Worried about the Future? How to Stress-Proof Your Finances

When it comes to the economy, there is no shortage of bad news: high unemployment, slow economic growth, falling home prices, eurozone problems&you get the picture. The gloomy economic picture has many of us worried how these issues might affect our financial situation.

The possibility of losing a job or a business is a very real concern for many, and its only natural to worry. Having said that, its also unhealthy to worry about things you cannot control. So rather than wringing your hands about the European debt crisis or the Obama Administrations job creation plan, try focusing your attention on what you can control: your personal finances.

By shoring up your finances in three key areas, you can protect yourself and your family from the short-term impact of a job or business loss and thereby reduce the stress and anxiety brought on by tough economic times.

Short-Term Savings: The best way to reduce the financial impact of a job or business loss is to build up an adequate emergency fund. This fund is simply a stash of cash that can be accessed at any time to help cover unexpected costs or loss of income.

For most working people, a fund that covers three to six months worth of living expenses should suffice. However, if you are a business owner or you work on commission, you should consider building up a larger fund closer to nine to 12 months of living expenses.

Having a fully-funded emergency stash offers the comfort of knowing that if you do lose your job or your business goes south, you will be able to weather the storm. If you dont have enough in short-term savings, its time to get aggressive: consider cutting back on non-essential expenses like eating out or entertainment, increasing home and car insurance deductibles and temporarily redirecting contributions to retirement accounts to free up additional dollars to bolster your fund.

Household Debt: Reducing your monthly fixed expenses will also alleviate stress. For the majority of households, the most likely candidate for reduction is paying down debt. Since the recession started, many Americans have reduced their household debt levels, but if youre anxious about your financial situation, you should strive to eliminate as much debt as possible.

Outside of your mortgage, (which you should refinance if you can), aggressively pay down all credit card or personal loan balances first and then move to equity lines of credit and car loans.

By paying off your debt, you will significantly reduce your monthly fixed costs and free up additional cash for savings.

Health Insurance: The last area to evaluate is your health insurance coverage. Losing your job or business not only means losing a monthly income, it can also eliminate losing employer-provided health benefits.

If you have employer-provided health insurance, a federal law commonly called COBRA gives you the right to maintain it for a specified amount of time. Thats the good news. The bad news is you will no longer receive the employer contributions to your monthly premium payment, so you will have to pay the full cost of the premiums going forward. This can be very expensive.

To protect yourself, ask your employer how much of your current premium costs they cover each month. That way you can assess what the additional premium costs would be if you lost your job. There is a grace period for making full payments under COBRA, but to be safe, you should factor the cost into your emergency fund savings estimate.

Times are tough, and many of us are feeling financial stress as a result. Do yourself a favor and take a hard look at these three areas of your finances. By taking proactive steps to increase savings, cut costs, and manage risk, you will begin the process of de-stressing your financial life, which will help you sleep better at night.

Bryan Link is the CEO and co-founder of SimpliFi, an online consumer financial planning service. SimpliFi has won several awards and was named one of Fast Companys Top 10 Most Innovative Companies in 2010. Bryans expertise in personal finance has led to him being featured in a variety of print and broadcast media, including ABC News, FOX Business and The Wall Street Journal.