I remember there being so many tears. Back when I worked at the Cancer Council, I was on the phone all day talking to Australians who were experiencing serious financial stress as a result of cancer.
At the end of each day, I’d often walk home feeling tonnes heavier than I had in the morning. I couldn’t help thinking about their stories.
The impact of financial stress is both devastating and far-reaching. It affects every aspect of a person’s life, from their wellbeing, to their relationships, and career.Credit:iStock
I learned quickly that the impact of financial stress is both devastating and far-reaching. It coloured every aspect of a person’s life, from their wellbeing, to their relationships, and career.
So, it was sobering to learn that according to research by UNSW’s Centre of Social Impact almost one in two adults experience financial stress. That’s almost half of Australia.
It’s not surprising, the last few years have felt like a movie that has a few too many plot twists just for drama’s sake. Except it’s no movie – it’s real life.
But financial stress is a big problem – according to AMP’s 2022 Financial Wellness Report, it costs the economy over $66 billion a year, with financial stress negatively impacting employee productivity and absenteeism.
So, what can we do about it?
It’s a complex area, but having spent years helping people make huge progress on this front, I’ve noticed one major misconception people have about financial stress.
The common misconception is that financial stress is simply the result of not having enough money. Therefore, if you had more money, you wouldn’t be stressed.
This can be true for some, particularly low-income earners or those with very little in savings. Research conducted by the Centre of Social Impact found that financial wellness improved once respondents reported 1-2 months of savings.
Imagine being asked to drive a car without ever having been taught how to drive. Sounds stressful, right?
However, after talking to countless people about their finances over the years, I also know that you can earn well and have plenty of savings but still be financially stressed – data shows one in five employees earning over $100,000 per year also suffer from financial stress.
This is because having or not having money is not the sole driver, with one of the key drivers of financial stress being financial capability, or not knowing how to properly manage money.
This is confirmed by the Centre of Social Impact’s research, which found that financial literacy is an important factor in determining financial wellness but found that even basic financial literacy remains an issue for many Australians.
Imagine being asked to drive a car without ever having been taught how to drive. Sounds stressful, right? Would a more expensive car help? No. That sounds even more stressful.
This is the position so many people are in with their finances. They’re earning money but have no idea how to manage it. So, they’re essentially winging it, hoping that it all turns out okay, but secretly they’re always a little worried that they’re ‘doing it wrong’, or they ‘won’t have enough.’
Now, contrary to what you might be thinking, this is actually fantastic news. It means that you don’t need a bonus, a pay rise, or a side hustle to improve financial stress. You don’t need to go on a never-ending goose chase for more money.
You can start reducing your financial stress just by increasing your financial capability. Learning how to better manage the money you are already earning will inevitably help you feel more confident and in control, and help you make better financial decisions.
Of course, as you start making better financial decisions, you might also notice that your mental health isn’t the only thing that improves. Your bank account will start looking healthier too.
It’s almost as though it literally pays to take care of your finances. Talk about a win-win.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Paridhi Jain is the founder of SkilledSmart, a financial education platform helping adults learn to manage, save and invest their money.
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