With life becoming more and more expensive, it is quite natural that finances can cause some stress. We can all go through difficult times – due to inflation, rising interest rates, debts, some significant life change such as unemployment, death of a family member, or the birth of a child – when there seems to be not enough money for everything , bills are a headache and monthly bills can even keep us up at night.
In this sense, we suggest some practical strategies to deal with financial stress, take control of your money and help you breathe a sigh of relief.
Make a strict and realistic budget
A good strategy for this is to create a budget, starting by making a list of all your expenses, including the smallest ones, and comparing them with your income. Remember to regularly update the document or application where you record your income and expenses so that it is easier to know the status of your accounts, how much money you have left at the end of the month and whether you need to make adjustments to ensure a healthy balance.
Reduce expenses
Now that you have listed your expenses, distinguish between your priority and essential expenses and those you can do without . Some luxuries that you could previously indulge in may now weigh more heavily on your wallet if you have lost income or simply because rising inflation has reduced your purchasing power. Subscriptions to streaming services , for example: do you use them to justify the monthly fee? You could also start opting for home-cooked meals instead of eating out or using delivery services so often, or swapping your car for public transport or cycling whenever your route allows. This step will also help you get to know your consumer behaviour better.
If you tend to make impulse purchases, it would be important to adjust your habits and make more considered decisions , not only for large-value purchases but also for everyday ones. A good practice for this is, for example, to always make a list of the items you need and stick to it when you go to the supermarket.
You may also notice increases in your bills for home services, which, as they are unavoidable, you cannot do without. However, you can renegotiate your contracts. In the case of electricity and natural gas services, you can switch to another supplier that offers you more economical rates and, with regard to the former, you should also check whether you have contracted a power that is above your consumption needs. As for telecommunications, pay attention to the end of the loyalty period, try to renegotiate the package with your operator and/or analyse whether the offers from competitors are more advantageous.
Review your credits
If you have a mortgage loan whose repayments are suffocating your budget, the first step is to try to renegotiate with the bank . Reducing the monthly payments here could involve lowering the spread – which may be too high compared to current rates –, extending the term of the contract or changing the associated insurance policies.
When the maturity of the credit contract increases, it is important to bear in mind that, at the end of the contract, the sum of interest will be higher because it extends over more months. However, reducing the monthly payment can be a great relief for the situation you are currently experiencing.
If you have a mortgage, you will also have life insurance and multi-risk insurance, which are usually taken out with the bank’s partner insurers. However, it is important to know that this is not mandatory , and you can take out these insurance policies with any other insurer or transfer them later. Therefore, if you think the price is too high, run simulations with other entities. But bear in mind that these insurance policies may grant a bonus on the spread and that you may be subject to a penalty. Even so, if you do the math, you may conclude that this change is worth it.
On the other hand, if your mortgage is not the only loan you have – in the case of also having a car loan, personal loans, credit cards, etc. – the best solution may be a consolidated loan . This is an option that combines several loans into one, resulting in a single payment that is generally lower than the sum of all the individual loan payments.
Analyze your insurance portfolio
Between car insurance, life insurance, multi-risk insurance, health insurance or even others, your insurance portfolio may be quite full and represent a considerable portion of your expenses. The first thing to do is to analyze whether you can do without any of them. If, in fact, they are all essential, review the policies, as you may have coverage that no longer makes sense to you. Alternatively, you can also request simulations with other insurers and transfer your insurance policies.
Create and maintain an emergency fund
A great way to save money and avoid financial hardships, and consequently drastically reduce financial stress, is to create an emergency fund . This is because unexpected events happen to anyone, whether they are health problems or breakdowns in household appliances or cars, and they often represent quite unpleasant surprises and heavy expenses on your monthly bills. An emergency fund helps you deal with these emergencies, as well as guaranteeing your subsistence in the event of unemployment or an unexpected drop in income. With an emergency fund, you have a nest egg that allows you to breathe a sigh of relief when one of these more demanding financial situations occurs without having to resort to personal loans or loans from people close to you.
As such, this should be an amount that you set aside each month to cover your essential expenses for a minimum period of 6 to 12 months. The amount depends on your monthly means. It is recommended that it be at least 10% of your income, but we know that at times this is not always possible. The important thing is that you set aside an amount regularly and that you increase it whenever you have the possibility.
And setting aside is a key term in this topic. It is important that this money does not remain in your current account, or you may end up using it for other purposes. Instead, save it in another account with no commissions, such as savings accounts with no early withdrawal fees. In fact, you should also make sure that the account where you accumulate your emergency fund does not hinder access to this money if necessary – after all, that is exactly what you set it up for. You can even automate this transfer at the beginning of each month, so that you do not forget.
It is essential that you only use your emergency fund for unforeseen expenses that represent essential expenses. You should not use it to make investments or impulse purchases. If you have to use this savings, try to replace the amount you used as soon as possible to protect yourself against future emergencies. This is a habit that you should maintain even beyond the goals you set, throughout your life, so that you can always have financial stability even in less favorable times.
Invest in your financial literacy
Since money is a constant in all of our lives, it is essential to know and understand its intricacies. Understanding how finances and the economy work – being aware of what interest is and how it is calculated, how taxes work, the advantages and risks of existing financial solutions, among many other aspects – is a crucial tool for making informed decisions about your money, with confidence and autonomy. Throughout this article, we have provided you with several best practices, but you can always learn more through books, courses, podcasts or videos on YouTube, for example; remember to ensure that the sources you consult are always credible.
Make safe investments
Once you have a solid emergency fund and have started to focus on financial literacy, a good way to provide yourself with some financial relief in the future is to put your money to work. Given that it can be a long and difficult road to get there, we will focus only on safe investments with guaranteed capital, which, although they provide a lower return than other alternatives, are well worth it in terms of security. Term deposits, savings certificates, capitalization insurance or retirement savings plans are options that you may want to consider. The important thing to keep in mind in a situation of greater financial stress is that this should not be a priority. Your first investment should be in your emergency fund and, consequently, in any needs that you may have in the future.
Negotiate a salary increase
If, after establishing and analyzing your budget, you have discovered that the main problem is your insufficient income, you may want to renegotiate your salary.
It is important, first of all, to be well aware of the average salary of someone in your position and with your experience, so as not to present proposals that are not reasonable or feasible. It is also important to be aware of the financial health of your company beforehand, as it may not be the best time to ask for a raise.
You should also prepare your arguments well. You need to show your employer that what you have to offer the company justifies a higher salary. If you feel that you are not yet ready for this step, it is a good idea to invest in developing relevant skills that can add value to both the company and your CV.
Finally, you should be aware that if your negotiation goes well, you will have to show that you are up to the task. On the other hand, if you are unable to achieve your goal, try to reflect on what you can improve or, on the other hand, start looking for another job where you can be more valued.