Recent high-profile bank failures, soaring inflation, and concerns about a looming recession have left many consumers grappling on how to deal with financial stress as they strive to safeguard their money, plan for the future, and make ends meet.
According to a survey, over half (52 percent) of adults report that money negatively impacts their mental health on at least an occasional basis.
Among those affected by financial worries, nearly a third (29 percent) experience daily concerns.
While external factors often cause financial stress, there are measures you can take to alleviate it and enhance your financial security.
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Table of Contents
Impact of Financial Issues on Mental Health
Over half (52 percent) of adults say money negatively affects their mental health occasionally.
Women are significantly more likely than men to report a negative impact on their mental health due to money issues (56 percent versus 47 percent).
Gen Xers (ages 43-58) are the most concerned, with 60 percent stating that money negatively affects their mental health.
This is compared to 55 percent of millennials (ages 27-42), 52 percent of Gen Zers (ages 18-26), and 45 percent of baby boomers.
More than a third of individuals with annual household incomes below $50,000 experience a negative impact on their mental health.
This is due to financial matters reporting this happening every day.
This percentage drops to 29 percent for households earning between $50,000 and $79,999, 21 percent for households earning between $80,000 and $99,999, and 23 percent for households earning more than $100,000 in the U.S.
Inflation is the top financial concern that has worsened over the past year.
Over half of those whose mental health is negatively affected by financial concerns say this issue has deteriorated over the past year.
Steps on How to Deal With Financial Stress
#1 Prioritize What You Can Control on Discretionary Spending
Focus on what you can control when dealing with stress-inducing factors.
Consider your food budget as an example.
Seek ways to reduce your grocery bill, such as comparing prices of different brands.
These savings will not only help your budget but also provide a sense of accomplishment and control, potentially reducing stress.
#2 Find Ways to Increase Your Income
When budget cuts have reached their limit, and your financial situation is already strained due to higher consumer prices, explore ways to boost your income.
Options include working additional hours, negotiating a raise, selling items you no longer need, or taking on a side gig.
Increasing your income can alleviate financial stress while maintaining your budget’s integrity.
#3 Prioritize Essential Bills
A significant proportion of employed state that their income hasn’t kept pace with the rising household expenses driven by inflation.
When you’re concerned about meeting all your financial obligations, prioritize essential bills.
This approach serves a dual purpose:
– It helps you identify bills that can be reduced or eliminated
– It ensures that you allocate adequate funds to pay vital bills promptly
This strategy can alleviate financial anxiety and promote better sleep.
#4 Save Money During Challenging Times
Saving money consistently can be challenging, particularly when you’re struggling to make ends meet.
Establishing a savings plan and building an emergency fund will provide you with a greater sense of control and help alleviate stress.
Look for high-yield savings accounts that offer substantially higher yields compared to traditional bank rates.
#5 Track Your Progress in Saving Money
To gauge your progress and ensure you’re moving in the right direction, track your efforts.
Knowing where you stand financially is essential.
It helps you understand the impact of your actions and adjust your strategy accordingly.
Monitoring your progress when saving for emergencies can reduce stress and anxiety associated with financial concerns.
Related content: What are expat savings plans and should you get one?
#6 Communicate with Your Lenders
Debt can impose both financial and psychological burdens.
Before succumbing to the stress caused by debt, have open conversations with your lenders.
Many lenders are open to discussing your issues and finding short-term solutions.
They may offer loan modifications, extend loan terms, or reduce interest rates to lower monthly payments
Refinancing is another option to consider.
#7 Consult with a Professional Financial Advisor
Seeking guidance from a financial advisor can provide valuable assistance with goal setting, saving money, and managing debt.
Research indicates that working with a financial advisor on financial planning and investment selection can increase your portfolio’s annual returns by about 3 percent.
A financial advisor can offer reassurance, demonstrate the benefits of your financial plan, and help you remain on track.
Related content: Should you invest in an expat financial advisor?
Financial stress and anxiety are prevalent in today’s environment, driven by factors like inflation and concerns about bank stability.
