The COVID pandemic presents not only a health crisis but also a threat to our financial and mental wellbeing.
Many people have lost, or have the fear the loss, of their main income source and like other type of stress, money worries can take a real toll on your mental and physical health, your relationships, and your overall quality of life.
Feeling bogged down by money worries can negatively impact your sleep, your energy levels and even your self-esteem, so it is important to try and tackle the problem head on.
Those that are more financially resilient before such an event have a better foundation from which to weather any financial stress. For those that were not, it can take longer to bounce back, but there are small and practical things that can help.
This article looks at what steps you can take to cope with financial stress today and become more resilient for the future.
Don’t bury your head in the sand
Ignoring any negative feeling you have about your financial situation may only exacerbate the problem. Acknowledging how you are feeling is the first step to making a positive change and if you are feeling persistent negative feelings around your money situation, whether it be stress, anxiety or helplessness, this may be a sign that you need help.
You’re Not Alone – Talk About Your Situation
If you are worried about money you are not alone. We often don’t talk to anybody about our financial challenges, possibly out of embarrassment, believing we are the only ones going through it – this is not true.
“A problem shared is a problem halved” – Not only is talking face-to-face with a good friend or loved one a proven means of stress relief, but speaking openly about your financial issues can also help you put things in perspective. The person you are speaking to does not have to provide a fix, nor offer a solution, they can just help to lend an ear and perhaps some helpful insights.
If you would still rather not talk to friends about these things then consider professional help. This could be a trained therapist that can provide emotional support or help with your mental well-being, or it might be a financial adviser that can help from more of a financial perspective. There is also an increase in the number of Life-Centered Advisers and Money Coaches that can bridge the gap between both the financial and emotional side of money.
A study by Royal London in the UK found that when talking with a financial advisor, 68% of people felt better about money management compared to 53% for those that did not.
Small Steps Often
When it comes to money you may feel overwhelmed or have a feeling that you cannot change or improve your financial situation. Taking small steps often can soon add up to big changes.
Before you look at the steps to take it helps to have some clarity of your position.
As a start I would review the last 6 months of your bank statements and credit card bills. List expenses in groups of those that are essential (rent, utilities, food etc) and those that are non-essential, the luxuries and discretionary expenses. Are there items there which you spend more on than you realised?
I find food expenses are one that are often significant with people favouring Marks and Spencer’s over a more local market or supermarket. This is also true for people that eat out at restaurants several times a week instead of cooking at home.
Could you reduce the amount or the frequency of the expense? It’s not about being restrictive but making small concessions can have a big impact without it being noticeable. Is cutting out a boozy dinner or two a month really going to impact your social life? Probably not, but it could easily free up more money for essential costs or paying off any bad debt.
These concessions may feel like you are reducing your lifestyle initially, but if you make these gradually over time, the impact will be less felt, and the improvements to your financial and mental wellbeing may will be worth it.
The National Endowment for Financial Education in the US found that the biggest cause of financial stress in America is not having enough emergency savings.
In an environment like Hong Kong where taxes are low and where borrowing is cheap, it is easy to overlook the foundations of planning.
If you did lose your job how many months of your outgoings can you cover, how long might it take you to find a job that pays the same as before?
What if the market has dropped suddenly and you don’t want to liquidate investments? What if your money is in property and you can’t release equity or realise the value quickly enough?
Having an emergency buffer of 3 to 6 months of your essential expenses covered will mean that if something does happen that you have a good period of time not to worry about money and that you can focus on getting things back on track.
Mental, Physical & Financial Routines
We are all aware of the physical benefits of having a consistent exercise routine as well as the positive impact it has on mental health. As with your physical health, if you neglect your financial situation, it will likely stagnate or will deteriorate.
It’s important to have balance between mental, physical and financial health, too much or not enough of one and the others may suffer – having a secure financial situation will not make you happy unless you also have physical and mental health.
In the same way that you might have a training plan to achieve a fitness goal, a financial plan can help you to achieve your financial goals and I would say the number one issue clients come to us with is a lack of structure or a plan.
A consistent routine for your financial situation is also a positive feedback loop, like with exercise – action leading to more action, the consistent accrual of wealth by saving regularly.
Are you investing on a regular basis? Do you know where you are financially versus where you hoped/needed to be to achieving your goal? Is your financial health optimised? These are all questions that a financial plan can help you with.
If you are currently experiencing financial challenges, don’t ignore the issue, we are here to help and can help you make sensible decisions to improve your situation. Don’t hesitate to reach out today.