financial problem solving

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Money Basics  - Financial Problem Solving Strategies

Money basics  -, financial problem solving strategies, money basics financial problem solving strategies.

Money Basics: Financial Problem Solving Strategies

Lesson 2: financial problem solving strategies.

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Financial problem-solving strategies

Have you ever experienced a financial problem? Do you feel like finances are holding you back from reaching your goals? This lesson will give a brief overview of the general problem-solving process and how to apply it to the most common financial problems.

The problem-solving process

First, let's take a look at a general problem-solving process that you can apply to any situation, not just a financial one.

• Identify the problem . The first step in solving a problem is to identify it. What exactly do you need to overcome?
• Make a plan. What are the steps you need to take in order to overcome the problem?
• Implement the plan . This step actually puts the plan you created in place. While it sounds fairly straightforward, this is usually the most difficult step.
• Evaluate the plan . Although this is listed last, this step might actually occur simultaneously with implementing the plan. Things happen and circumstances change, so you may need to re-evaluate your plan as it is happening.

Identifying the problem

The first step in the problem-solving process is to get to the root of the problem and understand what you need to overcome. Here is a list of the most common financial problems people may face:

• Lack of income/job loss
• Unexpected expenses
• Too much debt
• Need for financial independence
• Overspending or lack of budget
• Lack of savings

When thinking about these common problems, each one falls into one of three areas: You need more money, you need to reduce your debt, or you need to change how you spend.

Making a plan

After identifying the problem you need to overcome, it's time to make a plan. Not sure where to start? No worries! We have you covered with some tips and places to begin.

Problem 1: You need more money . Whether you've lost your job, met an unexpected expense, or are working on becoming more financially independent, a form of income is necessary.

If you are a looking for additional work or maybe just a better-paying job, take some time to update your resume and cover letter. Make sure they are neat, up to date with your most current information, and free of spelling and grammar errors.

Be wary of any advertisements or jobs that offer fast, easy money. A lot of quick-cash methods come with unintended consequences. More often than not, if something sounds too good to be true, it probably is.

Problem 2: You need to reduce your debt . With high interest rates or the need to live paycheck to paycheck, high debt can be debilitating. Sometimes it feels like climbing a neverending mountain with an invisible peak. However, by prioritizing and negotiating your debt, you can make it more manageable.

Try listing all of your debt and the interest rates associated with each. Focus on paying off the ones with the highest interest rates first. If you're having trouble making payments, call the loan company and see if it can offer any solutions for you. The company may be able to lower your interest rate or offer a temporary forbearance to help you get back on your feet. If you need more help tackling your debt, you may want to contact a professional debt counselor like Consolidated Credit.

Problem 3: You need to change how you spend . Going from financial problems to a healthy financial status often requires organization and a shift in thinking. Avoiding overspending, building your savings, and gaining financial independence can often be accomplished with good spending habits.

The first thing you may want to try is creating a budget. There are many templates and resources available to help you create one. Sticking to one can be challenging, but simply having a budget laid out can help you see where you need to start spending less.

In addition to your budget, create a savings plan. Start out small. Even stowing away an extra dollar or two here and there can make a big difference. Also, try placing your savings in a place you cannot easily access. For example, create a savings account at a bank you don't usually use. The more difficult it is to access your money, the less likely you are to spend it.

Implementing the plan

Although the explanation of this part is the simplest, this is often the most difficult part to actually execute. It requires self-discipline and perseverance. The most important part of this step is to know that if your plan doesn't work or if you have a difficult time sticking to it, all is not lost. If it happens, move on to the next step, evaluate your plan, then repeat the process.

Overcoming financial obstacles can require changing your lifestyle, and this does not happen overnight. However, just having a plan itself can help to give you confidence and reassurance that you can eventually overcome whatever is in your way.

Evaluating your plan

As you implement your plan, you'll need to continually evaluate it. Maybe something happens and your original plan needs to change. Perhaps you've learned more along the way and realize that your original plan was incomplete. Or maybe your first plan went as planned and was a success. No matter the circumstances, it is always a good idea to look back and re-evaluate. Try answering these questions:

• Was your problem solved? Did a new problem arise?
• What went right?
• What went wrong?
• What circumstances changed?
• Was there anything you didn't account for?
• What was easy about implementing your plan?
• What was difficult about implementing your plan?

Financial obstacles can often seem debilitating and impossible to overcome. They often create a significant source of financial anxiety . We hope this lesson will help give you the confidence to take on your problem one step at a time so you can conquer your anxiety and move forward.

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Fix Your Financial Problems and Get Back on the Right Track

A monthly budget and a plan can be mighty tools

Budgeting Problems

Create a budget.

• Track Your Spending

Budget Meetings

• Spending Issues

If You Have Debt Problems

Debts in collections, find extra money.

• Don't Add On
• An Emergency Fund

Credit Problems

People face a wide variety of financial problems. The trouble might begin because you have a hard time or a distaste for budgeting, then it blooms from there into additional issues that can have serious implications.

The key might be as simple as taking the time to identify the source of the problem. You can begin to fix it from there and take control of your finances.

You might be having budgeting problems if you're consistently running out of money before you run out of month, and you find yourself relying on credit cards to make ends meet. You look at what you earn and wonder why it doesn't seem to be enough to cover all your bills even though you earn a good salary.

You might even have a written budget that you try to follow each month, but it never seems to work. This is a prime indicator that you have a budgeting problem. 

Start by creating a budget if you don't yet have one. The easiest way to do this is to look at what you spent in each category last month and adjust from there. Common budget categories include:

• Housing (rent or mortgage)
• Savings (emergency fund, sinking fund, and retirement)
• Insurance (auto, health, and life)
• Medical care
• Transportation (car payment and/or commuting expenses)
• Debt service (credit cards, personal loans, home equity loans, and other credit accounts - see our payment calculator below if you're considering one)
• Health care
• Discretionary spending (entertainment, dining out, and "extras")

You might have others that don't appear here, such as child care. Add them in.

Some of these expenses are fixed. They remain the same month after month. Others might fluctuate beyond your control — utility costs can vary by season, or maybe your child-care provider has upped its rates.

Still others, like discretionary spending and groceries, are within your control. You can spend less on these things if you have to.

Track Your Spending and Adjust as Necessary

Add up all the categories you've determined in your budget. You have some tweaking to do if the total is more than your monthly take-home pay. You'll have to cut somewhere, typically from those expenses that you have control over. You do not want to put less toward your savings or debt service if at all possible.

The key to making your budget work is realizing that it's flexible. You can take money from one category and use it in another category if you overspend. For example, you might splurge on concert tickets, but then you'll have to adjust your grocery budget to cover the extra you spent in your discretionary/entertainment category.

Budget meetings are essential if you're married and want to succeed financially. You and your spouse should communicate on a regular basis about the budget, and who's spending what and where.

Again, budgeting software can come in handy here because you can update it when you're shopping and it can prevent you from overspending when you're on separate errands.

Spending Issues: Stick to a List & Play the Waiting Game

Most people have an area in which they consistently overspend. You can address these "leaks" in your budget in a few ways.

• Limit when you go "pleasure" shopping and don't take a credit card with you.
• Create a menu plan , a grocery list and make meals ahead if you tend to spend too much money eating out. Stick to your list no matter what's on sale. If you didn't need steak or five bottles of cola when you were making your list, odds are that it hasn't become a must-buy just a few hours later.
• Time is your friend when it comes to not spending needlessly. You might really, really want that classic bottle of bourbon today. Wait a month to buy it. You're not denying yourself. You're procrastinating. That little gift to yourself can be something like a reward if you find that you've really stuck to your budget at month's end.

You might also switch to the envelope budgeting system. This is basically a cash-only budget — or part of your budget — where you pay cash for your "controllable" categories like groceries and discretionary spending. Put the money you budgeted into an envelope for each category at the beginning of the month and stop spending in that category when the envelope is empty. You might realize that you think twice about dipping into an envelope if you consider that doing so now might empty it out before the month is up.

Too much debt can be crippling. Address this issue as quickly as possible because you won't be able to get ahead financially if you're carrying a large amount of debt.

Consider creating a debt payment plan. List your debts in order of the smallest balance to the largest, or the highest interest rate to the lowest interest rate. This is the order in which you're going to pay them off.

Take the money you were paying toward the first and add it to the payments you're making on the second debt after you've paid the first one off. Continue rolling the money over until you've paid off everything.

But avoid closing credit cards as you pay them off because this can lower your credit score. Part of your score depends on how long you've been borrowing, so closing a card that you've hard for a while can cost you some points. You should always leave at least your oldest card open, ideally with a very minimal or zero balance.

You can often settle debts that have gone to collections by paying less than you actually owe. The creditor will "forgive" or write off the balance.

