Summer is supposed to be a time to unwind, but that’s hard to do if you’re facing financial stress—something that is unfortunately all too common today. In fact, our latest research shows that 66% of employees agree financial stress is negatively affecting both their work and personal lives.
Building financial stability doesn’t happen overnight, but it is possible to move closer to your goals with the right information and consistent, clearsighted action. These four practical steps can help you transform your financial stress into financial confidence no matter what’s going on in your life (or the wider financial markets).
1. Build a budget
An effective budget starts with getting clear on where your finances are today—including income, assets, expenses, and debt. That takes out the guesswork and a lot of the stress.
First, calculate your total income, including your paycheck, side jobs, Social Security—anything that gets you paid. Next, tally up all your expenses from the basics like housing, groceries, and bills to “fun money” for things like date night or piano lessons. Subtract your fixed expenses from your income and figure out how much is left over—that’s the money you’ll be able to redirect toward goals like savings or splurging on a vacation. Every dollar should have a purpose.
Budgeting is a lifelong project, so be patient with yourself. There are tools that can help you create and manage a budget, like mobile apps, online tracking tools, spreadsheets, and journals. Figure out what works best for you and set a regular appointment with yourself to check in.
2. Defeat debt
Conquering debt can take years or even decades for many of us, so keep your eyes on the big picture.
If you’re not sure where to start, try listing out your debts from the highest interest rate to the lowest, then focus on repaying debts that charge the highest interest rates first. Transfer higher-interest credit card debt to a lower-interest credit card and apply whatever amount you save each month toward the principal. Pay more than the monthly minimum if you can and make sure all your payments are on time—even one missed payment can remain on your credit report for seven years.
Keep tabs on your credit score as well: Credit scores go from 300 to 850, and 800+ is considered great. A strong credit score can open the door to financial opportunities like better rates on insurance and loans.
3. Shape your savings
Saving is simple, but that doesn’t make it easy. Remember that incremental efforts made consistently throughout your life can make a difference.
For any savings goal, think about what matters most to you, how much time you have before you’ll need that money, and how much money you really need. Then divide the amount of money by the time frame—that’s how much you’ll need to set aside each month.
Start with prioritizing two essential savings buckets: an adequate cushion for emergencies and a retirement plan. Keep savings in a separate account so you won’t spend it on other things, and shop around for accounts that pay higher interest rates. For big goals like retirement, you’ll likely want to invest in assets where you can potentially accrue compounding interest over time—like your workplace 401(k).
4. Get support
If you’re stressed about your finances, you’re not alone, and there is help available to support you.
Everyone’s situation is different, but remember you have options. Some of the most important helpers may be your friends and loved ones. There are also several kinds of professionals who can help. Medical and mental-health professionals can work with you to alleviate the physical and emotional side effects of stress. Financial advisers or coaches can help you work on your personal relationship with money, build better habits, and create a personalized strategy to help you reach your goals.
Your workplace can be another great resource: More companies are trying to help their employees counterbalance financial stress, with nine in 10 offering financial wellness programs—which may include access to financial coaches or advice as well as tools to help with things like long-term savings and planning as well as budgeting, managing debt and learning more about financial well-being.
Your finances touch many areas of your life and finding the right routine or support system for yourself can take time. Small changes add up over time, so keep going—you and your financial health are worth it.
Craig Rubino is head of participant insights, financial wellness and learning for Morgan Stanley at Work.
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This material has been prepared for informational and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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