American families are working hard to keep up with their bills.

From 2020 to 2024, food costs soared by more than 23%. Other prices are rising, especially steep for vehicles, insurance, child care and housing, with nearly 40% of its credit card payments lagging behind.

Now, zigzag tariffs, shooting thousands of federal workers and contractors, and massive cuts and freezes of federally funded programs mean more and more people are becoming increasingly pessimistic about the economy.

As an assistant professor of social work, I have found through research that people’s experiences, performance and feelings about their personal financial situations, have as many differences in their experiences as their age and gender have on certain financial decisions. These decisions may in turn affect their income and wealth moving forward.

Improve your "financial effectiveness"

When we evaluate whether someone has personal finance know-how and the ability to make the most of it, scholars like me use the term “financial efficiency.” People with high financial effectiveness can be more capable of surviving financial difficulties and building wealth.

Although everyone’s situation is unique and personal resources vary, there are still five broad areas that personal finance experts say related to good financial outcomes: emotional regulation, problem-solving skills, ability to achieve goals, self-confidence and risk management.

1. Stay calm and continue

Staying calm in the face of potential or real financial crises often makes it easier for you to think through important decisions. In contrast, reactions out of fear often lead to mistakes or to quickly resolve long-term consequences. For example, rushing to resolve a problem can lead to you getting paid loans with high interest rates and fees.

This is why you should avoid rushing to make major financial decisions.

Wait until you feel calm and maybe giving yourself 24 hours to think can protect you from worsening situations. But don't wait too long - procrastination can lead to late fees and exacerbate your problems.

Maintaining emotions control depends on a healthy coping mechanism for stressful conditions. Having healthy habits can help solve this stress.

2. Solve the problem

Solving financial problems is an exercise in improvisation. This includes finding innovative ways to increase revenue and reduce spending through new jobs or fuel efforts. Or look for solutions that can take more time, such as negotiating a repayment plan for unpaid bills.

This perseverance and wit usually depends on the skills you used in the past. This may help if you seek advice from someone you know.

If you have questions about how to resolve financial problems, go to a financial advisor or social worker who can help evaluate your situation and determine what to do next. But be wary of the abbreviation of so-called financial influencers active on social media. Instead, learn from experts focused on consumer protection and impartial education.

3. Set goals and track them

Achieving goals can be short-term activities, such as solving direct problems or long-term processes. This means keeping clear results in mind and being able to tell when you reach your goal. More complex goals may need to be divided into multiple milestones to stay on track.

Whenever you have serious financial troubles, try to closely monitor your income and expenses. Adjust your budget based on what is important to you. This will increase your sense of control over the situation.

Responsible for all debts, including credit cards, automobiles, student loans, medical or utility bills, and home mortgages. Find out what you owe and who you attribute it to and make plans to repay them. And, if that feels overwhelming, it doesn’t matter: Credit consultation from nonprofits can help you through the process.

Listing all debts on paper or in a spreadsheet can help alleviate anxiety and fear of unknowns. Making a plan can help you see a real way to achieve a stronger financial future. Then, take action and start paying them back.

One possibility is to request a mortgage or extended or revised repayment schedule from a creditor. The previous conversation with them shows that you are taking responsibility and they are more likely to work with you.

Now Americans owe an average credit card debt of $6,455. Paying in full within the grace period, rather than later, and being interested, can cause a big difference in your debt.

4. Get more confidence through practice

If you have done it before, it is always easier for you to achieve some goals. This is how self-confidence is built.

But what if you are in a new situation? It can help you reflect on your personal history, realize that you have encountered challenges in the past, and reasonably make sure you can do it again. This confidence can help you stay calm, think about some solutions, and make sure you can achieve your goals.

Improve your confidence and skills in money management can relieve your anxiety and stress. It can show you those areas of financial life in your control and light up the path to a healthier financial future.

5. Plan to reduce your risk ahead of time

Even if your financial situation is OK today, I suggest you plan ahead. It is important to identify your own informal safety net before you need it.

Suppose you have to pay an unexpected $400 bill. How will you deal with it?

Would you call a friend or a relative? Is this payment saved, ready and waiting for emergency use? Use your income to cover it up? According to the Federal Reserve, only 63% of Americans can use their own cash to make up for the $400 financial shock.

By regularly putting some of the money you earn, you can manage your own risks at the same time and develop your skills to achieve larger goals.

Managing your own financial risks means trying to prevent the situation from worsening. This also means you may be able to prevent future disasters or be able to handle them better.

Owning insurance policies such as living and disability, homeowners or renters, and health and cars is part of it. However, maintain enough savings to compensate for emergencies or have multiple sources of income.

The steps you take can also include something less obvious, such as taking care of your health or developing a relationship with relatives and relatives, so you can call them when times are really tough. Or better yet, they will be able to appeal to you.