Money worries and your mental health
By Robert Wright /September 08,2021/
It’s been a trying time for many people, with our collective mental health taking a toll as the COVID-19 pandemic rolls on. The Melbourne Institute says one-in-three Australians are now reporting financial stress, while one-in-five are feeling ‘mental distress’.
It’s well known that our financial wellbeing and mental health go hand in hand. Severe or prolonged financial stress can trigger symptoms of anxiety and depression, relationship breakdowns, trouble sleeping and anti-social behaviour. This in turn can lead to further poor decision making when it comes to money.
Fortunately, there are things you can do to improve your financial security and wellbeing. If you’re experiencing financial stress, here are some practical steps you can take to get back on track.
Give yourself a financial health check
When you’re experiencing financial stress or hardship, it can be tempting to avoid the problem altogether; but this only makes things worse. Once you gain a clear understanding of your financial position, you’ll feel more in control and can take steps to improve your position.
Start by doing a financial health check to assess where your income is going. Use a spreadsheet or budget planner to list your income, debts, and expenses. Then look for opportunities to reduce your expenses, pay down debt and increase your savings.
Renegotiate your bills
Renegotiating what you owe is a smart way to free up some cash flow for daily living and ease the pressure you feel about meeting your obligations.
If you’re having a hard time meeting expenses, it’s important to speak to your service providers as soon as possible. Let them know you’re doing it tough and ask to negotiate lower repayment amounts and extended timeframes.
Don’t be shy to ask for a better deal on any services you use, including phone bills, internet, and utilities. Most organisations will try to work with you – it’s better for them to get paid (albeit slowly) than for you to default on what you owe them.
Pay down debt
With more cash flow available, you can concentrate on clearing your debts, a key step on the path to financial freedom. If you have lots of debt, it’s worth seeking the advice of a financial adviser. They can advise you on the most efficient and cost-effective way to repay what you owe. You might be able to refinance, take advantage of ‘no-interest’ periods or consolidate your debts into a single monthly repayment at a lower rate.
Make bank accounts your best friend
Keeping all your money in one bank account makes it hard to keep track of how much you have and how much you owe. One simple strategy to help you manage your money is to set up several bank accounts, each with a different purpose. For example, one to receive your income, another to pay household expenses, one for discretionary ‘spending’ and one for saving.
You can set up automatic payments to transfer the right amount of money into each account when you get paid. That way, you’ll always have the money put aside to pay your bills as they arise. Make sure to set up direct debits or automatic payments for each of your regular household bills from your expense account, so there’s no chance of falling behind in future.
Build your savings
Feeling financially secure goes hand in hand with having a good financial safety net in place. The more you have put aside for a rainy day, the less stressed you’ll feel when things don’t go to plan. Aim to build up your emergency fund to cover six-months’ worth of living expenses for yourself and your family. Again, creating an automatic transfer of funds to your ‘emergency’ savings account each month is an easy option. Then sit back and watch your savings grow.
Where to get help
If you’re experiencing financial hardship, struggling to make ends meet, or find yourself on the wrong end of one too many late payment notices, remember, there is help available.
Source: Money and Life
Five Financial habits to start
By Robert Wright /April 16,2021/
Like any habit, our financial behaviours are formed by doing the same actions repeatedly until they’re second nature. That’s great if you’ve got into the routine of saving regularly – but not so good if you’re one to whip out the credit card on impulse.
With the right approach, you can turn those less-than-helpful financial habits into healthy behaviours.
Research shows one way to avoid falling back into old ways is to replace them with healthier habits. Other useful strategies include:
- Making smaller changes rather than big, dramatic ones.
- Choosing specific actions like ‘I’m going to transfer $100 into a dedicated savings account every fortnight’ rather than vague goals, such as ‘I want to feel financially secure’.
- Triggering new behaviours with visual or sound cues – that’s why social media with its notifications can be so habit-forming.
Here’s how to use those strategies to set you up for a financially successful 2021.
1. It’s time to get organised
Knowing where you are financially gives you clarity around your money. This makes it easier to workout your financial goals – and what you need to meet them.
Start by having a place for everything. If you receive your bills electronically, save them in one place. Scan any other financial paperwork – or set up a folder if you prefer hard copies. Consider setting up direct debits or create calendar alerts to ensure you pay bills on time – and avoid late payment fees forever.
You can’t control your money if you have no idea where it’s going or how much is coming in. Using a budgeting app can help you easily track your expenses and get an accurate record of your monthly spend. You can use this information to create a realistic budget. You can also use your bank’s app to manage your day-to-day expenses and check your balance.
Don’t forget to record expenses as you go and photograph or scan receipts, so when tax time comes, you’ll have all the documents you need in one place.
2. Name your goals – And break them down into steps
What are your financial goals? Some common ones include:
- Buying a property or starting a business
- Going on a dream holiday
- Paying for the kids’ or grandkids’ education
- Leaving money for loved ones
- Retiring early
- Being free from debt/paying off the mortgage
Enjoying financial freedom. Once you know what your goals are, break them down into small, actionable steps. For example, say your goal is to buy a property. Work out first how much your ideal home will cost, how much you’ll need for a deposit and when you hope to purchase it. Next, decide how much you’ll need to set aside each fortnight for that goal. Don’t forget other sources of income that could add to your savings – like a tax return, bonus, or income from a second job.
3. Pay yourself first
One of the most important financial behaviours you can develop is the habit of saving regularly. You need some savings as a safety net – covering unexpected expenses like home or car repairs, or a trip to the dentist. You can then use additional savings to cover your financial goals, or to invest in assets like shares or property.
One of world’s most successful investors, Warren Buffett offers this advice on saving: “Don’t save what is left after spending; spend what is left after saving.” In other words, pay yourself first.
One way to do this is to automatically transfer a regular amount into a savings account each pay day. By taking the same amount out at the beginning of the pay cycle, you’ll get used to not having it. If money is tight, make the amount small.
Check the balance of your savings account regularly. This will give you the visual reward of seeing your savings account grow – helping motivate you to stay on track.
4. Set a debt repayment strategy
If you have credit card debt, try to pay off as much as you can each month. Make sure it’s more than the minimum, or you could end up paying a lot of money in interest.
If you have multiple debts, they may be easier to manage by consolidating them into one debt. Alternatively, pay off the debt with the highest interest rate first. Some people find paying off the smallest debt first, then moving onto the next smallest debt more motivating.
To avoid getting into more debt, try to avoid impulse buying. Consider having a credit card for emergencies only and relying on your everyday account to pay for groceries and other expenses. Even better, build up a rainy-day account and avoid credit cards altogether.
5. It’s never too late to learn
Do you find finances confusing, boring or stressful? Learning more about finances can take the hard work and mystery out of managing money.
Source: Colonial First State