By Rakshitha Arni Ravishankar
Money can evoke a range of difficult emotions for many of us. This anxiety only grows when we’re living through economically fragile times or don’t come from wealth. It can feel awkward, uncomfortable, and even scary to navigate these feelings when they show up. But know that it’s still possible to make smart decisions that will help you become financially stable.
We’ve put together some advice from our authors on how to build a healthy relationship with money and stay in control of your personal finances.
1) Let go of your limiting beliefs about money.
According to personal finance writer Anne-Lyse Wealth, the first step in attaining wealth is believing that you deserve it. In her article, “How to Build Wealth When You Don’t Come from Money,” she writes that building a money mindset is crucial. “This means believing that wealth is accessible to you and believing that you are worthy of wealth despite the systems designed to keep it from you. Without that mental drive, the other strategies are basically moot,” she explains.
Building a money mindset starts with intentionally reminding ourselves of the abundance of resources and opportunities around us. Wealth’s advice is to remind yourself each day that you deserve wealth. Start by noticing your negative thought patterns around money and replacing them with more positive ones. Slowly, you will learn to expect abundance and reframe behaviors that support your growth.
When you do, you will be able to apply to jobs, negotiate pay or ask for a raise, or ask for what you believe you deserve at the workplace with more clarity and confidence.
2) Take ownership of your money.
We’re all likely to face an unexpected, devastatingly high-expense emergency in our lives. So, how can we feel financially stable when this happens? In the article, “How I Survived an Unexpected Financial Emergency,” author Alex Hemmer shares a couple of strategies that have helped her manage her money better.
1) Reach out to someone you trust — whether it’s a family member, significant other, or friend. Even if this person can’t directly solve your problems, talking about your stress can help you better understand your feelings and form some perspective.
2) Figure out a payment plan. Based on the specific expenses, check if you’re expected to pay the entire amount up front or if you can make smaller payments over time. Understand that being financially savvy is not about being debt-free. Instead, it’s about learning to manage your expenses — even if you have debt along the way.
3) Always set a timeline for your money goals.
Reaching our goals is easier when we set a realistic timeline to achieve them. In the article, “Moving Back Home? Use This Time to Take Control of Your Finances,” financial expert Bobbi Rebell says that “the more specific you are about what you’re trying to accomplish, the easier it will be to stick to your goals.”
As a first step, start by asking yourself if your timeline is realistic given your current financial situation. If it’s not, you can extend your timeline or look for ways to make more money (such as through a side hustle).
4) Build an emergency fund.
One of the best ways to start saving is to set aside some money as an emergency fund for unexpected costs, according to author Kiara Taylor. In the article, “5 Easy Ways to Take Control of Your Personal Finances,” Taylor writes that you should aim to have at least $1,000 in your emergency fund, especially if you’re just starting to save or still paying off debt.
Taylor explains that an emergency fund can alleviate money-related stress. First, it gives you the psychological safety to stay calm during stressful situations such as a mass layoff or a global recession. Two, in case you face a personal emergency, such as a vehicle repair or a last-minute surgery, you will have one less thing to worry about. Lastly, it will help you build the discipline to budget regularly and make you more aware of your financial situation.
5) Create a diverse portfolio of investments.
When we save our money in a bank account, it’s likely to lose value over time. The low-interest rates that saving accounts offer can’t keep pace with inflation. To deal with this, finance expert Matthew Blume recommends investing. In his article, “Making Smart Investments: A Beginner’s Guide,” he writes, “…investing allows you to keep pace with cost-of-living increases created by inflation. At a maximum, the major benefit of a long-term investment strategy is the possibility of compounding interest, or growth earned on growth.
How do you invest? Blume advises building a diverse range of investments to manage your money effectively. Some examples include stocks, bonds, private equity, venture capital, precious metals, commodities, and real estate. Diversification helps you manage risk by ensuring all your finances aren’t tied up in a single entity. Blume adds, “A well-constructed portfolio should include several different types of assets (meaning stocks, bonds, etc.) that do not move in tandem. This reduces the volatility of a portfolio without necessarily lowering its return potential.”
This article first appeared on the Harvard Business Review Website.
Rakshitha Arni Ravishankar is an associate editor at Ascend.