Indeed, thinking about money can be stressful. In fact, money is one of the top causes of anxiety in marriage and many Americans prefer to avoid dealing with money matters altogether – until they absolutely have to.
Money, however, can also be a source of peace and stability. To help calm your financial stress, take a look at our top 4 tips to effectively manage and simplify your money matters.
1. Invest in Index Funds
About a decade ago, Warren Buffett said a simple index fund could beat out any active investor. A New York hedge fund firm took him up on the bet, but Buffett prevailed.
What, exactly, is an index fund and how can you get started investing in these funds? An index fund is a fund that tracks a certain sector of the market. For example, some index funds track the S&P 500, a collection of the largest public companies in America. By investing in an index fund, you put your money in all the companies in the index instead of one single entity.
Almost anyone can get overwhelmed when deciding how to invest their money. You want a fund that offers growth without too much risk or high fees. Buffett’s recommendation still stands. If you want to invest efficiently, the math proves index funds are the best pick.
2. Automate Your Finances
Finance experts recommend saving money for the future, even if you can only afford a little bit now. The sooner you start saving, the more time your money has to grow and become a nest egg.
If you’re not a saver, you’re in luck as there are now ways to automate your savings so that you don’t have to think about this on a regular basis. For example, banking with Chime helps you save automatically by rounding up purchases and transferring the differences to a savings account. Saving automatically takes the pressure off and is one less thing to remind yourself to do.
Other apps like Acorns can also help you move into investing automatically. This way you don’t have to set up external transfers or change your direct deposit information. Acorns also works as a “save the change” service, rounding up what you spend and investing the difference.
Setting up autopay for your bills is yet another way to help you pay your bills. If you’re the type of person who frequently pays bills late or at the last minute,auto-pay can save you lots of time and stress.
With autopay, you select when you’d like to pay your bill, how much you’d like to pay and which account it comes out of. No more worrying if your payment went through by the deadline or wondering if you’ll be hit with an extra fee. Some auto-pay systems kick in after one billing cycle so make sure to check it after you’ve set it up to see if it’s working properly.
3. Utilize Dollar-Cost Averaging
One of the easiest ways to pick a retirement plan and stick with it is to ignore what’s happening in the market. How do you do that? With dollar cost averaging.
Dollar cost averaging is when you set aside a certain amount every month to invest. If your shares are up, your money will be a smaller amount. If shares are down, your money will go farther. Over time it should average out that you buy the same amount of shares every month. Dollar cost averaging ensures people don’t try to time the market. If you can trust your plan, then you can ignore the headlines and stay focused.
CFP Jason Kirsch and author of “The Millenial Advantage” said one of the biggest reasons people struggle with investing is that they use the market’s daily trends to influence their decisions. A bad day on Wall Street can cause significant financial stress, but it doesn’t have to if you realize there are ways to ignore what’s going on and continue your financial plan.
“Our most important investment decisions will likely take place at the extremes of the stock market: when the market is riding high or when prices are sliding and panic starts to set in,” he said. “These are precisely the moments when emotion and cognitive bias are liable to get the best of us.”
4. Break Things Down to Alleviate Financial Stress
Procrastination is common when it comes to finances. Let’s be real: There are always other things you’d rather do instead of filing taxes and paying bills.s
Rather than becoming overwhelmed by your money to-do list, try breaking it up into smaller chunks. You can assign a due date for each task. Then, reward yourself with ice cream or an episode of your new favorite show.
You can break down any financial task. If you want to start a retirement plan, take small steps. These include contacting a financial adviser and determining how much you can afford to save each month. Also, consider researching your company’s 401k options.
Indeed, some financial stress is inevitable. Simplifying your finances and making small changes in how you manage your money minimizes anxiety. And, that’s a win-win.