Stress can come from many directions in life -- career, school, family, relationships, health -- and especially money.
The American Psychological Association recently reported that money remains the number one stressor for 72 percent of Americans -- above work, the economy, family responsibilities and even personal health concerns. In fact, money has led the APA's annual stress survey since its debut in 2007, the year before the financial crash that took the U.S. economy into its worst slump since the Great Depression.
Financial leaders have noticed, too. In 2009, the Federal Reserve Bank of San Francisco noted the connection between financial and physical health, adding, "Chronic financial stress has been linked to a cycle of increased workplace absenteeism, diminished workplace performance and depression."
How financially stressed are you? Here are some major indicators of financial stress with suggestions for taking action.
- Your job seems uncertain. Even in an improving economy, employers still have layoffs, reassignments and can adjust pay and benefits. If you've seen changes in other departments or you've been reading news accounts that indicate a shift in your industry, start thinking ahead. Action Plan: Build up your emergency fund to cover six months or more of basic living expenses, update your resume and get organized for a potential job search.
- You can't afford to save or invest. If meeting basic expenses is a struggle and you have no savings or investments whatsoever, it's time for a serious review of where your money is going. Action plan: Making a basic budget is the first step to tracking every penny spent. Figure out extras you can cut, set more aside for savings and debt payoff. In the future, aim to pay your everyday expenses with cash or debit only.
- You have disagreements with a spouse or partner about money. Transparency is key in financial and personal relationships. A 2013 University of Kansas study stated that arguments about money are the top predictor of divorce. Action plan: Sit down and talk about your financial situation. Share information about all debt and legal issues and exchange respective credit reports and credit score data to make a plan to solve all money problems together.
- You are paying all bills late. Late payments can ding your credit scores. Action plan: Set up a physical or digital calendar that not only notes the payment due date, but reminds you at least five days in advance that you need to make the payment in time. Also consider online payment if the creditor offers it so you won't have to rely on the mail.
- You're waiting for a windfall to solve your problems. Waiting for a bonus, an inheritance, a sudden jump in the value of your home or a winning lotto ticket to ease your financial burdens is not only a sign of financial stress but also a tendency toward denial. Action plan: If your current efforts at budgeting, saving money or paying off debt are not working, consider a reality check with a qualified financial advisor.
- You use your home equity like a cash register. Home equity loans or lines of credit can provide an interest-deductible solution for a variety of important needs, but the recent housing crisis severely cut or erased many borrowers' equity. Action plan: Either refinance into a lower-rate loan if you qualify or stop using the line entirely until you can pay down that balance.
- You're considering drawing from retirement funds to solve money problems. Many companies allow loans from 401(k)s and even though there are tax ramifications to liquidating IRAs, many investors still consider such accounts a source of cash. Think twice. Interrupting your retirement planning, particularly over the age of 50, can have significant financial consequences. Action plan: Re-budget your finances and seek help from a qualified financial professional to evaluate all potential solutions.
- Late and overdraft fees are piling up. According to the Pew Charitable Trusts, the average overdraft fee at American banks is35. Those are valuable dollars that could contribute to bills and paying debts. Action plan: Schedule bill payments and opt for online billing when possible to save time on mailing; if you are fined for late payments, ask your bank if they might forgive the fee. Some banks agree to remove one fee a year.
- You're late on student loan payments. It is difficult to have student loans forgiven, cancelled or discharged (eliminated) in bankruptcy if you can't pay. Paying late can also hurt your credit score. Action plan: Seek qualified financial advice that specifically addresses the type of student debt you have and resolve to pay bills on time.
- Your accounts are disorganized. It is difficult to reach important financial goals when you can't track your finances properly. Action plan: Get some advice from a trusted friend or a qualified financial professional about how to best organize your money -- determine which accounts to have, whether any funds you have should be consolidated in any specific way or if there's an efficient filing and recording system you should adopt. You can discuss broader financial goals as part of this process.
Bottom line: If financial stress is crippling to your ambitions and your health, get some qualified help so you can eliminate the burden.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney