Reduce Financial Stress: How To Budget & Save Money

Have you been feeling stressed out about your financial situation? Turns out, you aren’t alone. In fact, studies regularly show that the majority of Americans, often more than 70%, report feeling stressed about money.


If you are feeling anxious about your finances or having trouble effectively managing money, developing a spending plan is a great place to start. Mental Health America breaks down the formulation of a spending plan into four steps:

Step 1: Know Your Income

You should make sure you know exactly how much money you expect to get and when you expect to get it. If you receive regular checks from the government or an employer, you should know what to expect. If your hours and pay varies from week-to-week or you are self-employed, you should project an average set of wages.

Step 2: Know Your Regular Expenses

Look at the previous month and think of all the expenses that you regularly have to pay. Some expenses, such as rent, will have a fixed cost. Others will vary based on usage (such as power) or what you've spent. These expenses might include: Rent, Utilities (telephone, cable, Internet, power, water, trash), Groceries, Insurance, Medications, Transportation costs, Medical costs not covered by insurance, Entertainment and leisure costs, Personal costs, Any debt repayments

Step 3: Use all of this information to create a spending plan.

Step 4: Print out this Daily Spending Journal*
Link will take you directly to download from the National Endowment for Financial Education's (NEFE) guide "Your Personal Financial Growth."

If you write down everything you buy in a daily spending journal-even if you just buy a newspaper for $0.50-you will get a chance to uncover some new information. You may not think that three cans of soda a day is a lot, but each can costs a dollar. Three cans a day is $3.00. If you drink three cans of soda every day for a year, you spent $1095 on soda. If you smoke a pack a day at $5/pack, you spend $1,825 a year on cigarettes alone.


While creating a spending plan can be a great personal first step, there are plenty of options for assistance if you are still having a difficult time. Mental Health America highlights several ways to loop in others to manage your money.

  • Informal mentoring by others - Friends, family, and volunteers may help you manage your finances. Schedule a regular meeting to have someone come over and help you look at your finances and see whether you have been spending well.
  • Mentoring or Assisting Programs - One of the easiest ways to get help with your finances is to join a mentoring or financial assistance program. If you are part of a financial institution, there may be advisors on staff who can help you manage your money. Local non-profits might also offer training.
  • Power of Attorney - If, because of your condition, you are unable to manage yours affairs, you can give other people the ability to exercise some or all of your actions in your name, including financial actions, through a power of attorney. A power of attorney is a legal document and needs to be notarized. The more specific and limited a power of attorney is, the better. For example, a good power of attorney might authorize Jane Doe to make withdrawals from your bank account to pay your utility and rent bills only. A more broad power of attorney allowing Jane Doe to make withdrawals from your bank account could cause more problems.
  • Representative Payee - If you are receiving disability income from the Social Security Administration and you are a minor or cannot manage your money, you may be assigned a representative payee. The representative payee, which could be a person or an organization, will receive your check and spend it on your behalf. The payee must spend the money for your benefit, save any unspent money for you, and make reports to the Social Security Administration. Unless they have been appointed as your guardian, the representative payee does not have a power of attorney to conduct legal transactions for you. You can read more about rep payees at http://www.ssa.gov/payee/faqrep.htm.

Keep in mind, you should always enter any of these relationships with extreme caution. Turning over your financial information will give another person access to your private information-what you've bought, where you've been. Once you turn over financial decision making power or authority to another person either willingly or as part of a prescribed plan, you may have a very difficult time getting your autonomy back.

You should not turn over decision-making power to anyone who could profit by you, such as a landlord who owns the place you rent or a doctor who is in charge of arranging appointments. No matter how much you trust those people, it places you and them in a harmful situation. If someone spends your money on something you don't want, you may have a hard time proving that fact.


After your daily expenses are regulated, a savings plan is the next step to start building up your account. Regardless of your goals, savings is imperative to getting yourself set for stress-free financial freedom. Here are several tips and tricks to make saving money easy and effective from Mental Health America:

  • Save a little at a time - Saving a little at a time can make reaching a goal less daunting. If you want to buy a DVD player for $120, that could be a significant chunk of your monthly expenses. If you think instead that you're only setting aside $10 a month for 12 months, that's not anywhere near as bad-it's harder to miss $10 than it is to miss $120.
  • Open a different bank account - If you put your expenses in a bank account, open a savings account and put in a small amount of money ($10 - $25) each month. You will not feel the impact of $10 a month, but over 2 years, you will have saved almost $250. Having a separate bank account that you don't check regularly may help you save. You can ask people at your financial institution how to transfer money automatically, so you don't have to remember to do it yourself.
  • Hold on to unexpected windfalls - If you receive an unexpected amount of money from a raffle, a birthday gift, a tax return, or an inheritance, it can be tempting to spend that "free money" right away. But if you are saving up for something you want, an unexpected gift can help move you faster toward your goal. Always consider holding on to sudden winnings if you can afford to save. If you receive Supplemental Security Income (SSI) from the Social Security Administration, receiving an unexpected windfall that is large can be a problem. It may be necessary to establish a trust to hold the money and spend it on your behalf.
  • Save through your employer - If you work for a business, your business may offer a retirement plan, such as a 401(k) or a 457(b). This allows you to take money out of your paycheck before taxes are calculated to save for retirement. However, if you need to withdraw money from your 401(k) before you retire, you will have to pay harsh withdrawal penalties.
  • Create a PASS Plan - If you receive SSI, when you go to work special rules, called work incentives apply. It is important to understand all the rules that apply to working before you start back to work. If you make a lot of money working, it can affect your eligibility for Medicaid. However, if you have an approved Plan for Achieving Self-Sufficiency (PASS) you can save your extra earnings in a separate account that will not be counted against your asset cap. You must use the savings later to carry out your plan, which might be getting training or education, or buying the tools you need for your trade.

This article was derived from Mental Health America's "Managing Your Money".

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