10 sensible ways to deal with money stress
Money is a source of angst for lots of people. Surveys have shown that at least a third of us think dealing with our finances is stressful and overwhelming. A recent Harvard study even found money worries can reduce your IQ by up to 10 points.
But while there's no guaranteed quick way to riches, there are a number of ways to cut your money stress.
1. Tackle it head-on
When you are in trouble, it is tempting to bury your head in the sand. But the worst thing you can do is ignore the bills you cannot pay or the accounts that have gone into overdraft. As soon as you spot a problem, get in touch with your providers and warn them. Banks and utilities companies look much more favourably on situations that they can understand. They may allow you to pay off a bill over time, or restructure your obligations to make them more manageable.
2. Stop taking short-term debt
Short-term, high-interest consumer debt quickly spirals out of control. Always use it as a last resort. If you are on a low income, you may be able to access low and no-interest loans.
At the same time, be careful about the number of interest-free hire purchase agreements you sign, or how many times you take new online laybuy options to pay off your shopping. It is easy to find that these small payments quickly add up to a substantial monthly bill.
3. Spread your bill payments
This is especially effective with power bills. Most providers allow you to pay a bit more each month during summer to help offset your winter increase in consumption. You could do something similar by trying to get into credit on your broadband bill on months when you have extra cash, or taking the option of paying your rates more regularly instead of in quarterly lumps. When you have extra money in your account, buy Christmas vouchers at the supermarket to pay for future shopping - they can be redeemed any time of year, although you will not get the December incentive.
4. Don't get caught up in your budget
If sticking to a detailed budget is giving you a headache, simplify it. If you can work out what you need to save each month and how much you need for bills, you can allow yourself to spend the rest.
5. Automate
Paying your bills on time often gives you access to discounts. Set up your bills so they are paid by direct debit each month, on or just after pay day so you don't risk a default fee if there is not enough money in the account to cover it. You can also automate transfers to your savings account so that the money is gone before you are tempted to spend it.
6. Check in with your providers
Ring around your broadband provider, phone company, bank and anyone else you pay regularly to check you are on the best plan or using the right type of account. Should you be on a low-user plan for your power? Could you structure your mortgage better?
7. Increase your income
If you can't spend less, can you earn more to reduce your money stress? Apps such as Entisy match willing workers with people offering piecemeal jobs - you could do things such as weeding or window cleaning to make a bit of extra money.
8. Insure
Get good advice to make sure you have the right cover for yourself, your income and your belongings. Not taking out enough insurance is false economy.
9. Set up an emergency fund
Try to amass a pot of money that you can dip into if disaster strikes - when your car needs repairs or you find yourself short of work for a while. Some advisers recommend an amount equal to three months' wages or more. This may be unrealistic but the amount should be enough to ensure you are not living payday to payday. If you have a mortgage, you may be able to save this money in a revolving credit or offset facility to reduce the interest cost of your home loan at the same time.
10. Be open with your partner
Have an honest conversation with your loved ones about your attitudes to money. There is no point in one of you diligently saving if the other is regularly dipping into the same account and splashing out. Talk about your expectations and financial goals and aim to come to a consensus - or develop a plan to manage your differences.
Have you ever been stressed out about your finances?
Written by Susan Edmunds. First appeared on Stuff.co.nz.