Despite the effort required, it’s possible to stay ahead of expenses and address financial concerns through actions such as budgeting, tracking savings progress, and consulting with a financial advisor.
A wide array of free online resources are available to help you save money, spend wisely, and live within your means, aiding your financial well-being.
Financial stress is a common concern for many people, especially in the face of rising inflation and economic uncertainty.
In order to manage this stress and improve your financial well-being, here are some additional tips:
#8 Create a Realistic Budget
Building a comprehensive budget is one of the most effective ways to gain control over your finances.
This involves tracking your income and expenses to understand where your money is going.
By creating a budget, you can identify areas where you can cut costs and prioritize your financial commitments.
#9 Reduce Unnecessary Expenses
Once you have a budget in place, pinpoint unnecessary or discretionary expenses that can be trimmed.
Consider cutting out non-essential spending on things like dining out, subscription services, or impulse purchases.
Redirect these funds toward savings or essential bills.
#10 Build an Emergency Fund
Having an emergency fund is crucial for financial security.
This fund should cover several months’ worth of living expenses in case of unexpected financial setbacks, such as medical emergencies, car repairs, or job loss.
Accumulating an emergency fund can provide peace of mind and reduce financial stress.
#11 Pay Down High-Interest Debt
High-interest debt, such as credit card debt, can be a significant source of financial stress.
Allocate extra funds toward paying down these debts to reduce interest payments and free up your finances for other priorities.
#12 Invest for the Future
Consider investing your money for long-term growth.
While investing carries risks, it can provide higher returns than traditional savings accounts, especially when considering the impact of inflation.
Diversify your investments to spread risk and consult with a financial advisor for personalized guidance.
#13 Seek Financial Education
Knowledge is empowering.
Invest time in understanding personal finance, including concepts like investing, budgeting, and debt management.
Numerous online resources, books, and courses are available to help you build your financial literacy.
#14 Practice Self-Care
Managing financial stress also requires taking care of your mental and emotional well-being.
Engage in self-care activities that reduce stress, such as exercise, meditation, or relaxation techniques.
Talk to a therapist or counselor if financial stress is affecting your mental health significantly.
#15 Maintain a Support Network
You don’t have to face financial challenges alone. Share your concerns with trusted friends or family members who can provide support and guidance.
Discussing your financial situation with someone you trust can relieve the emotional burden.
#16 Keep a Long-Term Perspective
Financial difficulties are often temporary, and taking a long-term perspective can help you weather short-term financial storms.
Stick to your financial plan, and remember that with discipline and perseverance, you can improve your financial situation over time.
#17 Regularly Review Your Financial Situation
Periodically assess your financial progress, adjust your goals, and make necessary changes to your financial plan.
This ongoing evaluation ensures that you remain on the right track and helps you adapt to changing circumstances.
Financial stress is a common challenge, but by taking these steps, you can regain control over your finances and reduce the anxiety associated with money matters.
Building good financial habits and seeking guidance when needed will contribute to your overall financial well-being.
Now, let us have a look at the situation from an expat perspective.
How to Manage Finances as an Expat?
Establish a Practical Financial Plan
While it might seem evident, many expatriates dealing with financial stress may not have considered creating a robust budget.
Begin by tracking your income and expenditures, taking into account variations in currency and the cost of living in your new location compared to your home country.
Crafting a clear budget is invaluable for:
- Comprehending your financial situation
- Determining your financial capacity
- Identifying where to allocate your funds for enhanced peace of mind
Establish a Financial Safety Net
Building an emergency fund is a critical step for everyone, but it’s especially vital for expats.
Particularly those who might encounter unforeseen challenges or require a sudden return to their home country.
Strive to save an amount equivalent to three to six months of living expenses.
This reserve provides a reassuring cushion should an unexpected financial crisis arise.
Gain Proficiency in Taxation
Familiarizing yourself with the tax regulations in your new host country may not be the most important part of your overseas adventure.
But it’s fundamental for your financial well-being.
Expatriates often face unique tax considerations, such as reporting foreign income and adhering to tax treaties.
