Steps to reduce your financial stress

Financial stress is when you have difficulty meeting your basic financial commitments. You may have challenges with income, expenses, or both. Whatever the case, having a plan to try to manage these financial challenges can help ease some of this stress. Here are some steps you can take to help reduce your money stress and get motivated to take control of your finances¹:

1. Create a budget

A budget is the best tool you have to get control of your money. If you don’t have a clear picture of where your money is coming and going, it is difficult to make informed choices.

Having a budget helps you make sure you cover your immediate expenses, while still working towards your savings (or debt reduction) goals. Start an Excel spreadsheet to keep track of all your expenses, or use a free tool like MoneySmart². The first few months of planning and tracking your budget can be the most challenging. However, like most things that require practice, it gets easier over time.

2. Focus on the things you can change

The belief that you simply don’t have enough money to put towards your goals can keep you from dealing with your financial problems. Try to focus on making the most of the income you do have by spending wisely. Plan ahead. Plan your meals³, plan your expenses, and then you won’t need to think about it.

Sticking to a budget is not always easy, and there may be days when your resolve falters. If that happens, remind yourself of how much you have to gain by reaching your goals. Then examine your spending patterns to see why you overspent. You may need to modify your budget or your behaviour.

3. Reduce your existing debt (and don’t create new debt)

If start missing payments on your secured loans, you may risk losing whatever is being secured, whether it is your home⁴ or your car⁵. For unsecured debts such as credit cards or store cards, it is a good idea to list these from the highest to the lowest interest rates, and continue to pay at least the minimum monthly repayments, more if possible, starting with the highest interest rates first.

If you’re having difficulties meeting your payments, it is important to call your creditors to see whether you can make alternate arrangements, before they call you. You do have options. It is important to understand your financial circumstances, communicate these to your lender and find an appropriate course of action.

4. Get outside help

If you are really struggling with managing your budget and spending, don’t be afraid to get outside help. Education in basic money management will help you plan out a budget and put steps in place to succeed financially. If you are feeling overwhelmed by debt you can work with a free financial counsellor⁶ to help you restructure your debt and in some cases, negotiate with creditors.

5. Build a buffer

Unexpected expenses and financial emergencies can be expensive and stressful, especially if you do not have any buffer or emergency funds set aside to cover these. Setting up an emergency fund will help relieve a lot of this stress. It is also easier to use the money in your budget the way you planned if you know you have a buffer set aside ready to cover any unexpected emergencies.

Building an emergency fund may seem tough at first, especially if you are struggling to make ends meet each month. You can start small. You may not be able to save hundreds a month from reductions on one item, but spread it over a few items. You don’t want to set overly ambitious financial goals that you may abandon in a few weeks or months. Consider allocating your tax return directly to kick start your emergency fund. You may also consider selling any unused items around the house to build up that cash quickly.

6. Keep track of your progress

While this may not sound like it’s a solution to your financial problem, it can make a big difference in the amount of stress you feel each day. Find positive aspects of your financial situation by tracking your progress towards your financial goals. Looking at the positive aspects of your progress can also help reduce stress.

Remember, when you are in better control of your finances, you are in better control of your life. Every little step helps.

References

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1. https://www.thebalance.com/dealing-with-financial-stress-2385957↩︎
2. https://moneysmart.gov.au/budgeting/budget-planner↩︎
3. http://www.foodwise.com.au/recipe-room/meal-planner/↩︎
4. https://www.finder.com.au/missing-mortgage-repayments↩︎
5. https://moneysmart.gov.au/managing-debt/repossessed-car-or-goods↩︎
6. https://moneysmart.gov.au/managing-debt/financial-counselling↩︎

General advice disclaimer

The information contained in this document is provided for education purposes only. It has been prepared without taking into account your particular financial needs, circumstances or objectives. You should consider the appropriateness of the information as it relates to you. You may wish to consult an adviser before you make any decisions relating to your financial affairs.