How to end financial chaos and worry

Thursday, Aug. 2, 2018 12:55 PM

“I’m worried about money,” a friend confessed to me the other day. I assured her that she’s not alone, and neither are you if you’re worried about money. A recent survey by Varo revealed that 85 percent of us worry about money. Thirty percent worry constantly!

The survey illuminated that:

66 percent of American adults do not have a three-month emergency fund.46 percent don’t have any savings set aside for unexpected expenses.And for 33 percent, financial chaos would ensue if they lost a job, were injured or their car broke down.Worry and stress are a natural reaction to these facts, but stress doesn’t have to be part of your financial reality.

Here are the actions I recommended to my friend:

Accumulate $500 as soon as possible by selling some gear or household items.Make a list of all of your debts from smallest to largest.Create a realistic budget that includes:– Basic necessities: housing, groceries, utilities and gas.

– Obligations: credit card payments and other debts.

– Less-than-monthly expenditures, such as car repairs.

– Nice-to-have expenses, such as entertainment, coffee and restaurants.

Follow your budget and update it each month. It will take a few months to get the kinks worked out.

Stop using all credit cards. Use cash for all discretionary spending.Get a second job or start a side hustle to earn an extra $1,000 per month.Negotiate for a raise.Get a roommate or rent extra space in your home through Airbnb.Celebrate small wins and accomplishments.Build a small $1,000 emergency fund by selling more stuff and saving monthly. After the $1,000 is safely in the bank for emergencies, use the original $500 to cover unexpected expenses or what I call less-than-monthly expenses. Keep adding monthly to your savings for less-than-monthly expenses.Squeeze your budget and use the money to pay off credit cards and other non-mortgage debts, starting with the smallest on the list. When all non-mortgage debts are paid off, grow the $1,000 emergency fund to a three-month emergency fund.Have proper levels of insurance:– Auto

– Renters/homeowners

– Short- and long-term disability

– Life

Build your professional skills and network before you need to find a new job.Considered all at once, these action steps might seem overwhelming. Take one step at a time, and work on taking control of your financial life a little each week.

While the entire process of paying off all of your debt and saving an emergency fund equal to three months of living expenses is likely to take 12 to 36 months, the stress and worry will vanish quickly.

Then you will be among the 15 percent of the people who don’t worry about money.

Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance.