by Amy Weitzel

More than 40% of all Americans live paycheck-to-paycheck and have difficulty meeting their household expenses each month, according to a recent PricewaterhouseCoopers study. The same study says more than 72% of American workers are highly impacted by student loans and 24% have pulled money out of their retirement plans for unrelated expenses.

Financial stress is an epidemic. More than 45% of employees say financial stress causes them the most stress in their lives – more than double any other cause. Financial stress is also one of the leading reasons for divorce in the United States as well.

I teach a personal finance class called Mind Over Math that delves into the psychology of finance instead of just the numbers because let’s face it, most adults understand the basics of budgeting – you spend less than you make. So why is it so difficult to manage our personal finances?

Everyone’s personal finances are different. Debt-to-income ratios may be skewed; tax withholdings may be incorrect; personal finance philosophies are different – we all have different ideas of what money is and what it is supposed to do for us.

In my class, I address the psychology behind personal finance. We all have “money scripts,” the messages we received about money. Maybe you had parents who fought about money or maybe they never discussed money. Maybe you were never taught how to save or the importance of compounding interest as it applies to saving or, conversely, how it applies to debt.

These scripts translate into triggers, which cause us to develop unhealthy money patterns, which can include inappropriate spending. Triggers can include maintaining a certain image; experiencing a high; feeling special; soothing after a bad day; rewarding after a good date; creating safety, or a way to cope with stress.

We are self-medicating with our money habits and often with our spending habits, which in turn causes financial stress. It’s a never-ending cycle. This self-medicating mentality transcends income levels.

Comorbidity of financial stress and health care issues include:

• Migraines and headaches
• Insomnia
• High blood pressure
• Ulcers
• Muscle tension
• Severe anxiety
• Severe depression

The cycle is also becoming easier to perpetuate because we are disconnected from our money. I recently went on a tour of the U.S. Mint in Denver. While I was disappointed they do not print paper money at this Mint, it was fascinating to see the process of creation of coin monies. But I don’t know many people who carry physical money anymore.

In fact, I, too, like using my credit card because I get travel points. However, the use of electronic money is more abstract. We now have direct deposits, digital wallets, and automated payments — money flows in and out of our accounts without a second thought.

Being disconnected makes it easier to spend. We are more careless and thoughtless about where our money is going. We can spend without considering the impact; without considering the time and work required to earn that money.

This is why best-selling financial author Dave Ramsey is an advocate of using the cash method of budgeting. It makes spending money more tangible – more real. When you set down $50 cash, you see exactly what you are spending and exactly how much change you’re getting back. It’s a much different experience than swiping a plastic card and signing your name.

So how do we create less financial stress in our lives? Here are three simple steps you can take pretty quickly to help reduce stress:

1. Reconnect with your money: Many people opt to carry cash, but my recommendation is always to take it a step further. For at least a month (I recommend two to three months), track exactly where every penny is going. Write down how much money is being spent on eating out, groceries, clothes, utilities, rent/house payment, etc. Even pocket change needs to be recorded. At the end of each month, record in categories where your money is going and always reconcile against your bank statement. This does two things: One, it makes you aware of where you are spending money so that when you budget you have data. Two, it helps you fix any leaks in your boat. If you have any subscriptions, you’d forgotten about or automatic payments that you were missing, you now can fix any of those payments.
2. Create a budget: Budgeting isn’t really about the numbers on a piece of paper. Budgeting is about how you think and feel about money and the money connection. It’s not about limiting yourself but about how you can make the things that excite you become a reality. Budgeting is about mindset. Until you understand that, you will never be able to get – and keep – a budget entirely. The first aspect of creating a budget is changing your mindset. Breaking this down into two parts:
   1. Create a few goals you’d like to achieve, which can be paying off debt or buying something amazing. Part of budgeting is about making strategic decisions where you want your money to go.
   2. Tally up the months that you tracked your spending. Are you spending more than you’re making? Then it’s time to see where you can spend less to balance your budget. Are you not liking where you are spending money? Then you need to reallocate where you’d like your money to go. For example, if you spent $100 on coffee shops but you’d rather pay down a credit card then you should budget for that. Did you find a goal that you would like to achieve but isn’t in your budget? Then reallocate money toward that goal.
3. Savings account: Make sure you are always paying yourself first. Whether it is retirement or an emergency savings account, make sure you are always paying yourself first. According to a 2016 survey, nearly half of U.S. families have no retirement savings. By age 50, you should have five times your annual salary saved for retirement, according to some financial experts. You should also have between 6-8 months of living expenses saved in an emergency account.

Start doing these three things in the New Year to help reduce your financial stress. Taking steps to bring your budget under control will help bring you feelings of empowerment. But also learning that you have choices when it comes to money and budget and being mindful in these choices will help reduce the stress-inducing anxiety you may be experiencing.