Money and mental health are locked in a vicious cycle. If your financial well-being is poor, this can impact your mental health – causing you to stress about money and whether you’ll have enough.
On the flip side, if your mental health is poor, this can impact your financial health. You may not have the motivation to manage your finances properly, or you’re over-indulging in retail therapy to try and make yourself feel better. And just so we’re clear retail therapy ≠ real therapy.
What’s the state of financial well-being in New Zealand?
It’s not great…
The Financial Resilience Index released by the FSC earlier this year shows that 62.3% of Kiwis worry about money on a daily, weekly, or monthly basis – up from 56.7% the year before. And it’s clear that this is having an impact on their wellbeing – with 59.4% saying financial issues are adversely impacting their overall wellbeing.
So, what’s causing all this financial stress?
Unfortunately, there’s a lot that could be causing you to worry about money.
This could be:
- Lack of money to cover an emergency, or fund the lifestyle you want (or think you should have)
- Rising costs – and worrying you won’t have enough to cover the extra expenses
- Debt – and not being able to pay it off
- Not having enough for retirement (and not having any idea how you could close that gap)
- Not agreeing about money with a partner
Most often, though, financial stress comes from not having a plan and not feeling in control of your money. So, when economic headwinds hit – we feel even worse off and tend to focus on the things we have no control over, rather than the actions we can take to protect ourselves.
As we’ve mentioned elsewhere, financial success and well-being isn’t just about how much money you have, but rather about your mindset, or the feelings you have about money.
- Guilt – about spending money, even if we have enough
- Fear – of seeing where your finances are at and how far you may be behind
- Shame – of not being able to manage your own finances
- Stress – from the pressure to look after yourself, and/or others with limited resources
- Tired – from constantly worrying about money
And, a lot of the time, the stigma around talking about money – especially debt – can mean people struggle to ask for help and may become isolated. Making it harder for those who are experiencing financial stress to find a way out.
So, what can you do to improve your financial well-being?
The good news is that there is something you can do to improve your financial well-being. The end goal is to feel in control of your day-to-day finances and have a plan that takes economic headwinds into account so that when you experience a financial shock, you have the means to protect yourself.
This will take some time and effort, but here are some ways you can get started.
- Review your finances: Is there as much pressure on your finances as you think there is, or are you spending frivolously? In our experience, we’ve found people often fritter about 15% of their income. If you’re able to cut out those inefficiencies, you would effectively be giving yourself a 15% pay rise!
- Create a budget (or a spending plan if the word budget makes you cringe): But don’t just leave it there, track your spending against your budget to make sure you’re on track. Be sure to include savings and/or investment goals into your budget and allow for the things that make you happy – like a regular coffee with friends, or a trip to the movies (or mountains) if it doesn’t derail you from your bigger goals.
- Build your financial resilience: Start putting away money – even if it’s just a little each week – to build yourself a financial buffer. Having this buffer can help protect you against unexpected costs or in the event you temporarily lose your income. The recommended amount is about 6 months’ worth of expenses.
- Pay down debt: This could be short-term debt (i.e., credit card) or long-term debt (like your mortgage). According to one study, 17% of Kiwis say their credit card debt is the leading cause of financial stress. Paying it down would free up cash flow down the line and means one less expense for you to worry about.
- Make a rough calculation of what you’ll need for retirement: This is generally about 25x your current annual lifestyle cost. Once you know how much you need you can calculate what you’re on track to have and come up with a plan to bridge that gap. Take into account potential NZ Super, your projected KiwiSaver balance, and any other investments you may have.
- Understand the link between your mood and money: What triggers you to spend? Is there a way you can avoid those triggers, or find another way to manage those emotions?
- Have a plan: Knowing how you’re going to use your money and grow your wealth will help you feel more in control of your finances. If it allows you to buy the things you like, it may help alleviate any feelings of guilt you have about spending.
- Get financial advice: Talk to an external party (like a financial coach) about your money situation and what you can do to get in control of your finances. They’ll be able to show you what you need to focus on for maximum impact.
If you’re keen to dig a little deeper into what’s causing your financial well-being to suffer and learn the actions you can take to alleviate some of that stress, watch our recent webinar on Dealing with Financial Stress featuring enable.me founder & financial coach Hannah McQueen, and Sue Kohn-Taylor from The Mental Fitness Company.
If you’re keen for some one-on-one financial advice on dealing with financial stress and the steps you can take to get yourself into a better financial conversation, book a consultation with a financial coach. They’ll be able to see where you’re at from a cash-flow perspective and come up with the strategy that suits your financial needs. (A fee applies).
Disclaimer: This blog post is for informational purposes only and does not constitute individual financial advice. If you’re interested in receiving personalised financial advice, you can book in a consultation with an enable.me coach. Costs apply.