Dealing with money can be incredibly stressful—even just talking about it can give some people anxiety. This is even more true amid a global pandemic, where so much is unknown and uncertain, and where many people are not even sure where their next paycheck will come from. In this week’s blog and podcast, I speak with personal finance expert and bestselling author Rachel Cruze about managing money to reduce stress and anxiety, how to get out of debt, how to manage your money during a crisis like COVID-19, how to have difficult conversations about money with your partner, how to improve your financial and mental health and so much more!
Although we are not often taught how to manage our finances growing up, we need to be trained in how to use our money wisely. It is not a skill we automatically have, but it is something we can learn! Even though managing money involves a lot of common sense, we often get stuck between knowing what to do and doing it. Personal finance is 20% knowledge and 80% behavior—it is about putting good habits into place and practicing them every day.
As Rachel points out, there are two main aspects to managing your money:
1. Learn to control your money; don’t let it control you. This starts with a budget. Rachel recommends a zero-based budget, which is your income - giving - savings = 0. This will give you an intentional plan concerning your money, so you won’t always be wondering where it went. She also has a free budgeting app to help you do this, which will give you freedom to spend your money and enjoy spending it!
2. Get out of debt. When you owe someone money, it changes the relationship you have with your money, as well as your relationship with yourself. It can make you feel constrained, which can impact your stress levels and mental health. When you do not owe money to anyone, you are free to use your money however you wish. Opportunities suddenly open up, and you can do things that you never thought possible before. You are free, mentally as well as financially. Always remember, debt is a thief; it steals your income and your peace of mind.
Of course, money is not the “be all end all” in life, but it is a tool to help you create the life that you want, mentally as well as physically. Debt can severely limit your possibilities, so start getting rid of your debt today. Rachel recommends using the debt snow ball technique: get rid of smallest debts to largest debts, regardless of interest rate. This will give you the encouragement to continue on to the next debt and pay off what you owe faster. As you do this, you will break a huge debt problem into doable action steps that, over time, will help you start building a success network in your brain, changing your lifestyle and behavior and giving you hope for the future.
There are times, however, when we need to do what we can to just survive, such as during a global pandemic. During these times or when facing an emergency, Rachel recommends:
1. Making minimum payments on everything.
2. Stockpiling cash for an emergency fund.
3. Staying as current as possible on bills. Talk to creditors and see where you can be given grace, but try get back on track as quickly as possible because a payment delay is not debt forgiveness—you will have to catch up eventually.
4. Trying to replace your income. Try not to just rely on unemployment. Do jobs that you may not really like or want; see this as a temporary situation till things get back on track.
5. Reevaluating your lifestyle. Is it above your means? How do you spend your money? What sacrifices will you have to make?
It is okay to have nice stuff, just don’t let your nice stuff have you. The current COVID-19 pandemic is a great time to reevaluate how you spend your money and realign your value system away from the idea that things will make you happy. Don’t allow your identity to get wrapped up in how many things you want or have.
It can also be incredibly stressful to talk about money with your partner or spouse, but it can save you a lot of pain and heartbreak in the future if you do so. Money can be a great unifier, but also a great divider, in a relationship, which is why Rachel recommends:
- If you are engaged, talk about your value system regarding money before you get married.
- Have a wedding budget. This will be a trial run for how you manage money together, and a way to come together over common hopes and dreams.
- Combine your money after marriage. This is a way to become one in every aspect of your lives, creating unity as you learn to work as a team. This doesn’t mean you lose your independence. You can still choose what you want to buy or get what you need within a shared budget. But it does allow you to talk openly about money and finances, which is often the reason many couples separate or get divorced. Always remember, couples that work together go further together. If this makes you uncomfortable or upset, then try to pinpoint the “why” behind your feelings. Is there a lack of trust in your relationship? Is something in your past holding you back? It is important to note that this will be different if someone is in a toxic marriage or relationship. They may need to keep their finances separate to protect themselves or leave the marriage.
- Agree on the basics by sitting down and budgeting. This is one way to talk about your goals, dreams and fears and improve your communication as a couple. It may be difficult at first, but over several months it can become a habit and will really make marriage more stress-free.
For more on finances and mental health, listen to my podcast with Rachel (episode #194), and check out her website, show, resources and books. If you enjoy listening to my podcast, please consider leaving a 5-star review and subscribing! And keep sharing episodes with friends and family and on social media (don’t forget to tag me so I can see your posts!).
2:39 Why we all need to know how money works
4:37 What are the most important things we need to learn when it comes to money?
13:27 How should you manage your money in extreme situations or emergencies?
20:15 How to talk about money in a relationship
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