Updated: Jul 6, 2021
Money is seen as a dirty topic in our society; however, it is one of the main sources of stress and anxiety both for individuals and families. Money as they say is the root of all evil, and of many of life’s problems. If our financial situation has gotten out of hand, or we have suffered a job loss, it can be even more daunting to face it.
With financial stress there can be a paralysis in not knowing where to start or how to go about getting on top of it. If this is something you’re struggling with, I’ve put together some easy-to-follow steps to get you on top of your financial situation.
Work out what is coming in and going out. This sounds really basic, but a lot of people don’t keep track of where money is going. You can set up a budget like the one below for normal household expenses. I use excel, but feel free to use word, a notepad, anything that feels comfortable for you.
You can download our basic budget tool here:
In it I’ve included a tab to help calculate bills. As bills come at different times (Monthly/Quarterly/Annually) it can be difficult to figure out how much to put aside from each pay cycle. By working out how much everything is annually and then dividing by how often you get paid it makes it easier. You can just update the sample numbers with your own in the sheet.
Separate your accounts. I for one have NO impulse control and find it incredibly difficult not to spend money if it is in a current account. So, I have about 9485002 bank accounts. Not really, but it’s not far off. Most banks will let you set up an instant savings account from their mobile app.
For bills in particular, it is important to have a separate account. As car insurance for example only comes around once a year, the money set aside for it can look like spare money if it’s floating around your normal account and it’s easy for it to get spent. Then comes the crippling massive bill because nothing was put aside. Some accounts we have are:
Groceries (I don’t get paid weekly, so we put this money aside every paycheck)
If you’re a couple it really helps to have separate ‘fun’ accounts. This means an amount of disposable income (if you have it) every week/fortnight/month each that can be spent however you want or saved for things only you need.
Work out Debt. If you have any debt (credit card, loans etc.), figure out how much is owing and what the interest rates are. This is one of the most daunting parts of financial management as it can send us into a tailspin of anxiety. However, the best way to make it go away is to face it.
Start with the highest interest debts (credit cards are typically 25% compared to a bank loan 4-5%) and work on paying them down. Put some money off every paycheck, it might take time, but it will eventually go down and the anxiety around it will ease.
If you’re struggling with impulse control around spending, it might be time to cut up/cancel the card. This removes the temptation to overspend and allows you to work within your means.
Look at your providers. It’s not fun spending time on hold with gas/electric/internet/phone/insurance companies to review plans and get a better deal but it is worth it. The BareFoot Investor recommends doing this and we can save thousands by simply consolidating plans or switching providers.
For example, we switched internet providers– the monthly charge is the same but now we get Qantas points for every $ spent which saves us money on flights (or it will once COVID is over). If you are getting a credit card, it's worth looking at the 'joining bonus', this is often airline/shopping points or even cashback. If you google 'credit cards with most rewards' wherever you are in the world you'll get some good results.
Look at your pension/super/kiwisaver contributions. Firstly, ensure you ARE contributing especially if you are young. An extra $2,000 a year makes a difference when it’s accumulating interest/returns for 40+years. This can be a pitfall of anyone self-employed, especially when young. When a company doesn’t organize this automatically, we tend to forget about it because it feels far away.
In Australia you can ‘salary sacrifice’. What that means is you can add additional contributions to super(pension) beyond the standard and you get a tax break. For example, I earn $500, I ‘sacrifice’ $100, so I only pay tax on $400. If it’s affordable for you it’s a great way to put some extra money aside. To set it up just send an email to payroll asking them to salary sacrifice X per week/fortnight/month.
Get professional help. If you’re lucky enough to have substantial savings or any inheritance, get the help of a professional advisor. These people are professionals and know how to look at investments, tax, super funds etc.
It’s worth checking if the super your employer has enrolled you in is the best one for your needs. In Australia, we used True Penney Advisers to consolidate and manage our super when I changed jobs and they saved us a lot on associated fees by combining mine and my husbands so we only pay fees once. Financial advisors can also assist with things such as life insurance, income protection etc., which brings me to…..
Get some insurance. When you’re young and healthy is counterintuitively the BEST time to sort out insurance as you’re considered lower risk. Anyone can have an accident or lose their job and it’s better to have insurance than not. Some types that I have are:
Income Protection Insurance
Total Disability Protection Insurance
These can be bought separately, bundled or done through a financial advisor.
If you are struggling with job loss, this is one of the single most stressful situations anyone can be in. The above tips will hopefully benefit you to manage your finances and make an awful situation slightly easier. However, some other things to look into are:
Contact your bank RE mortgage freezes
Contact your landlord RE rent freezes
Contact your local social welfare department
Contact your financial advisor (if you have one)
Update your LinkedIn
Connect to every recruiter/HR person you can find in your field
Apply for every job you are remotely qualified for
Follow up - after the best part of a decade in sales I've learned sending 6+ emails to get a response is actually not unusual. You might feel as though you're being a pest, but in fact the recruiters/hiring managers are busy, they need to be reminded how enthusiastic you are and how much you want to work there. As I once said to my best friend 'you're trying to work there not date them, call them again'.
Be kind to yourself. Job hunting is long and difficult process and can be very disheartening. It's OK to take breaks. It's OK to have bad days. It's OK to be sad and to grieve your old life and your old job.
If you are consistently struggling with overspending and impulse control, please consider reaching out to a mental health professional as there may be underlying reasons for this. The Flawed Journey provides a FREE 20 minute consultation which can help in finding the best care for you.
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