We've all done it. Tossing and turning, aware of each passing minute. Completely comfortable, yet anxious. Seeing dollar signs before our eyes, bills piling on top of us. Afraid to look at the clock because it would only confirm how much closer we are to alarm time. If this describes you at night, you're not alone.
Two-thirds of Americans have trouble falling asleep because of financial worries, according to a survey of 1,000 people by CreditCards.com. Because they are worried about retirement savings, educational costs, mortgage or rent, and credit card debt, 65% of respondents suffer insomnia.¹
Money management is a requirement of adulthood. Someone once memorably tweeted that adulthood is the stage you arrive at when everyone wants some of your money. So what money management strategies are other adults using to get a good night's sleep?
1️⃣ They Live Below Their Means
"Cut back on your spending," will never NOT be good advice for managing money, but the thing is cutbacks are hard. We get used to a level of spending, to not thinking about dollars under a certain threshold. Asking us to cut back is like asking us to do without.
Rebuilding a lifestyle around less spending requires a major, but free, shift in perspective. Step back from consumerism. Remind yourself that you are not what you buy. Take pride in spending less than you earn and saving the rest. Once this becomes your mindset, spending less won't feel like living less.
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The tried-and-true advice for living below one's means is to keep a budget. That way you see where your money goes each month. But we live in an age when almost all our spending is already accurately logged in the form of transaction histories for debit cards, credit cards, and other cashless payment options. Most of us don't need to write down what we spend and where because it's all kept track of by the cards we pay with. Scrutinizing your transaction history serves the same function as keeping a budget: You see where your money goes each month.
2️⃣ They Automate Their Savings
People who live below their means don't all have extraordinary willpower. They direct some of their earnings into savings accounts before they have a chance to spend it. Out of sight, out of mind.
Just as taxes come right out of your paycheck to pay Uncle Sam, some money can transfer seamlessly into a savings account to pay the future you. Modest deposits into a savings account each pay period will add up nicely and provide an emergency fund for car repairs or other unexpected expenses.
"why isnt this character constantly worried about money" -me watching any movie or tv show— cullen "swamp trash" crawford (@HelloCullen) May 15, 2021
3️⃣ They Fund a Retirement Account
Nine of out of 10 households eligible for a workplace retirement plan participate in it, according to a report by the Stanford Center on Longevity.² The benefits of a 401(k) plan are so strong, we wonder what the 10% who don't participate are thinking.
Don't be one of the 10%. If your employer offers a 401(k), look into participating right now. It's not complicated. You get tax advantages, the money comes directly out of your paycheck, you invest it however you like with the help of experts behind the plan, and some employers will even kick in money alongside your own, in essence giving you a raise.
Alas, half of working Americans don't have access to an employer-based retirement savings plan like a 401(k). The DIY equivalent is an IRA, or individual retirement account. Contributions to an IRA are pretax, just as with a 401(k). They don't come directly from your paycheck, but rather, you transfer money into your IRA from a checking or savings account and then when you do your taxes, you subtract the contributions from your taxable income.
"We are bombarded 24/7 by posts from influencers constructed largely out of free merch, contrived backgrounds, beauty filters, and desperation."
A retirement account, which grows your money until you are at retirement age by investing in stocks and bonds, is an attractive alternative to a regular savings account. Nowadays, savings accounts earn hardly any interest. Even the rates on CDs are laughable. In contrast, IRAs and 401(k) plans have shown good rates of return decade after decade.
The money in these plans grows tax-deferred until you withdraw it, which you can't do without penalties until you are 59½. Therefore, retirement savings is separate from an emergency fund. People who sleep well at night have both.
4️⃣ They Don't Keep Up With the Joneses
Influencers are faking it. Well, most of them are. We used to worry about how the unrealistic perfection of airbrushed models in magazines was lowering people's self-esteem. Now we are bombarded 24/7 by posts from social media personas constructed largely out of free merch, contrived backgrounds, beauty filters, and desperation.
“Don't worry about trying to keep up with the Joneses. They're flat out trying to keep up with their repayments.”
Don't compare yourself to these people. Use them for entertainment only. Americans have a long history of competitive consumption, of buying and spending to keep up with our peers, and social media's pervasiveness and fakery just make the practice worse.
"Keeping up with the Joneses" referred to the family on the block that, say, parked a flashy new car on the driveway and now everyone on the block wants one too. Thanks to social media, the Joneses could live on any block, anywhere in the world. This makes competitive consumption not only wasteful but impossible. Someone somewhere will always have more.
5️⃣ They Know the True Cost of Buying With a Credit Card
Can't pass up a great sale without whipping out your credit card? If you need the merchandise and pay the bill in full when it comes, pat yourself on the back. You got a bargain.
If, however, you are like many shoppers and you keep a revolving balance on your card, nothing you buy on sale is ever really on sale.
For example, let's say you can't resist a sale on televisions. Even though your current TV works well, these new ones are bigger or have built-in apps or another feature you like. One of the good models is originally $1,299 but on sale for 25% off. What a deal, right? A sale like this doesn't come along every day, so you whip out your credit card.
People who don't toss and turn in bed at night worrying over money know that any merchandise you charge on a credit card actually costs a lot more unless you pay the bill in full:
- Original price: $1,299
- Price after 25% off: $974
- Average credit card interest today: 20%
- Typical minimum monthly payment: $35
- Months to repay: 38
- Total interest paid: $346
You end up paying $1,320 for the TV set that was on sale for $974.
Anyone can practice these five money management strategies. To relax peacefully at night, you don't have to hit a jackpot, inherit a pile of cash, or marry rich. Instead, you can change your perspective on money, sharpen your sense of spending, and stop comparing yourself to others. Having a retirement account and an emergency fund will go a long way toward helping you sleep. See how much you can lower your mortgage payment by viewing your quotes at Lendgo.