I’m sure you’ve heard the common financial advice “pay yourself first.” Well, I take it one step further and pay everyone first: my landlord, the gas company, student debt collector, and myself. And, in doing so, I’ve dramatically improved my mental health by reducing my money anxiety.
How do you calm financial anxiety?
I graduated from college a year ago, in May 2018. Within a week of walking across the stage, I was walking into the doors of my first real job, terrified, anxious, and frankly, a little upset at the meager paycheck I’d be earning. I’d worked part-time throughout college, but I had a combination of cushion from student loans and my parents’ contributions to fall back on. Now, I was alone with a significant pile of student debt weighing on my conscience.
I’m an anxious person by nature, so my finances became another line in the ever-expanding list of things keeping me up at night. In an effort to take control of my money anxiety — and finally get some sleep — I began tracking all of my purchases in a notebook. At the end of the month, I’d color code each purchase according to different categories: fixed expenses, groceries, debt, and other. But this method, while thorough, left me even more anxious than before! I obsessed over every dollar I spent and often would put off buying necessities, like groceries and gas, just so I wouldn’t have to log them. I soon realized that I needed a change — so I quit cold turkey.
Despite no longer tracking my purchases, I was still hesitant to spend money. I still had general money anxiety. What if I didn’t have enough for rent? What if I spent too much on a dinner out? Once again, I was frozen in place. I needed to create a budget to guide my spending, but I didn’t know where to begin. Through trial and error, I ended up with something far better for me than a traditional budget: a plan that provided structure, but not too much.
Here is the method I use to manage my money — and my money anxiety.
1. Calculate fixed expenses
First, I calculate my fixed expenses for the month, like rent, utilities, and the amount I want to put towards my student loans. Then, since I am paid biweekly, I divide this number by two. This is the amount I remove from each paycheck and move to a separate checking account.
Here are my monthly fixed expenses:
- Rent: $775
- Utilities: ~$50
- Phone: $0 (Through an amazing promotion I found online — free unlimited data for one year!)
- Student loans: $500
Divided by 2: $662.50 from each paycheck
*Note: My insurance, Ventra card, and 401k contribution are automatically deducted from my paycheck, so I didn’t include them here. I just consider these expenses a few less things to worry about!
2. Determine savings
Next, I decide how much I want to save each month (separate from my 401k) in my high-yield savings account and Roth IRA. This amount is given the same treatment as my fixed expenses — divided by two and placed in a separate account.
My monthly savings:
- General savings: $500
- Roth IRA: $100
Divided by 2: $300 from each paycheck
3. Behold, fun money!
Everything left over remains in my main checking account, and it is mine to spend. I use this account to pay off my credit cards, which I use for everyday purchases and pay off in full each month. I try to look at all of the money left over in my checking account as my “fun money,” but as lame as it sounds, the most fun thing for me is watching my savings grow and my debt shrink — which is why I rarely use this account to splurge.
How do I stop stressing over money?
This method isn’t foolproof, but it’s worked for me over the past year. Sometimes I still get anxious when I spend see my credit card balances go up, but with this method, I always know how much I have left to spend.
It’s easy to feel money anxiety; no matter how much I save or put towards my student loans, I always feel a bit guilty. I still have a long way to go, but for now, this method offers me peace of mind. Using this method of allocation, I can rest assured that I have enough to pay my bills, aggressively pay off my student loans, and save a healthy portion of my paychecks.
Jessica is a financial copywriter living in Chicago, Illinois.
Image via Unsplash