It's all about negotiation. Call the creditor, start with a low amount and offer a one-time payment. Maybe you owe $3,000. Offer to remit $1,500 right now if possible, if the creditor will "erase" that remaining $1,500 balance. The credit might counter with $2,000. Keep trying.

Do not give the creditor access to your checking account over the phone. Send a cashier’s check by certified mail once you've received a letter confirming your deal and keep a copy of that letter in case there's a question later on.

You might be responsible for paying income taxes on any debt that's forgiven. You could receive an IRS Form 1099-C from the creditor, and a copy is sent to the Internal Revenue Service as well, showing how much of your debt was erased. You must generally report this amount as taxable income on your tax return.

Check with a tax professional to be sure before you report this money on your tax return. You might not receive one at all because these forms generally apply to $600 or more of canceled debt.  

You can begin moving forward more quickly if you can get your hands on some extra money to pay off your debts. You might consider selling items you no longer use or look in your budget for things you can cut out without feeling the pain too much.

You might want to consider cutting your cable or cellphone service back to a less expensive package. You might be surprised at just how much you can pay off if you sacrifice a bit of your lifestyle for a while.

Another option is to take on a second job. In fact, you might want to try a combination of all three approaches if you're serious about conquering your debt.

Don't Add On

There's no point in working to get out of debt if you continually add onto it each month. Stop using your credit cards as much as possible. You're effectively just treading water if you make payments then turn around and charge right back up to your previous balance.

Don't Forget That Emergency Fund

Budgeting gurus came up with the concept of an emergency fund for good reason. Maybe life is moving along nicely, then the company you work for goes out of business. You're out of work through no fault of your own. Or maybe you're crossing the street when a taxi hits you. You're out of work while you recuperate and you might have uninsured medical expenses as well.

Having some cash stashed away in an  emergency fund might not save the day entirely, but life will be a lot easier than it would have been if you hadn't saved for the unexpected.

It's recommended that you have at least three months' living expenses set aside, and some experts say six months. Yes, that can be an intimidating number if your monthly nut is $3,500 or more. Start small if you must, but start. You'll get there eventually and you might be glad you did.

Credit problems can make it difficult to land a job, rent an apartment, or buy a home. Poor or even iffy credit can affect the interest rates on your car loan and negatively affect your finances. Understand how your credit works so you can identify why your credit score is low and start to fix it.

Two common culprits are making late payments and maxing out credit cards. Paying a week or two late might not ding your score too horribly, but paying 30 days late — or even worse, 60 — can deal it a serious blow.  

Your credit utilization ratio is also critical to your credit score. Ideally, you'll want to keep it at less than 30%. This means that your total balances add up to no more than $3,000 if you have credit limits of $10,000.

Internal Revenue Service. " About Form 1099-C, Cancellation of Debt ."

Experian. " Can One 30-Day Late Payment Hurt Your Credit? "

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6 ways to tackle financial stress

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For many Americans, financial concerns are ever present, especially given the uncertainties of today’s economy. While worrying doesn’t solve much, having a plan to manage financial challenges can help ease some of the stress. Plus, the monetary benefits of dealing with financial problems—paying off bills, saving more and reducing debt—can help improve your overall outlook. Here are some suggestions for tackling your money stress and taking control of your finances.

Identify top sources of financial stress

If financial anxiety is weighing on you, start by identifying the specific issues keeping you up at night. Whether the problem is credit card debt or upcoming bill payments, pinpointing the source of your stress will help you determine your next move .

Create a monthly budget

A budget is a powerful tool for taking control of—and understanding—your finances. It can help you avoid spending more than you have as well as save for future goals. Once you have a full picture of where your money is going every month, you can look for opportunities to redirect some of it to the areas causing your financial stress.

There are lots of apps and online tools to help you track spending or set up a budget. If you have an account with Bank of America, consider using the Spending & Budgeting tool .

Make the most of your income

When money is tight, you may think you don’t have enough to deal with your financial problems. However, it’s important to make the most of the income you do have. Know that small steps add up. You may not be able to cut any one expense by $500 a month, but you may be able to identify five that you can cut by $100 each.

Article continues below

Build an emergency fund.

Having money set aside for an emergency—such as car repairs, job loss or illness—can go a long way towards relieving financial anxiety. However, building an emergency fund can seem overwhelming, especially one with enough to cover three to six months of expenses. Don’t get hung up on the amount—what’s important is that you’re consistently setting money aside.

Bank of America offers a Savings Calculator to help you see how much time it could take to hit your savings goal.

Be strategic about reducing debt.

Credit card debt is a common source of financial stress. Not only is it expensive—it can also get in the way of your savings goals. The anxiety antidote: a plan to pay off the debt . If you have balances on multiple cards, consider using the snowball method (paying off your debts one-by-one, focusing on the smallest first) or the high-rate method (concentrating on the cards with the highest interest rates first).

Consider outside help

If you’re not satisfied with your progress in reducing debt, you may want to seek help from trusted resources, such as the Federal Trade Commission and the National Foundation for Credit Counseling. Or if you want guidance on long-term goals, such as saving for retirement or college, financial advisors can help. Finally, your friends and family may be able to offer support—just make sure to set clear boundaries and expectations to avoid damaging those relationships.

The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2024 Bank of America Corporation.

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Understanding financial stress

Effects of financial stress on your health, tip 1: talk to someone, tip 2: take inventory of your finances, tip 3: make a plan—and stick to it, tip 4: create a monthly budget, tip 5: manage your overall stress, coping with financial stress.

Feeling overwhelmed by money worries? Whatever your circumstances, there are ways to get through these tough economic times, ease stress and anxiety, and regain control of your finances.

If you’re worried about money, you’re not alone. Many of us, from all over the world and from all walks of life, are having to deal with financial stress and uncertainty at this difficult time. Whether your problems stem from a loss of work, escalating debt, unexpected expenses, or a combination of factors, financial worry is one of the most common stressors in modern life. Even before the global coronavirus pandemic and resulting economic fallout, an American Psychological Association (APA) study found that 72% of Americans feel stressed about money at least some of the time. The recent economic difficulties mean that even more of us are now facing financial struggles and hardship.

Like any source of overwhelming stress, financial problems can take a huge toll on your mental and physical health, your relationships, and your overall quality of life. Feeling beaten down by money worries can adversely impact your sleep, self-esteem, and energy levels. It can leave you feeling angry, ashamed, or fearful, fuel tension and arguments with those closest to you, exacerbate pain and mood swings, and even increase your risk of depression and anxiety. You may resort to unhealthy coping mechanisms, such as drinking, abusing drugs, or gambling to try to escape your worries. In the worst circumstances, financial stress can even prompt suicidal thoughts or actions. But no matter how hopeless your situation seems, there is help available. By tackling your money problems head on, you can find a way through the financial quagmire, ease your stress levels, and regain control of your finances—and your life.

While we all know deep down there are many more important things in life than money, when you’re struggling financially fear and stress can take over your world. It can damage your self-esteem, make you feel flawed, and fill you with a sense of despair. When financial stress becomes overwhelming, your mind, body, and social life can pay a heavy price.

[Read: Stress Symptoms, Signs, and Causes]

Financial stress can lead to:

Insomnia or other sleep difficulties. Nothing will keep you tossing and turning at night more than worrying about unpaid bills or a loss of income.

Weight gain (or loss). Stress can disrupt your appetite, causing you to anxiously overeat or skip meals to save money.

Depression. Living under the cloud of money problems can leave anyone feeling down, hopeless, and struggling to concentrate or make decisions. According to a study at the University of Nottingham in the UK, people who struggle with debt are more than twice as likely to suffer from depression .

Anxiety. Money can be a safety net; without it, you may feel vulnerable and anxious. And all the worrying about unpaid bills or loss of income can trigger anxiety symptoms such as a pounding heartbeat, sweating, shaking, or even panic attacks.

Relationship difficulties. Money is often cited as the most common issue couples argue about. Left unchecked, financial stress can make you angry and irritable, cause a loss of interest in sex, and wear away at the foundations of even the strongest relationships .

Social withdrawal. Financial worries can clip your wings and cause you to withdraw from friends, curtail your social life, and retreat into your shell—which will only make your stress worse.

Physical ailments such as headaches, gastrointestinal problems, diabetes, high blood pressure , and heart disease. In countries without free healthcare, money worries may also cause you to delay or skip seeing a doctor for fear of incurring additional expenses.

Unhealthy coping methods , such as drinking too much , abusing prescription or illegal drugs, gambling, or overeating. Money worries can even lead to self-harm or thoughts of suicide.

If you are feeling suicidal…

Your money problems may seem overwhelming and permanent right now. But with time, things will get better and your outlook will change, especially if you get help. There are many people who want to support you during this difficult time, so please reach out!

Read Are You Feeling Suicidal? , call 1-800-273-TALK in the U.S., or find a helpline in your country at IASP or Suicide.org .