It’s imperative to stay informed about these regulations, including where and how to fulfill your tax obligations while residing abroad.
If you find this overwhelming, don’t hesitate to seek professional guidance.
It’s a worthwhile investment to ensure you stay on the right tax track.
Exercise Prudent Currency Exchange Management
Currency exchange rate fluctuations can significantly impact your finances.
Explore strategies like employing a multi-currency bank account or currency exchange services to manage your funds efficiently and potentially minimize currency exchange costs.
Choose the Appropriate Banking Partner
Select a bank that offers expat-friendly services.
This includes multi-currency accounts, cost-effective international transfer fees, and easy access to your funds from abroad.
Just as you would in your home country, research and compare banking options, and consult with fellow expats to identify the most suitable choice.
Plan for Retirement
Your expatriate status should not lead you to neglect your long-term financial objectives.
Whether you intend to return to your home country or remain in your new destination, it’s advisable to explore retirement savings options.
Especially for both scenarios and devise strategies for optimizing your financial resources.
Recognize the Significance of Insurance
Expatriates must prioritize health insurance, life insurance, and other essential forms of coverage.
Experts provide comprehensive international health insurance that caters to your healthcare requirements and offers peace of mind in case of emergencies.
Consult with Financial Experts
If you find the entire financial management process overwhelming, consider seeking advice from a financial advisor or a financial planning service with an expat focus (like me).
Such professionals can furnish tailored guidance and strategies for effective financial management.
Said advice can help you in mitigating the stress associated with financial affairs.
Related content: What is a Financial Planner? All you need to know
Adapt Your Lifestyle Accordingly
Depending on your relocation’s location and your home country, your cost of living may have significantly changed.
Adjusting your spending habits may be necessary.
While it’s tempting to indulge and make the most of your expat experience, remember your long-term financial goals and the occasions when your funds may be required in the future.
Build a Support Network
Just as with any aspect of the expatriate journey, creating a community is indispensable.
Connect with other expatriates in your region or engage with online expat forums and communities to share your experiences and seek guidance.
You may obtain valuable advice and even forge new friendships.
No matter where your expatriate journey takes you, preserving your financial peace of mind should always be a top priority.
How to Save as an Expat?
Are you an expat trying to make ends meet on a tight budget?
Are you convinced that your income doesn’t leave room for saving or building wealth?
Fear not, for with prudent planning and the following ten savings tips tailored for expats, you’ll be well on your way to achieving your financial saving goals!
The initial step in formulating a savings strategy for expatriates involves avoiding common financial pitfalls right from the outset.
Among the expatriate community, there are three prevalent mistakes that often occur during relocation.
Such pitfalls can hinder your efforts to initiate your expat savings plan.
Common Savings Mistakes
Underestimating the Cost of Living in Your New Country
Many expats account for basic necessities like food but fall short of thoroughly researching other essential expenses.
Local transportation, utilities, clothing, and housing expenses are frequently underestimated.
People often make assumptions about the local rental costs for their new dwellings.
In Singapore, for instance, the average standard housing costs may be twice that of Bangkok.
Yet, what might astonish many is that in India, prices could be double those in Singapore. Quite unexpected, isn’t it?
Not Accounting for Moving Expenses
A common misconception among expats is that moving costs solely pertain to hiring professional movers.
In reality, expatriates often need temporary accommodations before settling into their primary residences abroad.
Additionally, various countries have distinct definitions of a “furnished apartment.”
In many places, you’ll be responsible for furnishing it with your bed linens, cutlery, cookware, towels, and possibly even furniture.
These expenses can accumulate rapidly, and as a newcomer in a foreign land, you might have little knowledge of what constitutes a reasonable or exorbitant cost.
Furthermore, don’t overlook expenses like utility and telephone deposits, as well as other potential administrative fees, such as those related to property rental or real estate agency services, which necessitate having sufficient funds to cover them.
Failing to Establish a Local Bank Account
Maintaining a local bank account is of utmost importance.
