4 Ways to Stop Worrying About Money

By Christy Bieber Markets Fool.com

Are you worried about money? You're not alone. Just 30% of Americans report high levels of financial security, while the majority identify money worries as a major source of stress.In fact, more than a quarter of all Americans experience financial stress "most or all of the time," according to the American Psychological Association's annualStress in America Survey.

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Being stressed about money can hurt your health and relationships, but you don't have to live in constant fear of a funds shortage. These four steps will help to relieve financial stress so you can breathe easier.

Image source: Getty Images.

1. Start saving up an emergency fund

Incredibly, 60% of Americans have less than $500 saved for an emergency or unexpected expense. Unfortunately, everyone knows "unexpected" expenses aren't actually a surprise. Your car will break down, your kid will need a visit to urgent care, and your fridge will go on the fritz. It's just a question ofwhenthese big expenses will arise.

Knowing you don't have cash to pay for these one-time expenses is stressful. That's why everyone needs to have an emergency fund.

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Most experts recommend saving three to six months' worth of living expenses in an emergency fund so you're prepared not just for little expenses but also for big things like a job loss or a serious illness. Saving this much money may seem impossible, but start small. Open a savings account and set up an automatic weekly transfer of an affordable amount to get you started.

Whenever you come into unexpected cash -- a birthday gift, a bonus at work, overtime pay, or money you saved from using coupons -- put it right into your emergency fund. As your rainy-day fund grows, you'll feel more peace of mind.

2. Find out how much debt you owe and make a payment plan

American families are deeply in debt. Average credit card balances reached $16,061 in indebted households at the end of 2016 -- just short of the record high set in 2008. Total household debt in 2016 including mortgages was also up to $132,529, and college students who graduated last year were the most indebted in history. With so many families owing so much money, it comes as no surprise that debt is a leading cause of financial stress.

Compounding the debt problem is the fact that a lot of people don't know exactly what they owe.This creates a nagging worry about how bad your situation is, and it also prevents you from making a plan to tackle that debt.

To start, obtain a copy of your credit report from Annual Credit Report.com. Your report will detail all your lenders. Make a list of who you owe money to, the outstanding balance, the interest rate, and the minimum monthly payment.Once you have all this information, it's time to create a repayment plan.

You can start by paying off the debt with the lowest balance first, then moving on to the next lowest balance debt until all your debt is gone. This gives you a quick win to help you stay motivated.You could also start paying off the debt with the highest interest rate, which will save you the most money, though it may be more challenging psychologically.

Paying extra on debt is smart, but you may want to prioritize saving an emergency fund of at least $500 before diverting extra cash toward debt payoff. If you're sending everything extra to your debt and you're forced to put emergency spending on a credit card, this can sap your motivation.

3. Create a budget and stick to it

Uncertainty about whether you can pay the bills is frightening, but you may be able to shed that stress by simply creating a budget. Just one in three households lives by a detailed budget , which means close to 70% of families don't have a clear spending plan.

When you make a budget, you can add up your monthly bills and allocate your income to cover necessary costs. If your budget reveals your income isn't enough, look for ways to cut expenses or increase your income until you're no longer in the red. When you see on paper that your income covers all your bills, a major source of financial worry disappears.

There are a number of ways to make a budget, from using apps to listing your expenses on paper or a spreadsheet. The key is to take control. Allocate cash for essential spending (including savings, retirement investing, and debt repayment), then plan how to spend on non-essential items like cable or shopping trips.Don't forget seasonal expenses (like holidays and birthdays) and leave wiggle room for unexpected costs that crop up.

4. Simplify your finances

Spending time actually managing your money is another source of stress. You have to remember to pay bills, check account balances, transfer money into savings, and move cash into retirement accounts. You need to keep deadlines in mind and set aside time to handle the logistics.

To reduce this stress, automate as much as possible. Set bills on autopay and arrange for money to move automatically from your bank account to your savings and retirement funds.

Sign up for alerts from your bank so you get a text when a check is deposited, money is debited, or your balance is low. Apps like Mint can see your entire financial situation at a glance, and you can sign in periodically to make sure all of your automated payments and transfers are working correctly.

The more you can automate your financial managment, the less stressed you're likely to be. If you have your debts paid, a budget to live by, and an emergency fund, then your financial worries should all but disappear.

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