The vicious cycle of poor financial health and poor mental health

A number of studies have demonstrated a cyclical link between financial worries and mental health problems such as depression, anxiety, and substance abuse.

Financial problems adversely impact your mental health. The stress of debt or other financial issues leaves you feeling depressed or anxious.

The decline in your mental health makes it harder to manage money. You may find it harder to concentrate or lack the energy to tackle a mounting pile of bills. Or you may lose income by taking time off work due to anxiety or depression.

These difficulties managing money lead to more financial problems and worsening mental health problems, and so on. You become trapped in a downward spiral of increasing money problems and declining mental health.

No matter how bleak your situation may seem at the moment, there is a way out. These strategies can help you to break the cycle, ease the stress of money problems, and find stability again.

When you’re facing money problems, there’s often a strong temptation to bottle everything up and try to go it alone. Many of us even consider money a taboo subject, one not to be discussed with others. You may feel awkward about disclosing the amount you earn or spend, feel shame about any financial mistakes you’ve made, or embarrassed about not being able to provide for your family. But bottling things up will only make your financial stress worse. In the current economy, where many people are struggling through no fault of their own, you’ll likely find others are far more understanding of your problems.

[Read: Social Support for Stress Relief]

Not only is talking face-to-face with a trusted friend or loved one a proven means of stress relief, but speaking openly about your financial problems can also help you put things in perspective. Keeping money worries to yourself only amplifies them until they seem insurmountable. The simple act of expressing your problems to someone you trust can make them seem far less intimidating.

• The person you talk to doesn’t have to be able to fix your problems or offer financial help.
• To ease your burden, they just need to be willing to talk things out without judging or criticizing.
• Be honest about what you’re going through and the emotions you’re experiencing.
• Talking over your worries can help you make sense of what you’re facing and your friend or loved one may even be able to come up with solutions that you hadn’t thought of alone.

Getting professional advice

Depending on where you live, there are a number of organizations that offer free counseling on dealing with financial problems, whether it’s managing debt, creating and sticking to a budget, finding work, communicating with creditors, or claiming benefits or financial assistance. (See the “Get more help” section below for links).

Whether or not you have a friend or loved one to talk to for emotional support, getting practical advice from an expert is always a good idea. Reaching out is not a sign of weakness and it doesn’t mean that you’ve somehow failed as a provider, parent, or spouse. It just means that you’re wise enough to recognize your financial situation is causing you stress and needs addressing.

Speak to a Licensed Therapist

BetterHelp is an online therapy service that matches you to licensed, accredited therapists who can help with depression, anxiety, relationships, and more. Take the assessment and get matched with a therapist in as little as 48 hours.

Opening up to your family

Financial problems tend to impact the whole family and enlisting your loved ones’ support can be crucial in turning things around. Even if you take pride in being self-sufficient, keep your family up to date on your financial situation and how they can help you save money.

Let them express their concerns. Your loved ones are probably worried—about both you and the financial stability of your family unit. Listen to their concerns and allow them to offer suggestions on how to resolve the financial problems you’re facing.

Make time for (inexpensive) family fun. Set aside regular time where you can enjoy each other’s company, let off steam, and forget about your financial worries. Walking in the park, playing games, or exercising together doesn’t have to cost money but it can help ease stress and keep the whole family positive.

If you’re struggling to make ends meet, you may think you can ease your stress by leaving bills unopened, avoiding phone calls from creditors, or ignoring bank and credit card statements. But denying the reality of your situation will only make things worse in the long run. The first step to devising a plan to solve your money problems is to detail your income, debt, and spending over the course of at least one month.

A number of websites and smartphone apps can help you keep track of your finances moving forward or you can work backwards by gathering receipts and examining bank and credit card statements. Obviously, some money difficulties are easier to solve than others, but by taking inventory of your finances you’ll have a much clearer idea of where you stand. And as daunting or painful as the process may seem, tracking your finances in detail can also help you start to regain a much-needed sense of control over your situation.

Include every source of income. In addition to any salary, include bonuses, benefits, alimony, child support, or any interest you receive.

Keep track of ALL your spending. When you’re faced with a pile of past-due bills and mounting debt, buying a coffee on the way to work may seem like an irrelevant expense. But seemingly small expenses can mount up over time, so keep track of everything. Understanding exactly how you spend your money is key to budgeting and devising a plan to address your financial problems.

List your debts. Include past-due bills, late fees, and list minimum payments due as well as any money you owe to family or friends.

Identify spending patterns and triggers. Does boredom or a stressful day at work cause you to head to the mall or start online shopping? When the kids are acting out, do you keep them quiet with expensive restaurant or takeout meals, rather than cooking at home ? Once you’re aware of your triggers you can find healthier ways of coping with them than resorting to “retail therapy”.

Look to make small changes. Spending money on things like a morning newspaper, lunchtime sandwich, or break-time cigarettes can add up to a significant monthly outlay. While it may be unreasonable to deny yourself every small pleasure, cutting down on nonessential spending and finding small ways to reduce your daily expenditure can really help to free up extra cash to pay off bills.

Eliminate impulse spending. Ever seen something online or in a shop window that you just had to buy? Impulsive buying can wreck your budget and max out your credit cards. To break the habit, try making a rule that you’ll wait a week before making any new purchase.

Go easy on yourself. As you review your debt and spending habits, remember that anyone can get into financial difficulties, especially at times like this . Don’t use this as an excuse to punish yourself for any perceived financial mistakes. Give yourself a break and focus on the aspects you can control as you look to move forward.

When your financial problems go beyond money

Sometimes, the causes for your financial difficulties may lie elsewhere. For example, money troubles can stem from problem gambling , fraud abuse , or a mental health issue, such as overspending during a bipolar manic episode .

To prevent the same financial problems recurring, it’s imperative you address both the underlying issue and the money troubles it’s created in your life.

Just as financial stress can be caused by a wide range of different money problems, so there are an equally wide range of possible solutions. The plan to address your specific problem could be to live within a tighter budget, lower the interest rate on your credit card debt, curb your online spending, seek government benefits, declare bankruptcy, or to find a new job or additional source of income.

If you’ve taken inventory of your financial situation, eliminated discretionary and impulse spending, and your outgoings still exceed your income, there are essentially three choices open to you: increase your income, lower your spending, or both. How you go about achieving any of those goals will require making a plan and following through on it.

• Identify your financial problem. Having taken inventory, you should be able to clearly identify the financial problem you’re facing. It may be that you have too much credit card debt, not enough income, or you overspend on unnecessary purchases when you feel stressed or anxious. Or perhaps, it’s a combination of problems. Make a separate plan for each one.
• Devise a solution. Brainstorm ideas with your family or a trusted friend, or consult a free financial counseling service. You may decide that talking to credit card companies and requesting a lower interest rate would help solve your problem. Or maybe you need to restructure your debt, eliminate your car payment, downsize your home, or talk to your boss about working overtime.
• Put your plan into action. Be specific about how you can follow through on the solutions you’ve devised. Perhaps that means cutting up credit cards, networking for a new job , registering at a local food bank, or selling things on eBay to pay off bills, for example.
• Monitor your progress. As we’ve all experienced recently, events that impact your financial health can happen quickly, so it’s important to regularly review your plan. Are some aspects working better than others? Do changes in interest rates, your monthly expenses, or your hourly wage, for example, mean you should revise your plan?
• Don’t get derailed by setbacks. We’re all human and no matter how tight your plan, you may stray from your goal or something unexpected could happen to derail you. Don’t beat yourself up, but get back on track as soon as possible.

The more detailed you can make your plan, the less powerless you’ll feel over your financial situation.

Whatever your plan to relieve your financial problems, setting and following a monthly budget can help keep you on track and regain your sense of control.

• Include everyday expenses in your budget, such as groceries and the cost of traveling to work, as well as monthly rent, mortgage, and utility bills.
• For items that you pay annually, such as car insurance or property tax, divide them by 12 so you can set aside money each month.
• If possible, try to factor in unexpected expenses, such as a medical co-pay or prescription charge if you fall sick, or the cost of home or car repairs.
• Set up automatic payments wherever possible to help ensure bills are paid on time and you avoid late payments and interest rate hikes.
• Prioritize your spending. If you’re having trouble covering your expenses each month, it can help to prioritize where your money goes first. For example, feeding and housing yourself and your family and keeping the power on are necessities. Paying your credit card isn’t—even if you’re behind on your payments and have debt collection companies harassing you.
• Keep looking for ways to save money. Most of us can find something in our budget that we can eliminate to help make ends meet. Regularly review your budget and look for ways to trim expenses.
• Enlist support from your spouse, partner, or kids. Make sure everyone in your household is pulling in the same direction and understands the financial goals you’re working towards.

