Does your heart pound when the renewal price of your car insurance is far more than you anticipated? Maybe you get a wave of nausea when the cost of calling out the emergency plumber is nearly as much as your mortgage?
When life throws unexpected expenses at us we often experience short-term bouts of stress, but sometimes money can become a constant source of stress, and the thing standing between you and achieving your dreams – whether that’s getting out of debt, buying a house, funding a wedding, affording a round of IVF or being able to retire comfortably.
In fact, money is a leading cause of stress in the UK, and more so for women, with research by Equifax and YouGov indicating that women are more likely than men to be kept awake at night by money worries.
SO WHAT CAN YOU DO?
Looking after your financial wellbeing is the first step in getting on top of your money worries, and tackling the symptoms of stress they bring. Having good financial wellbeing means feeling comfortable talking about, thinking about, and dealing with money, and having the sense that you are in control of your finances – rather than your finances being in control of you.
Achieving good financial wellbeing may require intervention on multiple fronts, so it’s important to carve out enough time to give your financial wellbeing the TLC it deserves. Even acknowledging that money is a source of stress for you can be daunting, but believe me, once you do this, you can start to implement strategies to manage your money better, and eventually wave goodbye to your money woes once and for all. Here are my top five tips to help you to take charge of your money:
UNDERSTAND AND SHIFT YOUR MONEY MINDSET
Reflecting on what has shaped your attitude towards money can help you to understand any bad financial habits you may have. Since our money mindset is thought to be shaped by around the age of 7 or 8, you may have to look to your childhood to find the answers you need. What was life like around this age for you? Was there a lot of money in your household, or not enough? Perhaps money was never discussed openly, or maybe your parents talked about the household budget with the family over dinner? Spend some time thinking about how those early experiences you had with money might have shaped how you now feel about money.
For example, if you always put off opening your bills when they arrive, is this something you saw when you were growing up? Once you’ve identified any bad habits, then think about any associated untruths you might tell yourself about them, such as “I hate getting bills and always avoid them, but it’s ok my dad does this too”. Next, try and think how you can change these to be more positive, so something more like “Dad might leave the bills until too late, if I open mine as soon as they arrive they won’t be hanging over my head for weeks”.
Once you shift the way you naturally think and feel about money, you can start to form new and more positive money habits.
AVOID A FINANCIAL CRASH DIET
We all know that crash dieting is bad for your health in the long run, and a financial crash diet is no different. Being good with money and avoiding getting stressed about it is about doing the right things regularly each pay day, not being savvy one month then falling back into bad habits the next. One thing you must do is to figure out your budget based on your income and your necessary outgoings, then automate your finances accordingly so that good habits can be established without you even having to think about them.
Start by working out your monthly and annual expenditures: rent/mortgage, utilities, holidays, birthdays, petrol/travel cards, weekends away, gym memberships etc, as well as your annual expenses like car insurance, home insurance, and Christmas. Hopefully your income covers all your outgoings, but if it doesn’t, you might need to think about seeking some expert advice/do some research on where you can reduce your outgoings. Next you’ll need to set up some additional accounts to deal with your outgoings (most banks allow you to tag extra accounts onto your main one easily enough). All of the money you need for your monthly outgoings should be paid into your ‘bills’ account the day you get paid. For the annual bills, total them up, divide by 12, and this is the number that you need to set aside each month. For example, if you are spending £2,000 per annum, set aside £167 per month into an ‘annual bills’ account to cover these costs so that way the money is ready and waiting for you when you need it, and you aren’t left short. By doing this you’ll be left with an exact figure, and know any leftover money in your account is yours to spend or save as you see fit, without dipping into money that is already spoken for.
The temptation to spend is always there: one-click shopping delivered straight to your door, one more drink in the beer garden, that new handbag that you just ‘need’. But what happens after you spend when you perhaps shouldn’t have? Are you left feeling guilty or worried at the end of the month when you check your bank balance, or your credit card bill arrives? To avoid being in this situation, you really need to understand your money triggers. For me it’s clothes. I can find every excuse under the sun to justify a new purchase, even if my wardrobe is crammed full of ten of the same thing! I have had to learn to try and keep those temptations at bay by unsubscribing from emails from the shops that lure me in the most. I’ve also deleted shopping apps to make it less easy to tap and buy, and I’ve set myself a non-negotiable monthly budget for clothes (which I have shared with my husband and best friend so they can keep me on track when they hear me chirp up about the latest thing I’ve seen!). So what are your temptations, and how can you keep them under control?
LOVE AND MONEY
If you and your partner have very different attitudes to money it’s important that you try and understand each other’s money mindset without judging. Arguments about money are a source of stress and strain in a lot of relationships, but understanding why you each feel the way you do, and working on improving your financial wellbeing together is far less destructive than falling out over money. Establishing some money ground rules can be really useful, especially if you have shared financial responsibilities, or are working towards a joint financial goal – like clearing debt or buying a house. Talk open and honestly and decide who is going to pay for what and when. Figure out the good and the bad – what can you both realistically afford and where might money be an issue? Is there an amount you can both spend on yourselves without having to justify it to the other person? Starting the ball rolling on these conversations rather than sticking your head in the sand can reduce the likelihood of money driving a wedge between you, and leading to greater stress.
PLANNING FOR A BIG SPEND
Money is often a source of stress when you find yourself facing a big expense you simply haven’t planned for – perhaps you never thought a wedding was on the cards but now it is, you’ve been made redundant unexpectedly, or maybe you need to fund a medical expense privately. This is where you need a 5-year cash plan. Think about the next five years of your life and work out what big lump sums of money you might need and when. You can then start saving each month towards these goals, so that way, when you need the money, it’s ready and waiting, rather than putting a strain on your day-to-day finances as you scrabble to find it. When saving regularly each month, shop around for ‘regular’ savings accounts as they tend to have better deals that the normal savings accounts. If you’ve been hit suddenly with an expense and you don’t already have a 5-year cash plan, then first of all don’t panic. This is where revisiting your budget to see where you can make cutbacks/swaps is helpful, and doing some careful research about options to access money where repayment plans can still fit in with what you can afford.
‘38% of workers have sleepless nights due to money worries’, Equifax, (August 2018). Available online at: https://www.equifax.co.uk/resources/newsroom/2018/38pc-of-workers-have-sleepless-nights-due-to-money-worries.html
ABOUT THE AUTHOR
Lisa Conway-Hughes is a chartered independent financial adviser. She is also a fellow of the Personal Finance Society (PFS)– the highest qualification a financial adviser can hold.
By day she works as a financial adviser at a wealth management firm in London, and as her alter ego ‘Miss Lolly’ she is a regular media commentator on women’s financial issues, and the go-to girl for tips and advice on female-oriented finance. To date, she has appeared in Stylist, Red, Glamour, Good Housekeeping Mother & Baby, Prima, The Guardian, The Financial Times and The Telegraph to name just a few.