People are under more financial stress and this is disproportionately affecting women.
According to the ABS, nearly a third of all Australians reported their household finances worsened due to COVID-19 and almost twice as many adults reported experiencing feelings associated with anxiety.
Women are bearing a greater financial burden during these challenging times (according to WGEA) with their income right now and their future income (super) more likely to be reduced.
De-risking is on trend for dealing with financial stress
“COVID-19 has forced me to save money” and “I am not spending as much” is something I have heard numerous times over the last few months when it comes to dealing with financial stress.
With our inability to spend money on our “wants” such as going out for a meal with friends (restaurants only open for take-away or restricted seating), going on holiday and enjoying entertainment out of the home (e.g. cinemas, museums, galleries closed) – in-home alternatives are forcing us to spend less.
“My goals have shifted” is the other common insight employees share. Paying off debt, saving up to buy or renovate a home and a general theme of ‘de-risking’ is coming through over the last six months compared with the six to 12 months prior.
While we are spending less as a result of COVID-19 and becoming more conscious about what we do with our money, women’s incomes (now and future) have been negatively affected. Therefore, creating a budgeting practice and making saving a habit will be important for many years to come.
The importance of goal setting while budgeting
I am a big believer in Ayn Rand’s quote “Money is only a tool. It will take you wherever you wish but it will not replace you as the driver.”
For me this means that the more conscious and deliberate we are about what we do with our money, the greater the likelihood we will be in control of our finances rather than our finances controlling us.
- Having a saving habit
- Not borrowing for everyday expenses
Saving for savings’ sake is unmotivating. Therefore, having a goal or an aspiration to anchor and motivate the behaviour is essential to creating a saving habit.
Here are my top budgeting tips that will help to manage financial stress
Write down what you earn and what you spend to know where you stand today
- Knowing your current money position is incredibly important, this is what you earn less what you spend on average.
- While there are apps out there that can scrape all of your credit card details and display your spending in a beautiful chart, the actual art of writing down your expenses in a spreadsheet enables you to consciously assess each line item.
- It may also be worthwhile to get a full picture of your money situation by accessing a credit health check.
Understand what you are saving for (your goals or aspirations)
- Financially fit people are more likely to have a saving habit.
- Saving habits are correlated with having goals, or simply something you want to achieve.
- For many people, this may be eliminating debt (for example getting rid of a home loan or credit card debt).
- Understand the dollar value of your goal then what it means for you on a per week basis and make it tangible. This will motivate you to save.
Channel your inner Marie Kondo
- Assess each of your expense line items with “does this spark joy?”
- If the answer is no, reduce or eliminate that expense.
Celebrate the wins
- Getting motivated to save starts with a savings goal (for example paying off debt, going on that holiday – when we can, buying/upgrading your home).
- Staying motivated can be tough, particularly for a goal that is large or a multi-year journey (for example paying off a large debt or saving up for a home deposit).
- For these types of goals, consider incremental milestones and celebrate these.