Resolving financial problems tends to involve small steps that reap rewards over time. In the current economic climate, it’s unlikely your financial difficulties will disappear overnight. But that doesn’t mean you can’t take steps right away to ease your stress levels and find the energy and peace of mind to better deal with challenges in the long-term.

[Read: Stress Management]

Get moving. Even a little regular exercise can help ease stress, boost your mood and energy, and improve your self-esteem. Aim for 30 minutes on most days, broken up into short 10-minute bursts if that’s easier.

Practice a relaxation technique. Take time to relax each day and give your mind a break from the constant worrying. Meditating , breathing exercises, or other relaxation techniques are excellent ways to relieve stress and restore some balance to your life.

Don’t skimp on sleep. Feeling tired will only increase your stress and negative thought patterns. Finding ways to improve your sleep during this difficult time will help both your mind and body.

Boost your self-esteem. Rightly or wrongly, experiencing financial problems can cause you to feel like a failure and impact your self-esteem. But there are plenty of other, more rewarding ways to improve your sense of self-worth. Even when you’re struggling yourself, helping others by volunteering can increase your confidence and ease stress, anger, and anxiety—not to mention aid a worthy cause. Or you could spend time in nature, learn a new skill, or enjoy the company of people who appreciate you for who you are, rather than for your bank balance.

Eat healthy food. A healthy diet rich in fruit, vegetables, and omega-3s can help support your mood and improve your energy and outlook. And you don’t have to spend a fortune; there are ways to eat well on a budget .

Be grateful for the good things in your life. When you’re plagued by money worries and financial uncertainty , it’s easy to focus all your attention on the negatives. While you don’t have to ignore reality and pretend everything’s fine, you can take a moment to appreciate a close relationship, the beauty of a sunset, or the love of a pet, for example. It can give your mind a break from the constant worrying, help boost your mood, and ease your stress.

Find financial resources

Find  U.S. Government Services and Information  including  How to Get Out of Debt ,  Unemployment Help , and  Getting Help with Living Expenses . Or call 1-844-872-4681. (USA gov)

Get help with debt and housing problems from  Citizens Advice , contact a free debt service at  National Debtline  or  Stepchange , or seek free financial advice from the government’s  Money Advice Service .

Find  Government Services , get free  Financial Counselling  or call the  National Debt Helpline  at 1800 007 007.

Find government services and information for  Managing Debt  and  Benefits .

More Information

• Managing Job Loss and Financial Stress - Helping yourself and your family cope with stress and financial worries following job loss. (University of Hawaii)
• Managing Debt - Steps you can take to deal with debt. (Federal Trade Commission)
• Managing money and budgeting - Tips for creating a family budget. (raisingchildren.net.au)
• Make a Budget - Simple worksheet to help you create a budget. (Federal Trade Commission)
• Money Stress Weighing on Americans’ Health - Details of the 2015 Stress in America: Paying with Our Health survey from the American Psychological Association. (APA)
• Trauma- and Stressor-Related Disorders. (2013). In Diagnostic and Statistical Manual of Mental Disorders . American Psychiatric Association. Link
• Inc, Gallup. “The U.S. Healthcare Cost Crisis.” Gallup.com. Accessed November 16, 2021. Link
• Anderson, Norman B, Cynthia D Belar, Steven J Breckler, Katherine C Nordal, David W Ballard, Lynn F Bufka, Luana Bossolo, Sophie Bethune, Angel Brownawell, and Katelynn Wiggins. Stress in America: Paying with our Health. “AMERICAN PSYCHOLOGICAL ASSOCIATION,” n.d., 23. Link
• Ramsey Solutions. “Money, Marriage, and Communication.” Accessed November 16, 2021. Link
• “At What Costs? Student Loan Debt, Debt Stress, and Racially/Ethnically Diverse College Students’ Perceived Health. – PsycNET.” Accessed November 16, 2021. Link
• Richardson, Thomas, Peter Elliott, and Ronald Roberts. “The Relationship between Personal Unsecured Debt and Mental and Physical Health: A Systematic Review and Meta-Analysis.” Clinical Psychology Review 33, no. 8 (December 1, 2013): 1148–62. Link
• Warth, Jacqueline, Marie-Therese Puth, Judith Tillmann, Johannes Porz, Ulrike Zier, Klaus Weckbecker, and Eva Münster. “Over-Indebtedness and Its Association with Sleep and Sleep Medication Use.” BMC Public Health 19, no. 1 (July 17, 2019): 957. Link
• Saleh, Dalia, Nathalie Camart, Fouad Sbeira, and Lucia Romo. “Can We Learn to Manage Stress? A Randomized Controlled Trial Carried out on University Students.” PLOS ONE 13, no. 9 (September 5, 2018): e0200997. Link
• “Stress, Social Support, and the Buffering Hypothesis. – PsycNET.” Accessed November 15, 2021. Link
• Salmon, P. “Effects of Physical Exercise on Anxiety, Depression, and Sensitivity to Stress: A Unifying Theory.” Clinical Psychology Review 21, no. 1 (February 2001): 33–61. Link
• Toussaint, Loren, Quang Anh Nguyen, Claire Roettger, Kiara Dixon, Martin Offenbächer, Niko Kohls, Jameson Hirsch, and Fuschia Sirois. “Effectiveness of Progressive Muscle Relaxation, Deep Breathing, and Guided Imagery in Promoting Psychological and Physiological States of Relaxation.” Evidence-Based Complementary and Alternative Medicine 2021 (July 3, 2021): e5924040. Link

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How to overcome 8 sources of financial problems & difficulties.

Financial problems and challenges happen to everyone at some point, and the stress and worry can get to you. However, realizing that there is almost always a way out can help you not feel so depressed. You may be able to find the way out yourself, or you may need someone else's perspective to help you find a solution. Below we’ll show you  how to overcome financial problems and difficulties  and ease your stress. But, one size does not fit all. If your situation is beyond the general help provided here, we’ll also let you know who you can go to for more in-depth help.

1. Identify the Underlying Problem That's Causing the Difficulties

The first step to overcoming financial problems is to identify the underlying issue that’s causing the financial difficulties. Financial problems are usually a symptom of a bigger issue. To come up with solutions that work in the long run, take the time to identify the real source of your financial troubles. Here are some common things to think about: 

Your problem may not be listed above or it may be more complex. However, the concept of identifying a specific problem is important because it is more likely to result in a lasting solution. Just like with a leaky faucet; placing a bucket below is temporary. Fix the tap and the leak will stop. Focus on solving the problem that’s causing your money troubles, rather than dwelling on your stress.

2. Create a Budget - Spend Money in a Way That Helps Solve the Problem 

One of the best weapons for combating financial problems is a budget. A budget is a monthly spending plan for your money. Creating a budget is like turning the lights on to find your way around a dark room. You no longer need to wander in the dark; banging your shins, tripping over the furniture, and stepping on the dog. Instead, with the lights on, you can see what’s going on and prevent problems before they happen. A budget works much the same way; it guides your spending decisions so that you're spending money on what's really important to you. In this case, you'll  spend your money in a way that helps solve your financial problem .

Click here to learn more about creating a budget , or try out our  budget calculator that guides you through the budgeting process , points out common problems, and offers suggestions to improve your budget.

Track Your Expenses to Build a Budget That Works

As you create your budget, it’s important that your expenses aren’t just guesses – they need to reflect reality. You may want to ​ track your expenses  for at least a couple of weeks (a month is best) to objectively see where you are spending your money and how much you’re spending. Although you may think you know where your money is going, when most people tally up all their purchases for a month, they are usually quite surprised to notice that their spending doesn’t always match up with what they thought their priorities were.

3. Determine Financial Priorities to Guide Your Spending Choices

4. Identify Small Steps You Can Take to Address the Problem & Achieve Your Goals

Look here to get ideas of where find some extra money each month , get the card paid off, and then permanently have $50 extra to use in your budget every month. However, if by the time you reach this goal you’ve learned to get by without this $50, then use it to accelerate the payment of another debt each month, and get all of your debts paid off more quickly. 

Look for Things You Can Do, Even Temporarily, to Improve Your Situation

Here are more ideas or steps you can consider taking to improve your financial situation and alleviate difficulties:

• As you look through your budget, ask yourself: Do I want this or do I need it? Will spending this money get me closer to my financial goals or further away? Can I live without it?  Learn more about separating needs from wants .
• Do you use credit cards for impulse purchases? This can contribute to a cycle of ongoing financial difficulty and  add as much as 50% to everything you purchase .  Learn how to reduce or change impulsive spending habits .
• Ask yourself if you can downsize anything in your budget or switch to a less expensive option. If vehicle costs are straining your budget, can you downsize your vehicle, get rid of one vehicle (the average person spends over $9,000 per year to own and operate a vehicle), take transit (80% cheaper than owning a vehicle), or car pool? If your rent, mortgage, or home upkeep is bleeding you dry, can you downsize to something more affordable, rent out your basement, rent a room in your house, rent out the storage space in your garage, or can you take in a student for some extra income?
• If debt is causing you financial problems, here are a lot of ways to reduce your debt or here are a dozen of the most effective ways to get out of debt .

