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Financial Zen: How to Get Financial Peace of Mind

Every Tuesday is Finance & Family Day at Zen Habits.

It’s a fact: our finances are one of the things in our lives that stress us out the most. If we’re trying for a stress-free life — with stress-free productivity, working and living environments, waking early, morning routines and the like — then we need to address our finances and find routines that will keep the stress of money to a minimum.

First, identify the financial stressors in your life. For many people, these include: worries about debt, paying bills late, not having a financial security net, not having a sense of control over your finances, and arguments over finances.

Let’s address these each with some simple solutions:

  • Get out of debt. This is often the first necessary step. But how do you do this? First, monitor your impulse spending urges to stop the bleeding. Use a debt snowball as a plan to get out of debt. Also see: How I save, How to stop living from paycheck-to-paycheck, and How I ended my affair with the credit card.
  • Pay your bills as soon as they come in. This is one of the easiest ways to eliminate stress over bills. When you get your power bill, write a check, put it in an envelope, and mail it the next day. Or if you bank online (and you should), go to your computer, log in, and send your electronic payment. To do this, you’ll need to develop a bit of a cushion in your bank account, so you always have enough to pay the bills as they come in.
  • Make your payments automatic. I’ve covered this before … it’s an great alternative to the above method. Instead of paying bills as they come in, you can set up automatic payments and automatic savings payments online, so that as soon as your paycheck comes in, your bills get send out and a certain amount is transferred to savings (or investments). Either method works great.
  • Develop a financial security net. This is something you should also do right away. First, if you are married or have any dependents, you should get life insurance right away. Do your research and make sure you’re getting the right policy for your needs. Don’t get whole life insurance — it’s not the smartest investment. Second, look at your other insurance to see if it meets your needs, from auto to homeowners to renters and more. Third, make sure you have a will — this might not seem necessary if you are young, but if you have any dependents, this is a must. Fourth, develop an emergency fund — right away. I know, it’s something that everyone advises, but if you don’t have at least a small emergency fund, you will never have financial peace of mind. Build it up to 3-6 months worth, or whatever you need to feel secure.
  • Review your finances at least weekly. To get a sense of control over your finances, you have to monitor them. Be sure you’re balancing your checkbook at least once a week, to ensure that you don’t have bounced checks or debit transactions. Even if your bills are automatic, you’ll still want to make sure they’re going out. Take the 10-20 minutes every week that’s necessary to look at your budget, your expenses, your income, and make sure you’ve got everything under control. If you’ve got a partner, do this together.
  • Talk about money with your partner. Money can be a huge stressor on a relationship. It’s important that you talk about money on a regular basis in a non-emotional way, as hard as that may sound. It’s crucial, in fact, to the survival of your relationship. You both have to be on the same page, or you will eventually argue and have major crises about your finances. You need to talk about your financial dreams and goals, your spending patterns, your budget, your income, your savings, debt, financial security, bills and the like. If you don’t already do this, it may take awhile in the beginning, and be difficult. But try to do it as a team, and not accuse each other of anything, don’t blame, and try to be positive and constructive. Over time, it will get easier. At the minimum, devote 10-20 minutes each week to reviewing your finances together, reviewing your goals, and making sure that you’re together and seeing eye-to-eye. It will make a major difference in your relationship and in your stress level.

See also:

Brilliant comments (14)

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Gene Says:

April 4th, 2007, 14:40 pm

The first point is crucial. Stay away from credit cards. The only reason you need one is to rent a car. For emergencies you a line of credit from you FI. And don’t even open the credit card company envelopes. Just rip them up.

Your points are excellent!

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Monica Says:

August 8th, 2007, 12:32 pm

Even though I eventually got into debt, I got “financial peace of mind” once I started using credit cards. That’s because I no longer had to worry about not actually having money in my hands (which is not necessarily the same as not having any at the bank, as my bank would place a hold on my own money each time I deposit my pay). I would use my credit card and the only issue to think about is how much to pay once I get the bill. If I can pay my bill in full, that’s great, and if I must carry a balance, it’s better than rummaging through my purse for grocery money, or worrying about not being able to withdraw money when I desperately need it (or about NSF fees due to the fact that I have money but my bank won’t let me use it). Of course, by the time I pay my bill, my money is available.

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J Thomas Says:

July 3rd, 2008, 3:49 am

Financial worries come in all forms, and at all times in life. One problem is outliving your retirement dollars. Imagine your worry when your nest egg is eroding. One thing to look at is the new immediate annuity for seniors whereby seniors receive income for life at no cost whatsoever.

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carmen Says:

July 22nd, 2008, 9:23 am

For me,it’s vary difficult to talk about many with my friends and my lovely person. I realize, that talking about money is very helpful, but is really hard.

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Aaron Says:

September 1st, 2008, 14:37 pm

I found that signing up for an equal payment plan with my utility companies was very helpfiul in making my bills predictable. Having predictable monthly expenses greatly contributed to my peace of mind.

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natalie dylan Says:

September 16th, 2008, 20:10 pm

and if i can add to the list, multiply your wealth by ways such as Bank CDs, investments, Saving accounts, etc.

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Tania Says:

December 4th, 2008, 10:22 am

Hi Leo! Thank you for one more great post:) I always enjoy reading your blog:)
I’ve used your idea for my new post about budgeting - Budgeting Your Money: Opinions From the Web . I’ll be glad to hear some comments from you.
Thank you!
Sincerely
Tania

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lovephileo@BusinessCoaching Says:

February 9th, 2009, 21:35 pm

Thanks Leo for another points for life. I started out paying bad debts last year because I have learned from my business coaching mentor ( kamja ) that major factor affecting man’s present and future prosperity is his past bad debts. I tried to cease borrowing but start to practice lending in stead. This principle makes me more productive and it boost again my confidence and self-esteem. While my debts are moving to zero, I still can move forward at the same time by becoming a micro-finance practitioner. I could help people in someways rather than being a borrower and a burden for years. This is something that propels me to work for a highest goal in life. More meaningful and satisfying.

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Log splitters Says:

March 7th, 2009, 14:55 pm

Leo, thank you for your tips. I liked this one quite a lot:

Make your payments automatic. I’ve covered this before … it’s an great alternative to the above method. Instead of paying bills as they come in, you can set up automatic payments and automatic savings payments online, so that as soon as your paycheck comes in, your bills get send out and a certain amount is transferred to savings (or investments). Either method works great.

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free divorce papers Says:

June 5th, 2009, 3:28 am

May I also add… Don’t lose your income!

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Exercise Says:

June 22nd, 2009, 14:14 pm

yeah, get away from debt.

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Fan Site Says:

June 25th, 2009, 17:05 pm

May I also add… Don’t lose your income!

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savings interest calculator Says:

July 3rd, 2009, 19:18 pm

Very sound advice Leo. I completely agree that talking about money with your spouse is critical. It should be a team effort, not a battle of the sexes. I’ve often found that it even helps build our relationship where we can share in the joy of meeting goals whether it’s to save 6 months of salary or buying a house. It actually brings more joy to our lives.

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