A financial advisor’s five tips for dealing with financial stress

The COVID pandemic presents not only a health crisis but also a threat to our financial and mental wellbeing. Many people have lost – or fear losing – their main income source. Like other types of stress, money worries can take a real toll on your mental and physical health, your relationships and your overall quality of life. It can negatively impact your sleep, your energy levels and even your self-esteem, so it’s important to try and tackle the problem head on.

Those who are more financially resilient before some kind of life crisis have a better foundation from which to weather any financial stress. For the others, it can take longer to bounce back; but there are small and practical things that can help.

This article looks at the steps you can take to cope with financial stress today and become more resilient for the future.

#1 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’re feeling is the first step to making a positive change; if you’re feeling persistent negative feelings around your money situation, whether it be stress, anxiety or helplessness, this may be a sign that you need help.

#2 Talk about your situation

If you’re worried about money, you’re not alone. We often don’t talk to anybody about our financial challenges, possibly out of embarrassment, believing we’re the only ones going through it – this is not true.

Remember: “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 doesn’t 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 who can provide emotional support or help with your mental wellbeing, or it might be a financial adviser who can help from more of a financial perspective. There has also been an increase in the number of LifeCentred Advisers and Money Coaches who can bridge the gap between both the financial and emotional side of money.

#3 Take small steps often

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, though, it helps to have some clarity of your position. As a start, I would review the last six months of your bank statements and credit card bills. List expenses in groups of those that are essential (rent, utilities, food and so on) and those that are non-essential – the luxuries and discretionary expenses. Are there items that you spend more on than you realised?

You might find, for example, that your food expenses here in Hong Kong are significant; perhaps you favour Marks & Spencer over a more local market or supermarket; or you eat out at restaurants several times a week instead of cooking at home.

If you’re feeling worried about money, you’re not alone! SIMON PARFITT of Pyrmont Wealth Management runs through some strategies to help.

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 them gradually over time, they’ll feel like they have less of an impact. And the improvements to your financial and mental wellbeing may will be worth it.

#4 Keep an emergency fund

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’s easy to overlook the foundations of planning.

If you did lose your job, how many months of your outgoings could 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 three to six months of your essential expenses covered will mean that if something does happen, you have a good period of time not to worry about money, and you can focus on getting things back on track.

#5 Establish mental, physical and financial routines

We’re 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 deteriorate.

It’s important to have a balance between mental, physical and financial health; too much or not enough of one, and the others may suffer. So 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. 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; as with exercise – action leads to more action, and 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 or needed to be to achieve your goal? Is your financial health optimised? These are all questions that a financial plan can help you with.

If you’re currently experiencing financial challenges, don’t ignore the issue. And don’t hesitate to reach out to us; we can help you make sensible decisions to improve your situation.

As with physical health, if you neglect your financial situation, it will likely stagnate or deteriorate