• Can you take on a side job or create another source of income with something you know how to do well?
• Look outside the box, ask yourself tough questions, invite a trusted friend to have a look at your budget and make suggestions, or  sit down with a Credit Counsellor and get their suggestions .
• Research viable options that will move you towards your goals. A  consolidation loan ,  speaking with a Credit Counsellor , a  Debt Management Program , or some other option may be a possibility.

While doing any of these can be an unappealing thought, don’t just dismiss them because they’ll move you out of your comfort zone. Keep thinking about them and give them some consideration. Come back to these ideas from time to time to see if you can come up with a new angle on decreasing your expenses or increasing your income that might just work for you. Remember, you’re trying to get through a tough a time; you don’t need to do this forever, just to get back on track. If you’re really struggling, an  experienced Credit Counsellor can be a great, free source of suggestions .

5. Develop Your Plan to Overcome Financial Problems for Good

Once you’ve come up with some ideas for how to begin tackling your financial problems and difficulties, you can  put together a realistic plan to accomplish your goals . Some goals will have a timeline of a few months; others will need a longer timeline, like 24 - 36 months. Write your goals down, but also write down where you’re at now in relation to each goal. For example, if one of your goals is to pay off a $4,000 debt, make sure to write down the current debt balance and your future goal of paying this down to $0. You’ll want to include in your plan the amount of money you’re going to pay on this debt every month so that you can pay it off within your desired time frame. For more  help on setting goals, have a look at this . Here are also some  tips on setting financial goals with your spouse .

If you’re really feeling overwhelmed and stressed by your situation, you can also  reach out to a non-profit credit counselling agency for help . They have professionally trained Credit & Debt Counsellors who can review your situation with you, help you put together a realistic budget, and help you come up with a plan to solve your current challenges and get your finances back on track. Their help is usually free and is always confidential.

6. Review How Things are Going

The last step takes place once you are a few months into working on your plan. Every once-in-a-while, take a few minutes to review how things are going. Is your plan working? Are you making progress toward your goals? If not, you’ll need to take a closer look to figure out why not and adjust your plan. Your plan needs to be realistic, or it’s not going to work. It should also contain some things you weren’t doing before you put the plan in place.

If you keep doing what you were doing before, then you’ll continue to get the same result  as before – problems.  You’ve got to do something different to get a different outcome.

As you follow your plan and see improvements in your situation, be open to the possibility of fine-tuning the plan. Once you start making some progress, you may find you’re doing better than you thought, or you may come up with some new insights. Improving your plan so that you accomplish your goals more quickly is good as long as your budget can afford the changes and everyone who relies on your budget is okay with the more aggressive approach.

Preventing Future Financial Challenges

Unexpected financial challenges are bound to arise in the future - in fact, research shows that  6 in 10 Canadians will experience major life events that will challenge their prior financial plans . The key to tackling these challenges is to be flexible. Review your budget occasionally and make necessary changes.  Build up savings so that you can handle unanticipated expenses  without going into debt and putting yourself in a difficult situation.

Overcoming financial problems and difficulties isn’t easy, but by setting some clear priorities for yourself, identifying ways to achieve these goals, and persevering with your plan, you can overcome the challenges and at the same time, put an end to the financial stress.

• Online Workshop:  How to Resolve Relationship & Marriage Money Problems & Issues
• How to Protect Yourself from a Financial Emergency
• Does Being Organized with Your Money Really Matter?

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• Add new comment

vivienne replied on Mon, 12/10/2018 - 4:59pm Permalink

how to overcome 8 types of financial problems

sagar pal replied on Tue, 05/28/2019 - 11:43pm Permalink

MyMoneyCoach Team replied on Wed, 05/29/2019 - 8:51am Permalink

Where to get help

Bandela Pratap replied on Thu, 03/05/2020 - 7:10am Permalink

Financial problems

MyMoneyCoach Team replied on Thu, 03/05/2020 - 8:40am Permalink

Finding help

Pushkaraj Sawant replied on Fri, 09/04/2020 - 7:21am Permalink

More More Money Problem

MyMoneyCoach Team replied on Fri, 09/25/2020 - 9:40am Permalink

You should speak with a credit counsellor

Diganta Gohain replied on Sat, 09/05/2020 - 8:43am Permalink

Drastic financial problems

MyMoneyCoach Team replied on Fri, 09/25/2020 - 9:43am Permalink

Two places to look for help

Lanie Won replied on Wed, 05/04/2022 - 7:35am Permalink

Nina replied on Sat, 07/08/2023 - 10:42am Permalink

68 years old with little money for the golden years

MyMoneyCoach Team replied on Mon, 07/10/2023 - 2:58pm Permalink

You should speak with a financial planner

7 ways to manage financial stress during trying times

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From recent high-profile bank failures to sky-high inflation and worries of a recession, many consumers are coping with financial stress as they try and keep their money safe, plan for the future and simply try to make ends meet.

In fact, more than half (52 percent) of adults say money has a negative impact on their mental health at least occasionally, according to Bankrate’s 2023 Money and Mental Health Survey . Among those impacted by money worries, almost one-third (29 percent) worry every single day.

While financial stress can often be attributed to external factors, there are ways you can mitigate it and take steps to improve your financial security. Here are seven steps to help you manage financial stress during trying times.

Impact of financial issues on mental health

• More than half (52 percent) of adults say money has a negative impact on their mental health at least occasionally.
• Women are significantly more likely than men to say money negatively impacts their mental health (56 percent versus 47 percent).
• Gen Xers (ages 43-58) are the most concerned, since 60 percent say money negatively impacts their mental health, compared with 55 percent of millennials (ages 27-42), 52 percent of Gen Zers (ages 18-26) and 45 percent of baby boomers (ages 59-77).
• More than one-third (35 percent) of those with annual household incomes under $50,000 who say their mental health is negatively impacted by money matters say this happens every day. That figure falls to 29 percent in households that earn between $50,000 and $79,999, 21 percent in households that earn between $80,000 and $99,999 and 23 percent in households that earn more than $100,000.
• Inflation is the top money worry that has grown over the past year. More than half (57 percent) of those whose mental health is negatively impacted by money concerns said this issue has worsened over the past year.

1. Prioritize what you can control on discretionary spending

You probably can’t change everything that’s causing you stress. Focus instead of what you can control so you can improve your situation. For instance, consider your food budget. Look for ways to shave a few dollars off your grocery bill , like comparing prices on different brands. You’ll not only save money, but the feeling of accomplishment and being in control may help reduce your stress as well.

Lowering your food bills can really impact your budget, since food prices are expected to increase 6.5 percent in 2023, according to the U.S. Department of Agriculture . One simple way to save on groceries is to buy store brands over name brands. Store-brand groceries tend to run around 40 percent cheaper than name brands, according to CNET research .

2. Find ways to earn more money

You can only cut a budget so far, and you’ll want to be careful that your tight budget doesn’t become a source of additional stress. With the price of consumer goods being higher than normal, line items in your budget are likely already under strain.

It might be worth looking for ways to increase your income instead. Some ways to do so include:

• Work a few extra hours: Try talking to your employer about putting in some extra time each week, if you’re paid hourly or at least eligible for overtime pay.
• Negotiating for a raise: Given high inflation and a tight labor market, employers may be more willing to grant a pay increase.
• Selling items you no longer need: This can include things such as old furniture, clothing, toys, pet items and tools.
• Taking on a side gig : A side gig can be a good option for those who want a flexible way to pad their income alongside a full-time job. This can include things like delivering food, tutoring or running a blog. The money can really add up, considering the monthly average and median income from side hustles in 2022 was $996 and $400, respectively, according to a Bankrate survey .

3. Pay essential bills

A majority of employed Americans (55 percent) say their income has not kept up with the increase in household expenses due to inflation , a recent Bankrate survey found. If you’re worried about being able to pay all your bills, prioritize essential bills first. Sorting through your bills and prioritizing them serves multiple purposes:

• Thinking through what you spend your money on can help you identify some bills that can be eliminated or reduced.
• Deciding in advance which bills you need to prioritize can help ensure you set aside enough money to pay them on time.

Paying close attention to your bills and prioritizing them will help reduce your financial anxiety and hopefully allow you to sleep better.

Some service providers and lenders may allow for payment extensions, which give you extra time to pay your bill. This can come in handy during a time of financial hardship. It’s important to read the terms of any extension agreement to understand whether associated fees will be charged and how the extension impacts any interest accrued.