Attempting to conduct all your financial transactions through your home country’s bank may result in unnecessarily high costs and foreign exchange fees.
Having illuminated the primary blunders expats often make at the outset of their journey, let’s now delve into the highly anticipated section of this article: financial savings tips tailored to expatriates residing abroad!
Top Ten Savings Tips for Expatriates
Expatriates frequently grapple with managing their finances while residing abroad, particularly when they must account for obligations both in their home countries and their current overseas locales.
Here are ten valuable savings tips for expatriates living abroad:
Develop a Budget
Initiating a savings plan necessitates creating a budget outlining your monthly income and average monthly expenditures.
Gaining a clear understanding of your costs and the amount you can allocate for specific essentials will later enable you to determine your monthly savings amount.
Moreover, it ensures that you budget for all expenses, including discretionary and spontaneous expenditures.
Establish a Separate Savings Account and Make Regular Contributions
The optimal approach for initiating savings is to consistently set aside a predetermined sum each month in a dedicated savings account.
This practice mitigates the temptation of spontaneous spending, as a portion of your funds remains securely isolated in a separate account.
Keep Detailed Expense Records
While creating a budget and maintaining a separate savings account is important, scrutinizing your spending habits is an invaluable way to uncover financial patterns.
Numerous applications are available to assist you in this endeavor.
The initial weeks or months in a new country can strain your budget, as you are still unfamiliar with low-cost supermarket chains or unaware of promotional deals.
To overcome this, explore your neighborhood, seek recommendations from local acquaintances or colleagues, and discover cost-effective places for shopping and dining.
Grasp the taxes you are liable to pay, understand where and how to fulfill your tax obligations, and determine whether you may be subject to double taxation in your home country.
Stay informed about tax and financial developments, especially those related to taxation and investments in your country of origin.
As a citizen of your home country, you will still be impacted by specific tax regulations.
Use a Local Bank Account
In addition to the previous mention, the main rationale for establishing a local bank account is to facilitate your monthly financial transactions.
Your offshore account can play a pivotal role in managing savings and investments in a tax-efficient manner.
It also serves as a secure repository for funds until favorable exchange rates allow conversion to your home currency for international transfers.
While it may not be immediately apparent as a direct savings tactic, securing health insurance when living abroad has the potential to save thousands, if not tens of thousands of dollars in the event of a serious medical issue.
Health insurance is a cornerstone of expatriate financial planning.
Retirement planning may not captivate the younger demographic of expatriates.
However, it is an important and frequently overlooked aspect of an expat’s life.
It’s essential to remain attentive to your home country’s retirement accounts and assess whether they can be managed effectively from abroad.
Moreover, it’s vital to comprehend the operation of the mandatory retirement system in your current country of residence.
State pensions often fall short of adequately funding retirement expenses when the time comes.
Hence, opening a dedicated savings account, even with modest contributions, can significantly enhance your future retirement fund.
Adopt a Simpler Lifestyle
While living as an expat, the temptation to partake in every networking event or local activity may give rise to FOMO (fear of missing out).
If you are operating within a budget or aim to bolster your savings, it’s crucial to live within your financial means.
The cost of living in your current host country may exceed that of your home country, necessitating lifestyle adjustments to achieve savings.
For instance, in numerous Asian countries, dairy product prices are considerably higher.
Dining out can become an expensive pursuit depending on your place of residence.
Preparing most meals at home, handling your laundry, and managing apartment cleaning can generate significant monthly savings.
Rather than frequenting restaurants every weekend, consider inviting friends over for a homemade pizza.
In essence, attempt to emulate local living while abroad and economize as you would in your home country.
Although saving money as an expat is not without its challenges, it remains an attainable goal.
With determination and, if necessary, guidance from a financial advisor, even budget-conscious expatriates can cultivate sound financial habits while enjoying their overseas experiences.
Commencing early savings for retirement, possibly within a dedicated retirement plan, offers the potential for these funds to grow over time, ensuring the security of your future, regardless of when that future may arrive.
Feel free to contact me to determine whether you can benefit from my top-notch services.
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