Dec 16, 2021
With Christmas around the corner and federal student loans switching on next month, money stress is reaching a peak for many young people — and it’s been bad for a while.
Nearly three in four Americans under 40 say managing their finances is taking a toll on their mental health, according to a new survey from Laurel Road, KeyBank’s digital banking platform. Over 60% feel “constantly stressed.”
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“Financial stress and anxiety are incredibly common feelings among Gen Z and millennials,” says Alyssa Schaefer, general manager and chief experience officer at Laurel Road. “We see that cultivating ‘mental wealth’ is clearly a priority for many individuals.”
That means building more financial knowledge and setting up a financial plan so you can feel confident about the future. Here are four ways to achieve those goals:
1. Beat your debt into shape
While you may not be able to eliminate your student debt or credit card debt anytime soon, you can relieve a lot of pressure by getting them in the most manageable shape possible.
If you have a federal student loan, the government offers income-driven repayment plans that allow borrowers to make more affordable payments, based on what they earn. After you make 20 or 25 years of regular payments under an income-driven plan, your remaining debt will be forgiven.
Another simple money-saving step is to enroll in autopay, because signing up for automatic deposits will qualify you for a 0.25% interest rate reduction when payments resume.
On the other hand, if you have a private loan, your best bet could be refinancing to lower your debt faster. Assuming you have a decent credit score, refinancing could help you pay off your loan more quickly and save you a huge amount in interest.
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The same strategy can work for any high-interest debt you’re carrying, like the kind on credit cards. When you refinance to a lower rate, you could free yourself years sooner.
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2. Create an actual budget
About two-thirds of millennials and Gen Zers are concerned about overspending during the holiday season, but only 38% are actually budgeting.
Consider talking to your loved ones about swapping homemade gifts, like baked goods or crafts, or agree to skip the gifts and simply share the pleasure of each other’s company. You’ll probably find some of your friends and relatives are tight on money, as well.
Even after 2021 comes to a close, a monthly budget can be a great money- and stress-management tool. Dig out a notepad and list all of your usual expenses, like groceries, credit card bills, mortgage or rent payments and retirement savings. That way you know exactly how much you can spend on the fun stuff each month, worry-free.
3. Prepare for disaster
If your anxiety comes from imagining the worst-case scenario, like a job loss or running out of money in retirement, then it’s time to prepare for it.
About 44% of the respondents in the study say they’re trying hard to save more. However, saving is only part of the picture; you’ll also want to maximize the money you’re saving.
Tuck away some savings each month into a high-yield savings account so it has a chance to grow. Normal checking and savings accounts offer next to nothing in interest.
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Experts suggest keeping enough money on hand for three to six months of expenses, if possible. Knowing you have a secure stash for emergencies like a big medical bill or expensive car repairs can help bring peace of mind.
However, you’ll also want to make sure you’re investing for the future — and the best thing you can do is to start early. Even a small amount can grow into a fortune with time.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
4. Ask for help
Don’t be afraid to talk to someone if your financial anxiety is spiralling out of control — whether that’s a mental health professional or a financial planner. Building “mental wealth” goes both ways.
A good financial planner will examine your situation and help you meet your goals, like planning for retirement, managing investments and dealing with debt.
Just keep in mind that they won’t be directly addressing your emotions or trauma regarding money.
If you can find one, financial therapists specialize in both mental health and money. They can help you rethink your relationship with money, address your coping behaviors and even assist in coming up with the right spending plan.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
