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& My money

Recognising and dealing with financial stress

A couple going through their household budget

Financial stress can arise at any point in your life. Getting your personal finances in order can help you alleviate the sources, and deal with the stress.

Financial stress and worry can come about for many reasons such as managing your debt obligations, your budget, or a life event, such as marriage, loss of a job, birth of a child or retirement.

Recognising and dealing with financial stress is important. If left unchecked, it can leave you feeling overwhelmed, and may impact other areas of your life, both at work and at home.

Recognising financial stress

Are there particular areas of your personal finances that you feel overwhelmed by or disengaged with, such as cash flow, debt, investments, superannuation? Pinpointing the source of your financial stress can help you to find the best way to deal with or manage the stress.

Suggestions for dealing with financial stress

Here are some suggestions that may help get your personal finances in order.

1. Talk to your partner.
An open and honest conversation might help you to both be on the same page when it comes to assessing your existing financial situation, and working together towards achieving your financial goals and objectives.

2. Seek professional advice
Speak to the professionals, such as your accountant, your bank or a financial planner to help get a handle on your current financial position and develop a plan for the future.

3. Keep your finance-related paperwork in a filing system.
Organising your documents can improve the management of your personal finances and allow you to find and refer to things more easily.

4. Put in place a budget or revisit the one you already have.
Understanding your cash flow and current household expenditure can help narrow down the source of your stress. A good budget allows you to manage your money to meet future expenses, track and review your spending habits over time and identify surplus income that could be used for debt reduction, saving, and investing.

5. Establish an emergency buffer.
Life can be full of unexpected events. Pre-planning an emergency buffer allows you to have funds available to cover unexpected events such as job loss, a medical emergency, home repairs and car repairs without the need to rely on other sources (e.g. credit cards and borrowing).

6. Get a handle on your debt repayments.
Debt repayments restrict your cash flow and, if not carefully managed, can cost you money in interest that could have been better used elsewhere. By repaying your debt obligations as soon as possible, you can free up cash flow to be used for other purposes such as saving and investing for the future.

7. Track down any lost superannuation and consider consolidating multiple superannuation accounts.
In Australia there are millions of lost super accounts valued at billions of dollars - is yours one of them? Rolling over your lost super or consolidating multiple super accounts may give you better earning potential, and avoids those smaller or lost balances getting eaten up by fees.

8. Make sure you have a suitable Plan B in place.
Appropriate general insurance (e.g. motor vehicle, private health or home and contents) and personal insurance (e.g. life, total and permanent disability, income protection and trauma) covers are a safety net that can provide you with peace of mind financially when an unexpected event occurs.

9. Consider selling household possessions that are collecting dust.
The extra cash could help cover upcoming expenses, establish an emergency buffer or top-up your existing savings. Plus, by updating your contents insurance to reflect this reduction may see a lowering of your relevant insurance premium.

10. Be proactive in planning for retirement.
It can be hard to think about retirement if it’s far off in the distance and you have competing priorities right now. However, starting sooner rather than later means you'll benefit from the power of compounding.

11. Make sure your estate planning affairs are in order.
Completing or reviewing your will and the nominated beneficiaries to your superannuation ensures that your wishes are carried out in the event of your passing. This also extends to making sure you have procedures in place regarding the management of your affairs whilst you are still alive (e.g. powers of attorney and guardianship).

12. Take care of your physical and mental health.
Eating a balanced diet, engaging in adequate exercise, allowing yourself time to rest and protecting your health may help you to reduce your overall stress levels.

Financial stress can arise at any point in your life. It’s important to recognise and deal with financial stress when it does present itself. Although the above suggestions are not a comprehensive list, you may find that getting your personal finances in order can help with alleviating the underlying cause of your financial stress.

Source: Financial Planning Knowledge Centre

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