7 Tips For Dealing With Money Anxiety During These Uncertain Times
Money is a top cause of stress no matter what. Add on a global pandemic, the stock market swinging at whiplash-inducing rates, and a growing unemployment rate, and both your physical and money anxiety may be at an all-time high.
Despite such uncertain times, it’s important to stay calm. Making rash decisions never did anyone any favors (Remember the time you decided to cut your own bangs “on a whim?”), and the same applies to your money. There are a lot of things out of our control right now, but focus on what steps you can take now to make smart financial decisions.
It’s hard to navigate the current climate, so we talked to Brittney Castro, CFP of Mint and Turbo, and CEO of Financially Wise Inc. for some expert tips. From what you should do with your 401(k) to saving money for an emergency fund, keep reading for seven tips on how to deal with money anxiety and protect your financial health in the long run.
Related: How I Paid My Way Through College
Don’t Obsessively Check Your 401(k)
With such volatile market swings, it can be easy to see your 401(k) take a hit and freak out. But remember, your 401(k) is a retirement account, which means it’s a long-term investment. “Stay put and ride this out,” advised Castro. “Don’t check your account every day, as it’s very likely going to drop, just as it’s very likely going to come back up in the months ahead as the world works to recover from this pandemic.” She explains that most people are invested in diversified target-date funds, which automatically adjust and become more conservative as you get closer to retirement (they’re kind of like “set it and forget it” funds). If you have a way to go before retirement, don’t panic and sell now.
She also notes that investment options in 401(k) accounts are limited. “You can’t just invest in any stock or bond that you like, and for most of us who aren’t stock analysts, it’s not in your best interest to chase returns in industries or companies that seem ‘hot’ right now,” she said. “No one has a crystal ball to see how this will all play out.” Resist the urge to try to outsmart the market and put your future retirement money at risk.
If you’re able to do so, Castro recommends continuing to contribute to your 401(k). “Now is your chance to buy low so you’ll benefit from the eventual market recovery,” she said.
Start or Try to Build Your Emergency Fund
Having some extra savings is something you should always strive for, but “having access to cash in an uncertain time is crucial,” said Castro. If you already have an emergency fund, no matter how big it is, you’re off to a good start. “If you’re fortunate enough to have stable employment right now, you should definitely focus on building an emergency fund,” she explained. One example is to contribute enough to your 401(k) to take advantage of any company matching programs.
If you don’t have an emergency fund, Castro recommends prioritizing building some reserves. “I would also prioritize cash savings over making extra debt payments during the next few months, especially if you feel the industry you work in is at risk,” she advised. “You always want to make the minimum payments, but if you don’t have any cash savings, I would focus on building at least a small cushion during this time.” Trim your expenses, find a way to make some extra money from home, sell some stuff, etc. – every little bit counts.
Continue Making Your Minimum Monthly Payments
If you have any credit card or loan debt, try to keep up with your monthly payments so your account doesn’t go into default and damage your credit. “If you’re truly struggling, make sure you call your credit card companies or other lenders to make alternative payment arrangements,” advised Castro. “Many companies are willing to work with their customers right now. Visit the American Bank Association website, which has a list of banks who are helping during this time with mortgage loans, car loans, and credit card payments.”
For student loans, the federal government has temporarily paused interest charges and payments until September 30. This applies only to federal loans and not private ones, and the debt doesn’t just go away; it will still be waiting for you after the six-month forbearance period (as of now, at least). It does give you a little buffer room on payments though, which can provide relief if money is tight.
Cut Your Unnecessary Expenses
The one good thing about staying at home all the time is that it’s probably easier to keep track of what you’re spending your money on. Yes, there are still credit cards and the internet, but things like commuting, taking vacations, or going to concerts are not really options anymore, so you’re at least saving there.
Castro suggests making a list of every single monthly expense you have, both fixed costs like rent and utilities and variable costs like groceries or household items. Then, aggressively trim wherever you can. “Cut all non-essentials like music streaming services, that Hulu account you forgot you had, or your gym membership you’re unable to even use at this time,” she said. “Call your cell phone company, credit card company (if you carry a balance), car insurance agent, and internet provider to see how you can reduce your bills. They may have smaller packages or discounts that match your needs at a lower cost.”
Consider Refinancing Debt
As an emergency response, the Federal Reserve recently dropped interest rates to zero and also increased the amount of short-term loans it offers banks to keep cash flowing smoothly. What this means for you is that your savings account interest rates will drop, but interest rates on credit cards or other personal debt could also be affected, which could give you some options in managing outstanding debt. Castro said: “Call your credit card company to negotiate a lower interest rate, especially if you have a strong history with the company. If you have a fixed interest rate on your mortgage, personal loan, or student loan, then you won’t see a change in your rate. You would have to take out a new loan or refinance to see a lower rate.”
Of course, refinancing is more complicated than swapping one loan for another. Do your research and consult with a professional to understand the options and make sure you make the right decisions for your money.
Make a Plan
There aren’t many things we can personally control right now, but there are certain ways to prepare and protect yourself when it comes to finances. Find simple ways to live more frugally, and make a realistic budget and stick to it.
“The goal is to know the minimum monthly amount you need to cover your bills and lifestyle spending during the next few months,” said Castro. “Once you know that amount, you can make a plan. You can compare what you need against the unemployment, stimulus check, tax refund, and other income you’ll receive. This will give you and your family a sense of control in what has become a very chaotic time.”
Stay Calm and Focused
“For families who have experienced financial hardship because of this pandemic, your gut reaction might be to avoid thinking too much about your budget or money in general,” said Castro. “More than ever, you need to make a plan, because while this crisis won’t last forever, the money choices you make today can have a long term impact on your financial health.”
Consider this an opportunity to reevaluate and improve your financial situation for the future. Continue to ask questions and stay educated so you can make smart money decisions, but try not to let money anxiety take over your life. Distract yourself by finding some (inexpensive) ways to destress at home, spending time connecting with loved ones, trying creative activities, testing out new recipes, meditating, napping, or practicing self-care.