5 ways to combat financial stress amid uncertainty
PremiumMcKinsey research in Asia found varying degrees of consumer confidence
Around the world, including in India, the lingering effects of the coronavirus have led to increased financial stress among consumers, particularly among those who have lost loved ones, jobs and businesses. Whether you are directly impacted by the covid-19 or know someone who is, the financial impact of the continuing situation touches all of us. During the covid-19 pandemic, almost one-third (32%) of CFP professionals surveyed globally by Financial Planning Standards Board Ltd reported being more involved with their clients in managing emotions. When asked about the value financial planners will provide to clients in the future, over half the CFP professionals surveyed reported that collaborating to set and achieve financial goals (29%) and providing objective advice to facilitate decision-making (27%) will be the greatest value they can provide.
According to McKinsey, the average life satisfaction in Europe, which consistently leads the world in well-being, fell in April 2020 to its lowest level since 1980. Similarly, McKinsey research in Asia found varying degrees of consumer confidence in a tracking study that began in February. Meanwhile, a US study by the National Endowment for Financial Education found that nearly nine in 10 Americans said the covid-19 crisis caused them to experience financial stress. Some common causes of financial stress include not having enough saved for emergencies, investment losses that could derail retirement plans, decrease in income or income interrupted by a job loss or furlough, having high credit card or student loan debt, etc.
While some governments have provided economic stimulus packages, including direct payments, grants and loans, the financial impact of the coronavirus may have long-term effects for some people. A number of studies have established the link between financial stress and poor mental and physical health. According to the Australian Government Department of Health, signs can include arguing over money, trouble sleeping or feeling angry or fearful. Other studies have shown financial stress contributing to inflammation, high blood pressure, muscle tension and poor digestion. If you have been affected financially by the coronavirus outbreak, don’t wait for money problems to eat away at your overall well-being. By proactively dealing with financial stress early, you may be able to stabilize your financial situation more quickly and improve your long-term financial outlook. Here are five steps you can take to reduce stress and make a plan to get your finances back on track.
1. Take stock of your situation: One way to help reduce financial stress is to fully understand how much money you have, how much is coming in each month and what bills are due. To get a full view of the month, try mapping it all out on a monthly calendar. Mark the date or dates that you expect to receive income, as well as the due dates for your rent or mortgage, utilities, credit cards, tax payments or other fixed expenses. This will help you understand your cash flow. If most of your bills are due within a one-week period or concentrated during a particular time of the month, it may make sense to contact your creditors to see if you can change some of your due dates or get an extension and preserve your cash flow.
2. Track your spending: If money is tight, try tracking your spending for a month or two to see how you are spending it. Write down each purchase and each bill paid in a notebook or spreadsheet. After your tracking period is complete, go through the list and see which expenses can be cut and which are essential. From there, try developing a monthly budget and sticking to it.
3. Don’t try to make financial decisions all at once: It’s easy to get overwhelmed when faced with mounting bills and not enough income to cover them. Instead of looking at your financial problems in the aggregate, try tackling them one at a time.
4. Remember your goals: Just because money seems tight right now doesn’t mean your financial and life goals are any less important. Besides saving, what are some other ways you can stay on track and make progress? Some people find that doing freelance work, selling unwanted possessions or relocating to a less expensive house can help generate extra cash for the future.
5.Seek the guidance of a certified financial planner (CFP) professional: CFP professionals are financial planners who have met rigorous initial and ongoing global competency standards for the practice of financial planning. CFP professionals have agreed to adhere to a code of ethics and have committed to putting their clients’ interests first. CFP certification is the standard of excellence in financial planning around the world.
Noel Maye is CEO of Financial Planning Standards Board Ltd.
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