Wealth and well being
New research shows one in five Australians does not have any money left over for savings after they have paid their bills. Further, around 75 percent of people report having to dip into savings to pay for unexpected bills, leaving them in financial stress.
Financial stress is one of the most debilitating causes of stress because it can occur over a long term with implications for relationships and the well-being of our families and ourselves.
Usually, financial stress comes about when people are hit with one big expense they can’t meet, then they juggle everything else around to pay it, which starts a cascade of overdue accounts, payments into 60 days, and letters of demand. Over time, with not enough money to go around, something has to give.
But one thing financial stress does not do is sneak up on you. Generally, the early warning signs are there and good money management practices can prevent anyone slipping into the red.
Anyone who maxes out their credit card every month and pays it off with their whole pay every month, is headed for financial stress. That means an unforeseen situation like becoming unemployed would mean instantly having no income, a big credit card debt, and loads of stress.
It is not a good idea to take on shared debt with people whose financial goals are different to your own. For example, if you want to save for a house but your partner wants to borrow the equivalent of a house deposit to buy a new 4WD, you might need to ask yourself if you are heading in the same direction before you sign on as co-borrower. Similarly, obtaining store credit to buy a big TV might make your share house very comfortable but it will lose its appeal in a decade’s time when the TV’s clapped out and those flatmates are long gone, but their credit history has welded itself to yours.
A good rule of thumb is don’t live beyond your means. If you don’t spend more than you earn, you can’t get into trouble. This means working out a budget in which all your expenses are covered, your repayments are made, and money is set aside for saving. If you can’t find that balance you will need to rethink your expenses or find extra income like working overtime or getting a second job.
It can be hard to know when you are living beyond your means. If you can’t make it to payday without putting living expenses on your credit card, that is a sign. If you have more than one credit card, including store accounts, and all have outstanding balances that, too, is a sign. If you regularly hand over all of your hard-earned cash for the latest gadget or new season’s fashions, but you don’t have any savings, that is a neon sign. With a strobe light on top. And sirens.
Image courtesy of Daniel St.Pierre at FreeDigitalPhotos.net