October 10th marks World Mental Health Day, with the theme “Make mental health & well-being for all a global priority”. Making mental health a priority has to start with identifying key factors that affect an individual’s mental health. Studies continue to show that personal finances are a key stressor for individuals, families, and continue to impact people at all ages and stages.
FP Canada’s 2022 Financial Stress Index surveyed a sample of Canadians asking them about the stress in their lives, and specifically financial stress. The sample included individuals who work with a financial professional (35%), and those who do not (61%).
Some key findings include:
- Even those who are working with a financial professional are worried about their finances. In fact, 32% of respondents who commented that money is their #1 stress are currently working with an advisor of some kind. There is no escaping money stress even with professional advice, however, a professional can provide you with perspective and education personalized to your life.
- Of the leading stress factors, saving more money was the frontrunner, followed by all things cash flow management including debt reduction, having an emergency fund, creating a budget, following a financial plan, and understanding expenses. This takes a commitment of learning and time to overcome, which many are not willing to invest.
Canadians Losing Sleep
These personal finance headaches are what people are faced with daily, so it’s no surprise that they’re losing sleep at a time when debt’s on the rise to make up for the inflation and (potential) interest rate gap between our income and expenses. Many people are being forced to increase their debt load to make ends meet, which heightens their stress as they increase their borrowing costs, hopping onto a treadmill that can be so very difficult to get off.
While ensuring that basic financial plan fundamentals like life insurance and an emergency fund are in place is crucial to protecting your future and those you love, it can be a challenge to prioritize additional savings or even the time to learn more about your money to better understand and make informed decisions.
Pandemic Effect and Recession
Dirty words. The pandemic isn’t over, but it sure feels like it’s back to business as usual in many parts of the world. As people squirreled away their savings and reduced debt because of a lack of spending opportunities, that’s all changed. Those trip credits are being used, those concert tickets are being purchased… often at a premium, and often more out of the fact that you “can” go and experience these things, not that you can afford to go. But why do you go? To improve your mental health, feel a bit of joy, and because you’ve felt so cooped up for so long you feel like you must.
The fact that people are still “pandemic spending” is the only thing that’s really deterred the recession from already having started. It can’t and won’t last forever though and people will have to start reining in their unnecessary spending as they continue to feel the pinch. This recession will affect different people in different ways, and it’s all still unknown when or for how long we’ll feel the economic slowdown in Canada. We are poised to fare better than many of our counterparts, including the US and the UK, but there’s still no immunity.
Personally Speaking
A professional habit, I’ve always paid close attention to my money, reviewing it multiple times a week. I also track my investments fairly closely as I hold a few different types of portfolios. When I look at my spending changes, however, there is a significant and noticeable increase in certain things like groceries. As a single person who eats simply without a lot of meat in my diet, I’m now seeing a 30-40% increase in my weekly grocery spend (produce ain’t cheap!).
I can only imagine what my clients that have a few kids to feed, pets to care for and more are seeing in theirs, and yet if you’re employed your income likely hasn’t increased with the inflating costs of living. So where does that leave you? Trying to make ends meet and using savings you’ve built up over the pandemic (or credit) to bridge the gap.
Where do you go from here?
Yeah, this is great and all, but no one’s raising your pay and you’ve got to make sure your kids are fed.
Here are some initial tips to get you started in reducing your money stress:
- create a budget that’s reflective of your real life: start by tracking every dollar your household spends for a month. Don’t let anything slip through the cracks, and then use that to create a budget, making cuts wherever possible (especially on discretionary spending). Need a spreadsheet to help you out?
- review expenses that automatically are charged to your credit card: these are often subscriptions or annual fees that we forget about and pay the card off blindly. Check to make sure everything you’re paying for is for services or products you’re actually using regularly (and NEED). If you can do without them, cancel them and find some savings.
- get real with your debt: don’t just pay a bit above the minimum each month without having a clear plan in place to reduce your debt. Developing a strategy is key, and can only work with the commitment of not accumulating anymore. Be realistic with your goals as well. You may just want to reduce it by 25% this year, instead of to $0. And remember to celebrate the benchmarks along the way.
- enhance your understanding so that you can make more informed decisions: whether it’s listening to podcasts from qualified financial professionals, reading books by the same, or seeking advice from your own advisor and coming prepared with questions in hand (instead of a broad “teach me about money” request — where would we even start!?!), investing in your own education of money is an incredible way to spend your time with benefits that will last a lifetime. Don’t be afraid or shy away from talking about money with trusted friends or colleagues. It may be comforting to know you’re not alone. Of course, don’t blindly follow a friend’s tip of the day, but use it as a jumping-off point from which to learn more.
- know when to ask for professional help: easier said than done when it comes to reaching out to a professional. Whether you’re working with an advisor already or not, we’ve already seen that you’re not immune to financial stress. Reach out to the advisor you’re with and be specific about what you’re looking for (cash flow accountability, budget help, debt reduction planning, etc). If they can’t help you with that as part of their service package, find someone who can. Often times it’s easier to have a sit down with a pro and get started on the right track to reducing money stress than it is to self-motivate using self-tools like books and podcasts. Get in touch if you need some help.
Lastly, be gracious with yourself. You can’t reduce financial stress overnight, but small changes can help you get to feeling better about your money. Financial health is part of your personal health and so paying attention to your money should become part of your self-care routine. Make a date out of it to review your spending, budget, or just have a family money meeting around some snacks at the table. You’re not alone, and should never feel as though you are.
If you’re feeling stressed and need to talk to a mental health professional please reach out to resources in your area such as Canadian Mental Health Association (CMHA) which has branches across the country (CMHA Niagara). Alternatively, reach out to me directly and I’ll provide you with finance or related resources to assist you.