, leaving a vicious cycle of physical and mental illness caused by financial stress.”

So many economic and personal factors can contribute to a person experiencing financial stress. If you manage your financial stress and take control of your money, here are eight things you can do, courtesy of successful business professionals.

1. Recognize the problem.

The only way to solve a problem is to recognize that it exists.

Believe it or not, one of the main reasons people are drowning in more debt is because we:

• Fail to acknowledge bad spending habits
• Fail to realize that financial stress is caused by an incomplete picture of our financial situation

Jesse Hanson, content manager at Online Solitaire and World of Card Games, says, “When you know how it starts, you’ll know how to end it. Like the strategies you use to win a game, managing financial stress begins with recognizing that there is a problem and the cause of that problem, even if it’s your own bad personal habits.”

2. Create a budget.

Once you’ve figured out the problem, it’s time to create a plan to tackle it. The first step in becoming financially savvy and managing financial stress is to create a budget.

There are many online tools and apps that can help you create a personal budget plan, but if those don’t work for you, you can simply do them yourself in a spreadsheet. This is the information to include:

• List all your cash inflows and outflows
• List all necessary expenses, such as debt repayments (including your mortgage if you have one), rent, transportation, food and other bills
• Set an appropriate amount to save after you have met your necessities
• Allocate whatever is left for your wants — don’t forget to reward yourself appropriately

You can also track your expenses through apps or your spreadsheet to find out where you’re spending more than you thought you were, such as on streaming subscriptions or daily coffees at Starbucks.

For savings, if you have kids, consider contributing to a 529 plan. Also, consider participating in your employer’s retirement savings plan, such as a 401(k).

3. Consolidate your debt.

One major reason people experience financial stress is looming debt. According to MarketWatch, Americans hit record levels of household debt in 2024, amounting to $17.3 trillion. A study from The Kaplan Group also showed unprecedented debt levels for Americans, growing at 81.5% in just 20 years, with auto loans, mortgages and student loans at an all-time high.

Grant Aldrich, founder of Preppy, says, “Funnily enough, the majority of increasing debt levels are caused by debt itself. How? To pay debt, some people choose to enter into another debt — this is called debt consolidation. When not managed properly, this ends up snowballing into bigger debt.”

To avoid this happening to you, consider these steps:

• List all your existing debts and their interest rates
• Pay off what you can, either starting with the debt with the highest interest rate or the debt you can pay off the fastest — the fewer debts you have, the less interest you’ll pay
• When consolidating your debt, shop for the option that offers the lowest interest rate and fees
• Make sure you make on-time payments on your consolidated debt
  

“Missing consolidation payments is a money trap — it’s like borrowing and spending money to pay for the money you owe while also spending more money for missed payments. Once you start missing consolidation repayments, you get charged (late fees that add to your debt), defeating the entire purpose of your debt consolidation,” says Cache Merrill, founder/CTO/CEO at Zibtek.

4. Prioritize your spending.

Much of the time, financial stress is caused by reckless spending. When you succumb to the pressure of “you only live once” (YOLO) and buy expensive things you might not need, such as splurging on the latest iPhone, that’s the perfect recipe for financial disaster.

To prioritize your spending, ask yourself:

• Do I need it, or do I just want it?
• Why do I want it? Will my daily life be negatively impacted if I don’t have it?
• Can I afford it today?
• Do I have the money in my budget for this?

Reyansh Mestry, head of marketing at TopSource Worldwide, says, “Most of the time, the easiest way to free yourself from the shackles of irresponsible spending is to differentiate whether you need it or just want it. If you need it, go ahead. If you want it and can pay for it in cash, go ahead. If you want it but can’t afford it today, press the brakes and turn around.”

5. Find additional sources of income.

Sometimes, cutting back on spending isn’t enough, especially when prices of necessities are rising. That’s when you might need to explore additional sources of income, such as a side hustle. Some options:

• Consider asking for a raise
• Explore part-time, remote freelancing roles such as virtual assistance or content creation
• Be a tutor
• Make something you’re good at and sell it
• Offer your services (do hair and makeup, teach a language, give piano lessons, etc.)

Kyran Schmidt, co-founder of Outverse, says, “With the advancement of technology, remote work and AI in the modern age, there are now endless opportunities for people to generate extra income from the comfort of their homes. For example, despite many businesses and startups utilizing AI and AI chatbots for customer support, human assistance remains indispensable — and the opportunities in this industry are enormous.”

6. Set up an emergency fund.

Many people become financially burdened not because of poor spending habits but because of financial emergencies such as unexpected car or home repairs, a family illness or an accident. This is why setting up an emergency fund should be a priority.

According to Roman Zrazhevskiy, founder and CEO of MIRA Safety, says, “There’s no hard-and-fast rule for deciding how much should go into your emergency fund, but consider rounding up your monthly necessary expenses and multiplying it by six or 12 months as a safety net.”

To get started on building your emergency fund, consider setting up automatic payments from your bank account to your emergency fund account and setting a goal.

7. Seek financial counseling or guidance.

Consider consulting with financial counselors or financial advisers to get help managing your finances and the stress they cause in your daily life. These professionals are experts at helping people like you get their finances — and spending habits — on track.

Conclusion

Trying to manage financial stress isn’t an easy process. Getting your financial health on track takes a lot of time and effort, as well as lifestyle changes, adjustments, sacrifices and reprioritization.

While it won’t exactly be a walk in the park, properly managing your financial stress won’t seem impossible once you pinpoint your problem areas, make active efforts to rebalance your priorities and recognize when you need outside help.

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