Regardless of financial position or socio-economic status, we’ve all endured financial stress at one point or another.
If you are under financial stress at the moment, you’re not alone. The NAB Household Financial Stress Index found that on average, Australians feel they are getting worse off financially. A huge one-third of survey respondents said they had experienced financial hardship in the past three months. Over 16 per cent of respondents couldn’t raise money in an emergency. One in five are dipping into their savings to pay the bills and 10 per cent are running out of money before their pay period ends. That percentage increases to 20 per cent for lower income earners.
Regardless of how it manifests, financial stress is real for people of all walks of life, earning all levels of income. Here are my tips for managing it.
1. Focus on what you can control
In an uncertain world, much of what is happening is out of our hands. If you are working or own a business in one of the industries impacted by COVID or the recent floods, the challenges may feel even more overwhelming.
It can help to break down the issues into what you can control and what you can’t. Focusing on where you can have an impact can help you take action and avoid decision paralysis.
Remember, when it comes to your finances, inactivity is your enemy.
2. Know where your money is going
Budgeting is often seen as a synonym for sacrifice, but it is really about knowing in great detail where your money is going. Then you can make adjustments to manage priority areas. It’s important to be realistic too; you can’t forgo everything in life. For example, access to streaming services may be more of a necessity than usual, but there are likely areas where you can cut back instead.
When we do this exercise with our clients, we find most people underestimate how much they are spending each week, often forgetting the small expenses that quickly add up. These expenses usually don’t have a notable impact on lifestyle, so it can be easier to cut them back.
Knowledge is power when it comes to your finances, so it pays to take a deeper look.
3. Put a framework in place for your financial decisions
When we are under financial stress, we are much more likely to make rash decisions. This can be disastrous when it comes to our finances. We may also find ourselves reflecting on the outcomes of past decisions to make our next ones.
While this sounds good in theory, it can be a minefield as we often don’t consider the context or outside influences that may have determined the outcome. It’s important to have a reliable framework that we can count on for our decision-making, rather than rewriting the process every time.
4. Set some clear ‘mini’ goals
Often when we are trying to manage financial stress, we set ourselves a goal of resolving the challenge, which sounds fine on the surface. However, we need to achieve a series of steps to get to a resolution point in most cases. And these mini steps should be the goals that we measure.
Measuring in ‘metres not miles’ can make it easier to stay on track because you can see your progress.
5. Understand your stress responses
When we feel overwhelmed, we all have emotional and physiological responses that are not helpful to clear thinking or decision-making.
When these symptoms arise, trying to make a decision can be futile and often results in a further spiral. Whether it is taking a walk, listening to music, spending time with pets, or just getting outside, most of us have an activity that will help to clear our heads. The Black Dog Institute has some helpful resources to manage stress here.
6. Get advice
Financial decisions can have long-term impacts on our lives. If you are making them without a clear plan, it can feel a little like deciding how you will get somewhere without a destination in mind.
That’s one of the life-changing impacts of financial advice – it gives you a roadmap so you can make the right moves, whether you need support to reduce debt and get your finances on track or grow and manage your financial position.
This is an edited version of an article that originally appeared on Apt Wealth Partners and is republished here with permission. This article contains general information only. This should not be relied on as independent finance or tax advice. If you are after specific professional advice, speak to your registered tax agent/financial advisor or reach out to Apt Wealth Partners.