10 Ways to Manage Financial Stress During Trying Times

The outbreak of Covid-19, followed by medical emergencies, layoffs, recessionary concerns, rising inflation, higher interest rates, etc., have led to a significant emotional and financial strain on numerous households. Coping with such financial stress may seem overwhelming, especially when you don't know how to start. However, if you are seeking ways to handle a financially difficult situation, this article elucidates 10 ways to assist you in taking control of your finances and feeling more positive about your situation.

1. Know the exact concerns:

If you are experiencing financial worries, start by recognising the exact concerns that are causing you stress and anxiety. It could be overdue credit card payments or children's tuition fees, but identifying the root cause of your stress can assist you in determining your next steps. You can begin by noting down the most significant financial issues that you are facing. It is recommended to keep the list concise to prevent feeling overburdened. Make sure you regularly review your list, every three to six months or as necessary if your situation changes.

2. Prioritise your expenses by creating a budget:

You should focus on what you can control and not worry about things that are beyond your reach. When it comes to managing financial stress, you need to assess your expenses and understand where your money is going. One way to start is by creating a monthly household budget that prioritises essential expenses and eliminates unnecessary ones. Without a clear budget in place, it could be challenging to manage your spending. You can use budgeting mobile apps or a simple Excel sheet to manage and track your expenses.

Once the budget is created, make sure you periodically review it and make any necessary changes. It also makes sense to create an emergency fund that can cover all your bills, expenses, and loan payments for 12-24 months in case of a crisis. This will enable you to manage unexpected expenses without falling into debt and experiencing financial hardship.

3. Request for a moratorium period:

If you are struggling to pay your monthly home loan instalments, taking advantage of the moratorium period may be a wise decision. This period allows borrowers to delay repayment of their loans without adversely affecting their credit score. It is a good option for those facing difficulties in making their EMI payments. You can request the lender for the moratorium period, and they may accept or reject your request considering your repayment history and credit profile. However, take note that while you do not have to pay the EMIs during this period, the lender will charge you the interest as per their terms and conditions.

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4. Try to reduce your debts:

One of the primary causes of financial stress and anxiety is huge monthly repayments. High EMIs result in an allocation of a larger portion of your income towards loan repayments and affect your savings and investment plans. Credit card debts, especially those with high interest rates, can also consume a substantial portion of your monthly budget. Hence, it is advisable to systematically and diligently reduce your debt burden. By paying off your debt on time, you can lower your monthly financial obligations, allowing you to focus on building savings and investing for long-term wealth creation. Maintaining a low debt-to-income ratio of 40% or less is essential to avoid overwhelming debt and financial mismanagement.

5. Consider selling idle assets:

While selling assets such as property, gold, and investments can be emotionally difficult, it may be necessary to do so during times of financial need. After all, the purpose of investing in assets is to be able to utilise them when required. Keeping idle assets while struggling to make ends meet does not make sense. However, if the asset holds sentimental value, you may consider taking a loan against it. Such loans have lower interest rates compared to unsecured loans since they are backed by collateral. This can help you consolidate your debts at a lower interest rate. Keep in mind that if you default on the loan repayments or miss a few EMIs, the lender has the right to sell your asset to recover their dues.

6. Check your EPF/PPF:

Since long-term investments like Employee Provident Fund (EPF) and Public Provident Fund (PPF) are important for a comfortable retirement, it is not advisable to withdraw from these funds in times of financial hardship. These funds often offer higher interest rates compared to savings accounts, making them valuable assets for future financial security. However, if you do need to withdraw from these funds in a financial crisis, make sure you do not withdraw too much and consider the potential impact on your future financial needs after retirement.

7. Create an emergency fund:

Creating a contingency fund can provide a sense of security and help you handle unforeseen expenses, such as a medical emergency, unexpected car repair, etc. Starting by making a small weekly contribution is a good way to begin building your contingency fund, and you can increase the amount as your financial situation improves. A contingency fund can minimise your chances of taking on debt to cover emergency expenses and help reduce some of the financial stress you may feel.

8. Start your investment portfolio:

If you wait for the perfect time and income to start your financial planning journey, you will never be able to achieve your financial goals without creating a huge debt burden. Hence, it is advisable to start saving towards your financial goals as early as possible. You can consider an SIP mode of investment that allows you to start your investment portfolio with as low as Rs 500 per month. SIPs can help you create wealth in the long term with its sheer power of compounding. You can increase the amount of your SIP investments as your income grows. Keeping a small portion of your income aside and starting investments will motivate you to achieve your goals and make your life less stressful.

9. Use your insurance:

It is a natural human tendency that as we hear about others struggling with the financial burden of medical expenses, we start imagining ourselves in the same situation and get more stressed. If you have not yet prioritised purchasing insurance, you need to understand that having a health insurance plan or a life insurance policy is necessary for long-term security. Make sure to select a health insurance plan with adequate coverage to protect yourself from future health-related expenses. Moreover, if you are the sole breadwinner of your family, you should be mindful of the potential financial losses and consequences that could occur in the event of your unfortunate demise.

10. Seek assistance:

If you feel that you are not making sufficient progress in paying off your debts, or if you need guidance on how to achieve long-term financial goals like saving for retirement or funding your children's education, it may be wise to consult a reliable financial advisor. While your loved ones may offer support, you should establish clear boundaries and expectations to prevent damaging your relationships. Furthermore, if you are experiencing significant financial stress and feel overwhelmed, do not hesitate to take the help of a mental health professional.

To conclude:

Financial stress can be overwhelming, especially during trying times. However, by following the tips and strategies mentioned in this article, you can manage your finances and reduce stress effectively.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.