4. Save money during trying times

It’s often hard to consistently save money, especially if you’re struggling just to make ends meet. In fact, 74% say economic factors, including inflation, rising interest rates, and change in income/employment, are causing them to save less right now, Bankrate found .

Following a savings plan and building up your emergency fund will not only help you feel more in control, but it will also relieve some stress.

Shopping around for the best high-yield savings account is worth your time, considering these accounts often earn exponentially higher yields than the near-zero rates commonly offered at big banks.

Many consumers continue to earn lackluster rates on their savings accounts, however. Only around 1 in 5 Americans (22 percent) with short-term savings say they’re earning a yield that’s 3 percent or higher, according to Bankrate’s Online Savings Survey . Nearly a quarter (24 percent) earn mediocre annual percentage yields (APYs) of 1 to 2.99 percent, while the same percentage (24 percent) report earning a rock-bottom APY of less than 1 percent and 16 percent say they’re earning no interest whatsoever.

If you want to contribute a certain amount to your savings each month, you can set up an automatic transfer from your checking account .

Once you’ve built an emergency fund, you may want to put any extra savings into a certificate of deposit (CD) . In exchange for keeping the money in the account for a set time frame, you’ll earn a guaranteed return rate that may be higher than traditional savings accounts.

Other places to save your money include money market accounts, cash management accounts and individual retirement accounts (IRAs).

5. Track your money-saving progress

You won’t really know if you’re making progress if you don’t track it. Make sure you know where you stand.

“Do the work to figure out your exact financial situation,” says Tracey Bissett, president at Bissett Financial Fitness. Tracking your progress lets you know whether the actions you’re taking are moving the needle.

Tracking your progress in adding to your emergency fund over time can have a positive impact on your wellbeing. Of all U.S. adults who say concerns about money have negatively impacted their mental health, 41 percent say not enough emergency savings has caused an increase in concern over the past year, Bankrate found in its Money and Mental Health Survey.

“Having good financial health and a positive mindset is really all about understanding your opportunities, your options and how your money is working for you,” says Cara Macksoud, a certified financial behavior specialist and CEO of Money Habitudes, a financial personality assessment provider.

“If you don’t have a positive mindset currently, understanding your finances will let you know what story your money is telling, and that may be the check-in that helps you begin to have a positive mindset around money,” Macksoud says.

Bankrate’s savings calculator is a handy way to determine how soon you can reach a financial goal based on how much you save every month. Another resource, Bankrate’s Magnify My APY , helps you determine your current savings rate, compare other rates, and see how much more you can earn with a higher APY.

6. Talk to your lenders

Debt can be both a financial and mental burden. Before you let debt and the stress it causes overwhelm you, talk to your lenders.

“Always remember that lenders are often open to discussing your issues and finding at least a short-term solution,” says Anna Barker, personal finance expert and founder of personal finance website LogicalDollar.

The lender may be willing to make a modification on the loan, such as extending its term or lowering the interest rate, to reduce your monthly payments. You could also try refinancing .

7. Consult with an expert financial advisor

Consider talking to a financial advisor to help take some of the weight off your shoulders when it comes to things like setting goals, saving money and decreasing debt.

Working with a financial advisor on aspects that include financial planning and investment selection can add around 3 percent to your portfolio annually, based on research by consulting group Envestnet | PMC .

“In times of stress, a financial advisor should be there to validate your feelings [and also] show you why you should feel calm with the plan you have in place,” says Money Habitudes’ Macksoud. “If you have a longer-term relationship with an advisor, the greatest part of that is you can see where you were, where you are, and where you’re going. And if you’re still on track, even with market uncertainty as it is, you should find peace with the diversification you have.”

Bottom line

Financial stress and anxiety are common nowadays, whether you’re struggling to make ends meet due to inflation or you’re worried about the safety of your money in the bank after several high-profile bank failures.

Though it will take some effort, you can work to stay ahead of expenses and curb financial worries. This can be accomplished through steps like creating a budget and tracking your savings progress. Also, don’t hesitate to reach out to a financial advisor or a trusted friend or relative for advice.

Various online resources are available for free to help you save money, spend wisely and live within your means. Bankrate’s money-saving calculator can help you determine how long it’ll take to save for goals. What’s more, you can help build up your nest egg through a money-saving app or any savings features available in your own bank’s app.

— Bankrate’s René Bennett and Brandon Renfro, CFP, contributed to previous versions of this story.

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5 money mistakes you can learn from

Key takeaways

• Before co-signing a loan or a lease with someone, make a plan for covering payments and consider putting it in writing.
• Compound interest works against you with credit card debt. Try not to charge more than you can afford and always pay on time—more than the minimum when you can.
• Before taking out a student loan or withdrawing from your retirement savings, do your research to understand how doing so could affect your future plans.

Have you ever made a money decision you regretted? If the answer is no, congrats—bet you floss every day too, you rock star. On the other hand, if you still cringe over a past money move, you’re not alone. In 2022, 76% of Americans reported making at least one financial mistake, according to a Credit Karma survey. 1

We asked 5 real people to share their past financial problems, so you can learn their lessons without feeling the pain yourself.

Feed your brain. Fund your future.

1. Co-signing for a friend who didn’t repay the loan

When Molly Watters was a 25-year-old graduate student, a close friend came to her with a question: Would she co-sign a $10,000 student loan? Watters, now 40 and living in Hollywood, MD, says she thought about it carefully. “I’m someone who says I would do anything for a friend, and here she was asking me to do something for her. So I figured, ‘I’m going to do it,’” says Watters. They discussed that payments, which would start immediately, had to be paid on time. Watters says her friend paid $10 each month faithfully until she graduated in 2010. Then, when the monthly payments went up to $125, she simply stopped paying.

Not only did this money mistake cause an irreparable rift in the friendship, Watters found herself dealing with it for more than a decade. Watters protected her credit by making on-time payments until the loan was paid off in 2022—and walked away with an important lesson: “If you co-sign for someone, you’re stuck paying it off if they don’t,” she says. “So be very careful before making that kind of commitment.”

2. Racking up credit card debt

Mark Margarit, a 41-year-old team leader at Fidelity, says he ran up $20,000 worth of credit card debt in his 20s. He got his first credit card when he was in college and used it for school-related purchases. His intent was to pay off any charges at the end of each month when he was reimbursed by his parents—but that didn’t always happen. Instead, he used the new card for day-to-day living expenses, such as health insurance, food, parking, gas, and nights out. He also took cash advances, not realizing that those came with a much steeper interest rate. The worst part, he says, was that he didn’t  understand you need to pay off your balance each month to avoid racking up interest charges. 

Once he graduated, Margarit took over paying the credit card bill with his own money. He never missed a payment, but he often only paid the minimum each month based on what he thought he could afford, and the card’s interest rate was well over 20% by then. This ballooned the total amount he owed as the interest compounded. Margarit says it seemed as though he would never pay it off. It wasn’t until he educated himself that he turned the tide on his debt, but it took years. He finally made his last debt payment only a few years ago.

“I read about the importance of always paying more than the minimum and always paying on time ,” Margarit says. “So I started trying to pay a little bit more each month, even if it was only $5 more than the minimum. That kept me going from a mindset perspective not to break the chain. I also started to limit my use of the card whenever I could.”

3. Borrowing from future you for a wedding

Bethany Marlatt, 36, wishes she had more financial education, too, before she and her husband made their own money mistake. The couple, who live in Sugar Grove, IL, were planning their wedding and finding it difficult to pay for everything with cash. They had already run up high-interest credit card debt and were paying off a car loan at 26% interest, due to a low credit score.

“We had intended to save up for our wedding, but the budget was just spiraling out of control,” she says. So the couple took a 2-year, $10,000 loan against her husband’s 401(k) to pay wedding bills. Though opting for a loan rather than withdrawing the money outright saved them from penalties and fees, it still impacted their retirement planning, as they missed out on several years of potential tax-free investment growth. The wedding was beautiful, but Marlatt says she wouldn’t recommend doing what she did. “I don't think we understood how important it was to save for retirement until we were older.”

Read more about the tradeoffs and other considerations before taking out a 401(k) loan .

4. Moving in with a partner without a written agreement

Ten years ago, Misti Nippert, 40, and her fiancé decided to rent a house together in Hendersonville, TN. But when the couple experienced problems, Nippert asked her fiancé to move out. Although he was listed on the lease, her fiancé immediately stopped paying rent and refused to pay thousands of dollars in damages his dog caused.

Between window replacements, carpet cleaning, and 4 months of rent, Nippert owed $17,000. She emptied her savings account but still couldn’t pay everything, so she took a high-interest loan and borrowed money from her father. “It took me 2 years to recover from that,” she says. “Now I wouldn’t go into any type of rental or home purchase with someone unless I could afford 100% of the rent or mortgage on my own salary. And that includes all the utilities.”

Among other tips when moving in with a partner , it’s important to discuss how expenses will be covered including what happens if you split up. Consider putting that agreement in writing—beyond co-signing a lease—just in case. This could give you a stronger position should you have to take legal action to recoup your money.

5. Taking on too much student debt compared to future income

Katie Munizza, 35, a part-time occupational therapist from Abington, PA, attended school on and off for 10 years—in part because she switched majors along the way. She borrowed both federal and private student loans to finance her education, and by 2016—after earning 2 associate degrees and being one class away from a bachelor’s degree—she owed more than $100,000. Today, she still owes about $78,000.

Munizza has hustled to pay down her loans by working 2 jobs, but she says she wishes she had done more research before spending so much time and money on degrees that didn’t set her up to earn a lot.

Student loans can be an important tool for gaining access to higher education, and nearly 1 in 4 adults with a bachelor’s degree or higher have at least some student debt. 2 But prospective students should understand how much their potential salary could be—or could increase to—and how that compares to their loan amount and future payments. Just like any investment, it’s important to calculate the ROI (return on investment) of taking out a student loan .

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8 Ways to Manage Money Stress

The only way to not stress about money is by facing your financial stress head on.

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Face your finances by sitting down with your bills and a calculator to see just how big of a hole you’re in.

It's easy to get stressed about money. Inflation hasn’t helped, nor has Congress arguing over the debt ceiling, and ever since the first bill was paid, it was likely that money stress was a thing. Meanwhile, all year-round, there are chances for plenty of financial stress. Maybe you're trying to save up for a summer vacation while also thinking about home improvements or back-to-school expenses that you're going to incur. And before long, you'll be thinking about all of the holiday spending you have to do, and after that, there’s taxes to consider.

So if you’re frazzled and wishing you knew how not to stress about money, it's no wonder.

Even though inflation has improved, it's still ever-present in everybody's lives. According to the Consumer Price Index, the price of everything, on average, is 4.9% more expensive than it was a year ago. That’s actually good news. About a year ago, inflation was a lot worse.

Still, lack of money and anxiety tend to go hand in hand. What’s a financially crunched person feeling acute money stress to do?

Get help, suggests Darren Moore, a licensed psychotherapist in Columbus, Georgia. He says that might mean getting financial help or medical help or both.

"A financial advisor can help develop the most effective financial strategy, and a mental health professional can help discuss the impact these changes might have on the couple and family relationship,” Moore says.

Of course, if money is tight, you may feel like the last thing you can do is pay for professional help.

But you have to do something, and you should.

“There are different kinds of money problems, ranging from true poverty to having too much credit card debt to not being able not afford a vacation this year – and everything in between. But no matter what the circumstances, if you are unable to make ends meet, it will wear you down, physically and emotionally, and in every other way,” says Naomi Angoff Chedd, a licensed mental health counselor and director of counselor support services at Counslr, a text-based mental health support platform.

“Money worries often change behavior, almost always in negative ways. It can affect your sleep, your ability to concentrate, your ability to do your job, your relationships with family and friends, and it certainly affects your self-esteem,” Chedd says.

So, in light of May being Mental Health Awareness month, we reached out to some experts to get their thoughts on what you should do if you’d like to take a do-it-yourself approach to financial anxiety and solving money stress.

Run Toward Your Financial Problems, Not Away From Them

Sit down with your bills and a calculator and start trying to see just how big of a financial hole you’re in.

“In my experience, the greatest source of financial stress and anxiety is the fear of the unknown. We're often terrified of digging into our numbers and finding out bad news,” says Chris Janeway, a certified plan fiduciary advisor and the founder and president of Fourth Point Wealth, a financial management firm in Newport Beach, California.

“The reality is, the truth is a liberating thing. More often than not, the fear is worse than the facts of anyone's situation and once we pin down the facts, we can create the steps to progress forward,” he says.

None of this is to say that once you crunch the numbers, you’re going to feel great. If you’re really in a financial bind, being more aware of how bad things are may make you feel even worse. But Janeway is right: No one can get out of a financial hole without understanding how deep it is. If you can figure out just how bad things are, that knowledge can often serve as a pretty good flashlight.

Create a Financial Plan and Share It With Your Household

Revamping your budget – or starting a budget for the first time – is your next step.

You may also need to start a plan to pay down your debt. That might mean getting help from a professional , like going to see a credit counselor. It could mean hiring a financial advisor or working with the IRS to pay back taxes.

Maybe your financial plan is simply that you’re going to look for a new job , one that pays more money.

But assuming your financial plan involves cutting back on expenses, you need to make sure that you’re not the only one in your home fighting what can be a very lonely battle. If you have a spouse, partner or teenagers, looping them into the financial picture could help combat your stress – and keep everyone from blowing up your budget.

“My wife and I, each year, use a date night to sit down with our computers and map out holiday travel, shopping lists and a budget,” Janeway says. “It can seem tedious, and it is, but we leave that date night with a plan that builds trust and reduces an incredible amount of stress as we head into the holidays.”

Use Positive Language When Thinking of Your Financial Situation

Look at the bright side. Kelan Kline, who runs the personal finance blog The Savvy Couple with his wife Brittany, says positive talk is part of financial self-care. He says that it’s very important to not beat yourself up.

He offers up the classic example of not having enough money for the holidays.

“If you don't have as much money as you'd like to spend on gifts, decorations and other holiday purchases, don't get down on yourself,” Kline says. “When trying to cut down on spending, focus on the positive. For example, instead of saying, 'I can't afford that Christmas gift I want to give,' reframe it as, 'I have the opportunity to give a homemade gift from the heart.' This change in language can help you remain relaxed and gain a sense of empowerment.”

While empowering language can’t always turn a cloudy day into a bright one, it’s better to try and reframe a situation positively rather than dwell on the negative. For instance, if you’re paying your rent or mortgage every month and feeding your family, you are succeeding. Maybe not as much as you want, but you’re holding your own.

Remember: You’re Not the Only One Experiencing Financial Problems

If you spend a lot of time on social media, some people you follow may occasionally mention a scary health issue or a frightening moment, like a car accident, but it’s rare that you see posts saying, “Wow, I have $18 in my bank account, and I’m not getting paid for another three days.”

So heed some advice from Joshua Zimmelman, managing director of Westwood Tax & Consulting, a New York City-based virtual accounting firm.

“Remember that you’re not alone,” he says. “Financial anxiety is super common. According to the American Psychological Association, money issues are a major source of stress for most adults.”

He adds that it may not make your own money situation any less stressful, but hopefully you can take comfort in knowing that a lot of other people feel the exact same way.

Zimmelman is correct about that. A survey by FinFit with Salary Finance, which surveyed 2,000 Americans, found that almost 60% of those making under $55,000 a year feel financial stress, but nearly 40% of those making over $200,000 experience it, too.

Make Some Room in the Budget to Splurge

Remember to not beat yourself up too much – or at all – if you occasionally spend money on something you don't need.

If you like to go to the movies, or you refuse to give up a beloved coffee drink or you’re purchasing a toy for your kid just because you want to, and you know the money would be better spent on something else – don’t beat yourself up.

Yes, staying within your budget is important, but so is financial self-care. Nobody’s suggesting that you should be reckless with your money, but keep in mind that being too rigid with how you spend your money can also be somewhat reckless. Even when inflation is high, sometimes we all need to splurge.

Identify the Causes of Any Bad Financial Habits

Some people simply don’t have enough money. They aren’t spending badly; they just don’t have enough to spend. But you may be in the other camp, where you always pick up the check when dining out with friends, or maybe you always have food delivered when you could be picking it up yourself or making it at home.

“Identify the circumstances and triggers that lead to unhealthy spending,” Chedd says. “Do you order things that you want – but may not need – online? Do you buy on impulse when you are in the check-out line?”

If you are mismanaging your money and can figure out where you’re always going wrong, developing better financial habits should give you more funds in the bank and a little less money stress.

Take Care of Yourself

“Healthy eating, sleeping, regular exercise and relaxation will contribute to your ability to remain calm, clear-headed and more able to find solutions to your problems, even your financial problems,” Chedd says.

She suggests identifying activities “that are fun, relaxing and do not cost money – or cost very little. Going for a walk in the woods or along the water can do wonders for your mental, physical and financial health.”

Consider Getting Professional Help

Again, that might be financial help or someone like a mental health counselor. And, yes, professional help is going to cost something, which will add to your stress – but it may not cost you anything or at least less than you think.

"Seeking mental health treatment does not always require a lot of funds,” Moore says. “Depending on where a person works, they may actually have access to free resources including mental health as well as financial advisors through employee assistance programs.”

He adds that about 20% of his clients are referred to by their employers, and their employers generally cover anywhere from two to 10 appointments as part of their employee benefits . So if you’re really feeling anxious over money stress, you could talk to somebody about it for free.

