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Money on your mind? How you can better your financial health

Posted: 5:41 PM, Apr 14, 2022
Updated: 2022-04-20 11:51:03-04

BALTIMORE — Inflation is impacting just about every Marylander. It's not only affecting gas prices, but grocery shopping and local food banks as well.

Food banks feeling the pinch of inflation

The stress or worry about finances is nothing new. As of 2020, more than 25 percent of adults didn’t have enough in savings to cover a $400 emergency, according to the most recent statistics from the U.S. Federal Reserve.

Licensed psychologist Dr. La Keita Carter explained that some of that stress comes from the fear of the unknown.

"If we're not comfortable with doing something or working with something, we tend to get anxious about it," Dr. Carter said. "That's the case with a lot of things, it just so happens that we use money every day in some capacity."

Money worries occur from the moment you enter this world to the time you leave, what differs in how money impacts you, is what stage of life you're in. Whether it's dealing with paying off student loan debt, worrying about daycare or paying rent, one of the best ways to better your own financial health is by being conscious about how you spend your money.

Avoiding the money issue is often part of the problem, and Dr. Carter explained that like with any skill, the more you do something, the more you'll get comfortable with it.

You need to take a step back and ask yourself if your avoidance of dealing with your finances is helping or hurting the problem.

"If you are avoiding, you're having physical reactions to even the thought of it or the topic or the mention, that's anxiety and you should probably address that," she explained.

Dr. Carter found with some of her patients who are stressed about money in particular is that they can do what is called "the ostrich effect" which is essentially just acting and not really thinking about the impact of their choices.

"That's actually the point of a budget, to help you be more insightful about what you're spending and where you're spending it," Dr. Carter said.

Having a budget set in stone can be a bit daunting, but Mark Ring, a wealth advisor at Jacob William Advisory in Timonium says it may be more beneficial to take a step back and write out your spending habits.

"The best way to start a plan is to stop worrying about what the outcome is going to be and actually go old school," Ring said. "If you take some time, and you simply list what you spend money on, first of all, I think we'll all notice, we actually don't spend money on that many different items."

The first part of financial planning is understanding how you spend your money, Ring said. That can often be the hardest part of the entire process, because that's an emotional response that we all have.

"Being an educated consumer obviously is important, knowing that you're not overspending for something and you do have alternatives when you're a consumer, but at the same time, we're always going to be in a position where we have to spend the money we earn," he explained.

There are necessities that you can't avoid. One of the mistakes a lot of consumers make is setting these lofty goals.

Ring says when someone sets a rule, they're usually the first one to break them.

And what happens often when you break these rules? Guilt and shame can set in. Dr. Carter said that's why its important to give yourself grace but also give yourself some boundaries, whether that's an accountability partner or another system.

"Life is about the balance between extremes...anything that has no boundaries and anything that has such rigid, rigid boundaries, that you can't be a person or human being, you really are more expecting robotic responses from yourself," she said. "Both of those things can create stress."

Saying that you're never going to spend again is unrealistic, but there are things you can do on a bigger scale, to help you move towards improving your savings.

"Especially with all the inflation that's going around, one of the first things you want to look at is your debt and what kind of debt if you have any," Ring continued. "Do you have credit card debt? Do you have other debt that has adjustable interest rates on it? You could have a mortgage with adjustable interest rate, you can have a personal loan, there's all different types that have adjustable rates."

RELATED: Inflation jumped 8.5% in past year, highest since 1981, Labor Department reports

Paying off debts improves your cash flow and allows you to take that money that you were sending into that bill and start saving it, so that improves the situation of building wealth over time.

"The other thing to do if you haven't already over the last few years with all the low interest rates we have, is to look to see if you have an adjustable rate mortgage, and you have the ability to go refinance it into a fixed rate for whatever term is appropriate for your plan or for your economic situation," Ring said. "So if you can take advantage of locking in an adjustable rate debt to a fixed rate, then it makes it easier to budget over time as you pay it off. But if you can also pay some of that debt off, you are better off over time."

Creating these sort of financial plans can seem intimidating, but Ring said sometimes you need to face the fear head on.

"When you hug that monster and pull it close to you and you accept it, all of a sudden, it's not so frightening, and you can actually develop a plan," he continued. "The first step of a really good financial plan is getting past the emotional fear of what the outcome could be and just saying, 'I got to do this and I'm gonna be better off no matter what.'"