Around the world the lingering effects of the pandemic have led to increased financial stress, particularly among those who have lost loved ones, jobs and businesses. According to McKinsey, the average life satisfaction in Europe, which consistently leads the world in well-being, has fallen to its lowest level since 1980. Some common causes of financial stress include:
- Not enough cash in event of emergencies
- A loss of income as a result of job loss or furlough
- High credit card or student loan debt
- Unexpected healthcare expenses
- Inability to pay rent, mortgage or utility bills
- Inadequate pensions / income for retirement
Despite provision of stimulus packages including direct payments, grants and loans, the financial impact of the coronavirus may have long term effects for some people. Here are five steps you can take to reduce financial stress and make a plan to get your finances back on track:
1. Take stock of your situation
One way to help reduce financial stress is to fully understand how much money you have, how much is coming in each month, and what bills are due. To get a full view of the month, try mapping it all out on a monthly calendar. Mark the date or dates that you expect to receive income, as well as the due dates for your rent or mortgage, utilities, credit cards, insurance payments or other fixed expenses. This will help you understand your cash flow. If most of your bills are due within a one-week period or concentrated during a particular time of the month, it may make sense to contact your creditors to see if you can change some of your due dates or get an extension and preserve your liquidity.
2. Track your spending
If money is tight, try tracking your spending for a month or two to see how you’re spending it. Write down each purchase and each bill paid in a notebook or spreadsheet. After your tracking period is complete, go through the list and see which expenses can be cut and which are essential. From there, try developing a monthly budget and sticking to it.
3. Don’t make financial decisions all at once.
It’s easy to get overwhelmed when faced with mounting bills and not enough income to cover them. Instead of looking at your financial problems in the aggregate, try tackling them one at a time and spreading out your decisions.
4. Remember your goals
Just because money seems tight right now, it doesn’t mean your financial and life goals are any less important. Besides saving, what are some other ways you can stay on track and make progress? Some people find that doing freelance work, selling unwanted possessions or relocating to a less expensive home can help generate extra cash for the future.
5. Ask a Certified Financial Planner for help
CFP professionals are financial planners who have met rigorous initial and ongoing global competency standards for the practice of financial planning. In addition, CFP professionals adhere to a code of ethics and agree to always place their clients’ interests first. CFP certification is the ultimate standard of excellence in financial planning around the world. To find a CFP professional near you see sfpi.ie or fpsb.ie.
If you like this article, try this one: How To Save