A survey by the Australian Psychological Society has found that the number one stressor for women is money – yet shopping ranks highly amongst the ways women de-stress.
Overspending is truly counter-productive if money is something that causes you stress. Finding healthy ways to deal with stress is essential for anyone who wants to overcome the problems created by uncontrolled spending and is a must for anyone serious about growing their wealth.
Think about walking with friends, meditating regularly, taking up yoga, having some professional hypnotherapy by a qualified therapist (usually a psychologist who has done further studies) or consider seeking professional help to get on track with managing anxiety.
The next step is to create a spending plan which puts you in control of your money may also help lower your stress. Here’s a guide on how to do just that:
1. Know what your fixed costs are each month
It’s not good enough to have just a ‘rough idea’ when you do this exercise. You need to know exact numbers and put down on paper what your fixed monthly costs are.
You can do this either the old-fashioned way with pen and paper or using an online budgeting tool, but whichever way you do it major sub-headings should include: housing, food, clothing, child care and child-related expenses (activities), self-care, health-care, transport, education, entertainment, gifts, holidays, insurance, personal business, debt repayment and investments.
Be specific. If you have a big annual expense, divide this by 52 and multiply by four to give you a monthly figure. Spend the time to do this properly – it may take several weeks but it will be worth it.
2. Track your outgoings
So you’ve put down what you believe to be accurate numbers against your fixed monthly costs. Here comes the true test: tracking your actual spending. Do this for at least two or three months. It’s essential to capture absolutely everything you spend. If you put most of your purchases on a credit card you can draw from your statement, but you also need to write down what cash purchases you make. This may not be such fun but it’s important if you want to get ahead.
3. Compare and identify savings
You might get a little shock once you’ve done this exercise properly. For most people there are usually a couple of areas of surprise where they didn’t realise just how much they were actually spending. For others, they know only too well but have been reluctant to admit to it. The point is that knowledge is power.
Once you can identify areas where you are able and willing to cut back, you are in greater control of your future. There are no rights or wrongs here – and I’m not about telling people that they need to stop having their daily coffee. This is an individual exercise – only you know what is truly important to you and what areas you’re willing to cut back in.
In fact, to make this plan work it needs to be realistic – that is, you can and should factor in having fun! The aim is to balance this with keeping some money aside for prudent investments or paying down debt.
By now, you should have a very definite dollar figure of what you stand to save by making certain changes.
4. Spend some time dreaming about your goals
Goal setting – or thinking about what you want from life – is extremely important and a big motivator. In my experience clients don’t stick to a spending plan where they have no tangible financial goals – that is, goals that are specific and have a dollar amount and timeframe attached to them. Spend an afternoon one weekend soon just contemplating your life goals. Then map out specifically what you want and add all the details on cost and how long you expect it will take you to get there.
5. Consider debt-recycling strategies
If you want to invest but are feeling the financial pinch because of your home loan or other debts, you might consider if debt-recycling is a viable strategy for you. Debt recycling is wealth creation strategy that aims to reduce ‘bad’ non-tax deductible debt and increase ‘good’ tax-deductible debt faster. A qualified financial planner can help you determine if this might work for you – there are a number of debt recycling strategies people can use, so it really is worth getting advice around which one is best suited to you and your personal circumstances, goals and timeframe.
Finally, consider that simply by acknowledging that you need a little help with controlling spending is a great place to begin. Many of us are great at earning money but not so good at managing it. Ever ask yourself, ‘where does all my money go?’ – if so it’s a sure sign that you could be limiting your potential to live the life you really want to live.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.