Facing your Finances

The American Psychological Association annual survey found that money is the #1 stress for American adults. For a majority of us, we aren’t rich enough not to think about our finances. Especially, our spending. But alas, spending more or ignoring your financial responsibilities won’t fix them. Facing your finances will.

It can be daunting and its always easier to ignore the situation. However, your financial and mental health will deteriorate quickly. Things don’t go away and neither do collection agencies!

Taking the first step towards acknowledging your financial situation is the most difficult part.

Warning signs

How do you know if you’re avoiding facing your finances? Here are some clues:

You try to put money and finances out of your mind
You avoid talking about money with family and friends
You avoid opening bank statements or credit card bills
You don’t know what your credit score is
You don’t know your net worth
You feel guilty every time you spend money
You validate every purchase as a need, not a want

If you can relate to any of these feelings and behaviors. It may be time to take a hard look at your relationship with money.

Don’t Ignore Money

When you ignore your finances, you don’t know how much you are spending. Especially, in regards to your income. You put yourself at risk for late fees on bills and credit cards. Continue to spend and overdraft fees pile up. Digging yourself a deeper money pit.

But wait! It can get worse.

If you don’t regularly check your bank and credit card balances you will miss bank errors. Or even worse, fraudulent transactions or identity theft.

The lesson? Don’t ignore your finances!

Money Mantra

We develop beliefs and attitudes about money early in life. Often, we aren’t even aware of what our beliefs are, let alone where we learned them.

If you’re avoiding facing your finances it can help to think about money lessons you learned in childhood. Think about what your parents taught you about money. Talk to family members about their money beliefs. Then try to challenge your existing beliefs about money.

Many people feel embarrassed about their debt. They feel ashamed that they let bank statements pile up unread. But that shame keeps you stuck in a rut. Time to move past the self-blame so you can take some critical steps toward financial health.

Time for Action

Well, its time to roll up your sleeves and get at it. Here’s how to start facing your finances and take action.

Spending Plan

Also known as a budget. Now, before you skip ahead and ignore this, budgeting is easier done than said. Yes, that was stated backward. You didn’t read it wrong. There are apps that aggregate your bank accounts and automatically creates a budget for you.

Making a budget is simple now. I personally recommend Personal Capital. Besides their budget dashboard, it tracks your net worth and provides investment advice. You can adjust the budget as you please to meet your financial goals.

Remember stuff happens! Forgive yourself if you slip up. Sticking to a budget is not easy, and there may be days when your resolve falters. If that happens, remind yourself of how much you have to gain by reaching your goals. Then examine your spending patterns to see why you overspent. You may need to modify your budget or your behavior. If you can’t go into shoe stores without buying a new pair, stop visiting them.

Using a convenient budgeting app will help make the transition easier. Visually seeing your income and spending will assist your money decisions. Think of it as a robo-accountability partner.

Additionally, leaning on your relationships can help keep you on track. Every hard task becomes easier with the support of friends and family. So share your goals! There’s no one better to hold you accountable and remind you what you’re sacrificing for than those you love, trust and respect.

Baby steps

As Marvin said to Bob (Bill Murray) in What about Bob? about baby steps:

“It means setting small reasonable goals for yourself one day at a time. One tiny step at a time. Baby steps.”

Besides being one of the funniest movies, approaching life or finances one day at a time is important. It would be nice if we could rub a lamp and have a genie fix our finances instantly. But realistically, that isn’t going to happen.

Fixing your finances won’t give you instant gratification. It can be a long or short process depending on your money situation. Make realistic short term and long term goals. This could include the following:

Paying off a credit card
Paying off a loan
Paying off your debts
Building an emergency fund
Building your net worth
Investing in your 401(k) or TSP
Investing in your Roth IRA
Investing in stocks or ETFs

Whatever goals you create. Make them realistic and start small. If you have three credit cards overdue. Pay the minimums on each but choose to pay more towards the one with the smallest owed. Once that card is paid off, work on the next one. Even though you have more credit card debt, those small victories mean a lot. Not just for your financial health, but for your mental health.

Also, if you have considerable debt that has lasted for years. Check out these articles to see if you still owe the debt.

You may not be able to cut one expense by $100. But you may be able to identify five monthly expenditures you could reduce by $20. This could be cutting back your cable bill, lowering your phone plan, or reducing how many nights you eat out. I have listed a few financial moves that are often overlooked that could lower your monthly bills.

Keep Tabs

Tracking your income and spending is critical to a healthy relationship with money. So tear open those credit card bills and bank statements. Now is the time to face your finances and take control.

Now that you have a budget in place, the fear of the unknown is gone. Remember baby steps. What looks bad now, you will tackle with realistic goals. There is no reason to cower when the mail is delivered. It’s time to keep tabs on your bills and ensure they are properly budgeted for.

Open bills as soon as you receive them, and pay them off. The less time a bill sits around unpaid, the less you will worry about it. Seeing a bill on the table while you eat breakfast. Isn’t conducive to your mental or physical health.

Personal Capital provides notifications when you exceed spending limits within your budget. This will help you keep tabs on your spending within the confines of your budget.

If you want more control over organizing your transactions, Personal Capital allows you to categorize them either in general groups like “Entertainment” or “Food,” or in customizable fields, like “Fido’s dog food” or “Yard Maintenance.” If you charge work expenses to your personal accounts, you can label transactions as reimbursable so they won’t count against your household budget. – Personal Capital

Make it easy on Yourself

I am naturally lazy and prefer not to create a budget by hand. Nor do I want to call a broker to buy me some stocks. If you do, all the power to you. But I think most of you are like me. We want to use technology to make it fast and easy.

With that said. Use automated systems as much as possible. Arrange to have a portion of your paycheck automatically deposited into your savings and retirement accounts. Make it easy and thoughtless.

Apps like Trim Financial can help you budget and save automatically. Trim will automatically organize all your recurring monthly charges—and help you cancel the ones you don’t need. You can set it to text you spending alerts, balances and how much you spent on Uber last month. Its a unique financial app with a twist and very popular.

Have you heard of Acorns? Acorns is based on the idea of saving your spare change. Instead of throwing your spare change into a piggy bank, or a plastic jug. Acorns rounds up all your credit or debit card purchases to the nearest dollar. Then invests that change into a portfolio of exchange-traded funds (ETFs). Investing made easy and thoughtless.

Money is complicated but there are plenty of apps that make it easy. Don’t choose to make money complicated. Download an app that meets your financial needs and something you will use. Set up automatic reminders to alert you when a bill is due. Use an auto-invest app. Set up your paycheck to have funds sent to a high yield savings account. And so forth.

It’s a lot harder to make a bad decision when the decision is out of your hands.