And if that’s not in the cards for you? “There are mental health professionals that offer services that are pro bono or at a reduced cost. Also, there are educational programs that offer services that are pro bono or at a substantially reduced cost,” Moore says.

Finding those services will cost time, of course, but at least not money.

“People might be able to gain access to resources through their medical insurance specifically if their medical insurance coverage includes mental health benefits – which could be completely covered or at a significant reduced cost, such as a copay," Moore says.

And, of course, it must be said that if you’re feeling seriously or chronically depressed or suicidal, you could and should get help very quickly. Chedd says that you can call 988, which is the National Suicide Prevention Lifeline, or text 741741, which would put you in touch with the Crisis Text Line, a global nonprofit that provides a free mental health texting service.

But if you feel like it’s professional financial help you need for your money stress rather than a therapist, there are free places to go for that as well, says Howard Dvorkin, a certified public accountant and chairman of the debt education website, Debt.com.

“There’s no shortage of free assistance,” Dvorkin says. “Your bank or credit union probably offer free online budgeting tools that can help you squeeze every last dime from your income. Nonprofit credit counseling agencies ... offer you a free, in-depth debt analysis over the phone.”

And if you want some monetary guidance for your money stress, Dvorkin says that after experiencing a couple years of historical inflation, getting financial professional help may be your best bet.

“Do-it-yourself solutions are mostly played out,” he says. “There are only so many coupon and gasoline apps you can download.”

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10 Tips for Resolving your Financial Problems

No one is immune to financial problems. Poor planning or going through a tough time, such as a divorce, illness or unemployment, can really tip the scales. Need help? Here are 10 tips for resolving your financial problems.

• Identify the problem
• Make a budget to help you resolve your financial problems
• Lower your expenses
• Pay in cash     
• Stop taking on debt to avoid aggravating your financial problems
• Avoid buying new
• Meet with your advisor to discuss your financial problems
• Increase your income
• Be realistic when it comes to resolving your financial problems
• Improve your credit score and adopt good habits

1. Identify the problem

Being in debt does not necessarily mean that you have financial problems . Very few people would be able to buy a house or a car otherwise. However, certain red flags should be taken seriously.

Do any of the following statements apply to you?

• You have many credit cards and you sometimes use one to pay off another.
• You've had to refinance your home to support your lifestyle or pay off debts.
• You are unable to pay off more than the minimum amount required on your credit cards.
• You delay or skip certain payments.
• More than 40% of your gross income goes to paying off debt.
• Your financial situation is a source of stress.

If so, you'll need to take some steps to correct the situation .

2. Make a budget to help you resolve your financial problems

The first step towards managing your financial problems is making a budget . You can use:

• Budgeting software
• An online budgeting tool  
• A mobile app
• Or simply a piece of paper, a pencil and a calculator

Write down all your sources of income and all your expenses.

To avoid underestimating your expenses, save all your bills and receipts for a month. 

Also consider occasional expenses like school supplies, gifts, vacations, your driver’s licence, etc. Don't forget to budget for paying off your debts .

Reorganize your debts 

Don't forget to include debt repayment among your expenses. 

Start by identifying your debts and listing their amounts and interest rates. Then pay off the debt with the highest interest rate, or consider debt consolidation . Consolidating your debts into a single loan with a lower interest rate will help you pay them off faster. In this case, make sure the interest savings are used to accelerate debt repayment, or for long-term savings. If these savings end up as expenses, the problem will persist.

→ To find out more, read our article Debt management: How to pay off your debt

Good to know: Many consumer associations offer training on budgeting and debt managment. You should have a look!

3. Lower your expenses

Analyze all of your expenses to see which ones you can reduce or eliminate .

Think about reviewing various packages, such as your telecommunication services. You could save by ensuring all they do is meet your needs—nothing more and nothing less. You could also start looking for deals, make a food budget and limit the cost of eating out by packing your own lunch.

4. Pay in cash

Paying in cash can help you stick to your budget . Debit and credit cards are convenient, but they can make it harder to track your expenses.

Budget tip: Put your cash in separate envelopes for groceries, entertainment and clothing.

→ Looking for new tips to help you save? Read our article: 35 tips to help you save money and optimize your budget .

5. Stop taking on debt to avoid aggravating your financial problems

If you tend to make impulse purchases and regret them later, you may want to start leaving your credit card at home .

Avoid taking on additional debt by living within your means. Make sure you have enough to repay your credit card balance and other debts.

6. Avoid buying new

There are many alternatives to buying new .

• Buy used or exchange goods . Check out thrift stores, online classifieds ads and Facebook pages for neighbourhood sales. There are many bargains and opportunities for trades.
• Borrow or rent . This is a good option for items you will rarely use. For example, sign up for a library card to check out books and magazines.
• Do it yourself . Over the long term, using a coffeemaker is much cheaper than buying coffee every day.
• Take advantage of freebies . For example, there are many free shows and activities at festivals.

7. Meet with your advisor to discuss your financial problems

Your advisor can help with your financial problems . They will help you review:

• Your banking package  
• Your banking fees 
• Your insurance coverage
• Whether you should apply for a reduced interest rate credit card (with an annual fee)

→ For tips on optimizing your credit card use, read our article : 6 smart ways to use your credit card .

8. Increase your income

Think about ways to increase your income to deal with your financial problems. Here are some options :

• Ask your employer if you can work overtime.
• Offer products and services for extra income.
• Sell items that you no longer use.
• Find a roommate.
• Get a second job.

Be wary of ads that claim you can earn money easily. These are often scams.

Use your emergency fund

In the event of a problem, you can dip into your emergency fund instead of putting yourself into debt . However, make sure you don't make a habit of it. As the name implies, it should only be used in exceptional circumstances. 

Your emergency fund is a cushion to help you deal with the unexpected, such as losing your job or a broken electrical appliance. Ideally, it should cover between 3 to 6 months of expenses , so be sure to use it wisely!

Pro tip: avoid dipping into your retirement savings, especially your RRSPs. Your withdrawals will be taxable, and you'll also lose contribution room that could be useful in the long term. 

→ Read our article on withdrawing funds from an RRSP in the event of debt to further understand the potential implications .

9. Be realistic when it comes to resolving your financial problems

Realistic goals will help you stay motivated and reduce your financial stress .  If you've overspent for many years, you can't expect to pay off your debts in just a few weeks. 

Just like a diet, significantly restricting your expenses will only increase your appetite to spend. Plan a little wiggle room in your budget to treat yourself .

10. Improve your credit score and adopt good habits

Do you have bad credit? That means you'll be offered higher rates on financing. Why? Because you present a greater risk for the financial institution. Here are a few tips to improve your credit score :

• Pay your bills on time.
• Try to keep your credit card balance well below your limit.
• Don't submit too many credit applications.

Once you have managed your financial problems, continue taking care of your personal finances . The money you save will allow you to create an emergency fund. Ideally, this fund should equal three to six months of expenses . If you run into issues, you'll be able to withdraw money from the fund instead of going into debt.

Next, you can start saving to finance other goals, like retirement, travel or your children's education.

Nobody is immune to financial problems. A stroke of bad luck or a poorly controlled budget could happen to anyone. The important thing is to take action and get help from our team of specialists when necessary. With the right support, you'll be able to manage your financial problems.

Video transcript

- You asked: “How do I make a personal budget?”

I’ll explain faster than I can do 20 push-ups.

A budget can help anyone understand their spending habits, avoid debt, prepare for emergencies and reach their financial goals.

- Finding a tool that helps you organize your budget can be a big help.

It can be anything from an Excel spreadsheet to an app that you download on your phone.

- Identify all your sources of income.

Use your bank statement to identify precisely how much money you make.

You could add up all your deposits, and that’ll tell you how much you have coming in every month.

Don’t be lazy!

Sorry, I’m talking to myself.

- A good personal budget includes three spending categories.

Fixed expenses, that’s like your rent or your phone bill.

Variable expenses.

That’s groceries, or restaurants or shopping.

And infrequent or annual expenses like insurance, or your driver’s licence renewal and your annual ski pass.

- Experts typically recommend putting 10% to 20% of your gross income towards savings.

Now I know, I know. 

That might be painful at first, but no pain no gain!

- Easy for you to say.

- When you deduct expenses from income, you’ll find out if you’re at a deficit or not.

If you are, you might need to make a few cuts to your budget.

Maybe you’re like me and you spend way too much on stylish activewear.

If you have a deficit, it’s easier to cut down on variable expenses like restaurants or shopping.

But if you have any money left over – you can pay off some debt or put some into savings in case an emergency comes up.

Now that you know how to do it, stay on top by keeping track of your budget month to month.

It’s all part of getting into great shape... financially. 

I think I’m done.

How about you?

- Only one left!

- You wish.

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