8 tips to De-stress if your money is funny
Getting a handle on your finances is a must to reduce stress! Black women suffer a great deal of financial stress. It’s no surprise considering that we are underpaid (compared to our White counterparts), and about 30% of Black households are held down by Black women.
This article offers 8 tips to improve your finances and manage your finances.
8 Tips to Improve Your Finances and Manage Financial Stress
Focus only on the things you can control.
The best way to start reducing your financial stress is by identifying the issues causing your personal anxiety and those creating tension in your household. Write them down and highlight those within your control.
You may be capable of accomplishing anything you set your mind to but controlling everything causing your financial stress is nearly impossible. Prioritize what you can control and spend less energy on what you can’t. You’ll feel a sense of fulfillment from managing the financial concerns within your power.
2. Track your spending.
Tracking your financial transactions aims to help you understand your lifestyle and money habits and keep you accountable to your budget. It’s not to make you feel shame, bound, or stressed about money. It’s hard to control finances if you don’t know where the money is going.
A spreadsheet is a practical tool for keeping track of your spending. It allows you to track the percentage of your income devoted to subscriptions, daily living expenses, charity and gifts, housing, utilities, entertainment, emergency funds, college funds, investments, taxes, etc. Download the Vertex42 yearly budget calculator to track your monthly income and expenses.
Another tool for budgeting is EveryDollar by Ramsey Solutions. It’s free “zero-budget” software that balances your expenses and income down to the cent. Upgrade to premium for $9.99/month or $99.99/year to connect to your bank accounts and automatically pull in every transaction. It tracks every cent in and out of your accounts to accurately view your spending habits.
3. Spend less or make more.
The most viable option is decreasing your spending. Look at your finances like a balance sheet; your spending must equal or exceed your take-home pay. It’s a guarantee that you’ll never get ahead of your financial situation if your expenses surpass income. However, if you are already as bare as you can go, increasing your income can help you get ahead.
Here are a few ideas to increase your income:
- Ask for a raise.
- Start a side hustle. You can start a blog or vlog, pick up freelance gigs in your spare time, sell a course or e-book online, create an Etsy store to sell your handmade creations or printables, etc.
- Enhance your skills and look for a higher-paying job
- Try affiliate marketing
- Start your own business from your passion
Use the 10/70/20 Rule
The 10/70/20 is a widely used rule for building wealth from the book Richest Man in Babylon by George Clason. It specifies what percentages of your income you should contribute consistently to your savings, spending, and debt to live comfortably and ensure your future.
70% - Living expenses: rent/mortgage, food, clothing (within reason), insurance, transportation, utility bills
20% - Savings: 6-month emergency fund, side hustle, retirement, vacation, and personal development
10% - Consumer debt: student loans, mortgage, personal loans, credit cards, and future purchases, donations
Another common ratio is 50/30/20, where 50% of your after-tax pay should be set aside for must-have/must-do expenses (food, shelter, utilities, and whatnot). 30% to cover your “wants” (i.e., travel and entertainment), and 20% savings. Here is an easy calculator to plug in your take-home pay and get a quick 50/30/20 breakdown.
4. Pay off your debt.
Debt is an American problem (look at the state of our government debt). But because of racial inequality in the US, Black and Brown people feel it the most. Check out the debt-to-asset ratios by race for American families. A high debt-to-asset ratio has the same impact a low credit score has on borrowing; there are fewer, more expensive options. High debt can be debilitating without a strategy to reduce it. There are two recommended ways to approach paying down debt.
Snowball Method
The Snowball method entails paying off the smallest loan first while only paying the monthly minimum payments on the higher balance accounts. For this to be effective, you need to pay higher than the required minimum on the loan. Once the debt is paid, that money is added to the next payment to quickly clear the balance. As you roll the money from the lowest balance to the next, the amount “snowballs” and grows, so you pay down your debt quicker. This process continues until all loans are eventually paid off.
Avalanche Method
The avalanche method focuses on paying the debt with the highest interest rates first. Pay above the required minimum on the high-rate loan while only paying the minimum on the remaining loans. Once the first loan is paid off, that money goes to the loan with the next highest interest rate. Repeat until all loans are satisfied. The Avalanche method could be discouraging if the balance on the first loan is very high. It can require discipline and patience to stay committed to the process.
JOURNAL POST: PAYING DOWN YOUR DEBT
5. Control your debt.
You run the risk of getting back into debt if you are one to spend impulsively or make poor financial decisions under stressful situations or if you face an emergency. The best way to avoid debt is to build an emergency fund, pay your bills on time, work on prioritizing needs or wants, or create a splurge fund. Avoid debt traps like “Buy Now, Pay Later” by budgeting for that item.
6. Manage black tax.
Black tax originated in South Africa. It is a term that describes the financial support many working-class Black people feel obligated to provide their extended families. You may feel obligated to help your immediate and extended family. Over time, the financial responsibility can become overbearing, impacting your ability to save or care for your household. If not checked, you can become anxious, stressed, and resentful.
It isn’t easy to manage black tax without offending a few people. Some of your relatives get upset when you decline their financial requests. Still, it is up to you to resist the urge to people-please and maintain your boundaries.
Special Tip: Be careful not to make yourself the final solution when your relatives share their problems. Statements like ‘What do you want me to do for you?’ or ‘I will see what I can do.’ Puts the onus on you to become their problem-solver. Instead, help them take responsibility by challenging them to think of strategies to manage their finances better. Teach them how to fish rather than provide the meal!
7. Lend Wisely.
The rule of thumb is don’t lend money that you need. That’s the quickest way to reduce financial stress and maintain good relationships. Unless you have a surplus you don’t need and wouldn’t be shattered if you weren’t paid back- don’t lend it. The repercussions of not following this rule can lead to irreparable harm to relationships and uncomfortable social situations.
Only lend money you can afford to give as a gift to avoid dealing with financial stress or stress from a strained relationship. Otherwise, lend to people you trust to pay back. If you are giving out a big loan, consider making it a legal arrangement with the help of an attorney. Documenting the loan terms with a detailed repayment plan can help keep the transaction civil. Most importantly, avoid co-signing for people who you wouldn’t lend money.
Remember, it is in your right to say NO. If giving a loan complicates your budget, you can recommend other solutions to your loved ones.
8. Talk to a Professional.
Whether you are working towards improving your habits, saving money for your child’s college, paying debt, or investing for the future, managing your finances can feel overwhelming. Consider seeking the expert opinions of a financial advisor or accredited coach.
Getting advice from a finance expert can provide deep insights into the best ways to navigate your financial journey and cause you to feel more confident about managing your finances.
Word of caution: Avoid taking the advice of self-acclaimed finance experts or gurus online. Also, even if a particular stock or fund appears to be “a winner,” don’t give in to the fear of missing out until you have done your due diligence.
Queen, if you are working hard to improve at handling money matters or just getting started- don’t get discouraged! Focus only on what you can control and exercise your right to protect your money and well-being.
Let us know in the comments which of these tips you’ll like to try out first and how you would personalize it.