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Managing financial stress and mindfulness

How to budget successfully

Managing financial stress and mindfulness.

In the second part of our financial stress webinar covering managing financial stress, we look at goals, mindfulness, and monitoring progress with expert help from Lea Clothier, a Master-certified behavioural money coach involved in the development of the Financial Mindfulness program. Part one looked in detail, decision making, literacy, and learning new skills.

Setting financial goals

By definition, moving forward – out of financial stress – means we have to do things differently.

“If we stay where we are, we’re going to get more of what we’ve got,” Ms. Clothier says.

The reason for setting financial goals is because they can help unlock genuine and transformative behaviour change.

The theory of behaviour change is that we need to be motivated to make changes. Setting goals is a way of taking early but clear steps towards change.

“These goals can be tiny, or they can be very significant. I’m a big fan of what they call small but significant goals,” says Ms. Clothier.

One type of goal is a milestone – reaching a certain target of savings or being able to afford something we’ve targeted, like the deposit to buy a property, or fund a small business.

On top of the achievement of reaching a goal, the very act of setting financial goals can actually help reduce financial stress because it makes us feel a little more positive about our money.

“We can start to see the progress that we’re taking away from what we don’t want, towards that which we do want,” Ms. Clothier says.

In setting financial goals it’s a good idea to nominate an ‘accountability partner’ and make them part of your process.

That is a person to check in with around your progress.

The more you think about how you got into financial stress – this point where major change is necessary – and reflect on your history of self-defeating or disorganised behaviours with money, the more you’ll see accountability is essential in changing your relationship with financial stress.

It’s important to note things may not happen quickly. Making a meaningful change that can be sustained for a lifetime will probably be slow.

It is also just a reality that we are likely to go through periods of not seeing any changes or slipping back into old patterns with money.

That might seem depressing, but depending on your perspective and openness to change, the re-emergence of old habits is an opportunity.

How?

We have a clear choice: we can slip backward and give up or re-evaluate our goal, our process and perhaps set a new smaller financial goal.

Small financial goals and milestones are also rewarding.

It’s well-known by experts in goal-setting that most goals consist of smaller tangible goals, like stepping stones on a path.

“I’m also a fan of doing something physical to acknowledge reaching goals,” says Ms. Clothier.

“Whether that be like marking off a calendar every time you complete payment towards debt or colouring in a picture that has 52 elements of savings that you’re doing weekly over a year.”

This is important and useful because our relationship with money has become even more abstract than it was: very often we don’t even see or touch money in our cashless society.

Because so many transactions have become contactless or online during the pandemic the likelihood of not carrying any cash at all has increased for millions of us.

“We have lost that connection to the reality of our physical relationship with money,” she says.

“That money ‘disconnect’ is very real and it helps our ability to reach financial goals if we can get back a sense of connection to money.”

We are more likely to think of concepts and issues every day if we feel connected to them.

Discovering the power of mindfulness

Lea Clothier trained as a meditation and yoga teacher when she saw clients to her money behavioural coaching business were suffering acute stress.

“When they started to talk about money, they talked about their hopes and dreams with cash or their actual reality with money I could see that it was stressful, and I could see that stress was directly linked to their wellbeing,” she says.

Financial stress is a type of stress, and as we discussed in a previous blog which means it responds to a range of stress reduction techniques, including mindfulness.

Mindfulness – which at its most basic is about bringing our awareness to the present moment – is an important stress reduction technique.

“It means we are paying attention; we’re fully invested in this very moment,” Ms. Clothier says.

“We do that through the application of our five senses. It means that we start to pay more attention to our touch, our sight, what we can smell, hear and taste.”

“By doing that, we get out of that hectic, noisy head of thoughts that all of us have.”

The power of mindfulness with money is it’s two-fold.

It means we need to bring our full attention to our finances.

We need to pay attention to what’s going on in our bank accounts, with our spending, in how we earn money, and in the way that we interact with money every time we use it.

Mindfulness also has the power to help to reduce our stress levels. It is known and proven to be able to reduce cortisol, the stress hormone.

There is also research to show mindfulness can actually increase the density of the pre-frontal cortex, also known as ‘the thinking brain’.

This is important because our responses to money are so often based on how we feel and our emotions.

This means that we’re reacting when we’re interacting with money; we’re not responding. We’re not making logical, clear, calm, well-thought-out decisions.

“For me, mindfulness is like a superpower when it comes to our finances,” Ms. Clothier says.

“It’s a way to slow down and give provide enough space to practice better decisions and practice a better way to manage money.

“Think about when you’re in the shopping centre, and you’re about to buy something.  You’re not thinking much about it, you just like it, you’ve seen it and you want it.”

“You go to the counter, you tap as you go, you walk out, and as you leave, you get in the car, you go home. You get home, and you go, “Argh, I probably shouldn’t have bought that. I don’t have the money, and I’ve got those bills coming up.”

The emotional part of the brain reacts seven seconds faster than the thinking part. It’s unlikely we would turn to the knowledge gained in improving our financial literacy in that time.

But we can just stop.

A mindful approach with money in that situation would involve, slowing down our actions, and stopping before tapping the card, taking a breath, and checking in about how important the item really is?

The same can apply to investing in the share market, or lending money to family or friends for them to invest.

But by approaching and adopting mindfulness, we just slow everything down, and we don’t react.

“We can stop and consider the repercussions of any decision or action before making it.”

How to measure and monitor our progress

Very few of us know how financially stressed we really are. We need to have some kind of idea of this before we really know what progress looks like.

To measure financial stress, we need to look at more than just our bank account balances.

The context for how we spend, why we spend, and what we spend it on matters a great deal.

“Think to the gym and doing a fitness assessment before you get there,” Ms. Clothier says.

“Where you’re sitting with your PT, and they’re saying okay, ‘tell me about your diet, tell me about your state of mind, your sleep patterns, tell me about your exercise routines.”

“It’s the same concept as that, except it applies to your relationship with money instead of food or exercise.”

Financial Mindfulness developed the Financial Stress Index (FSI) as a way to measure and monitor the financial stress of individuals and groups of people in detail.

It is contained within the Financial Mindfulness app and measures the levels of financial stress on five dimensions with suggested solutions for individuals.

These are the financial status, the physical and psychological burden, the social engagement, the psychological impact, and the behavioural signs of stress.

The score given to each user is a starting point, a baseline.

Returning to doing the FSI every 30 days or more allows users to clearly see their progress across the five dimensions.

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Managing financial stress – Decision making, literacy, learning new skills

Managing financial stress - Decision making

Managing financial stress – Decision making, literacy, learning new skills.

In the first part of our financial stress webinar covering managing financial stress, we take a detailed look with expert help from Lea Clothier, a Master-certified behavioural money coach involved in the development of the Financial Mindfulness program.

There are so many triggers to create financial stress in our lives today that reducing and managing financial stress has become an ongoing, sometimes daily task.

Thankfully financial stress as a specific type of stress is finally being acknowledged and a number of different methods are available to deal with it.

There are a variety of well-practiced stress reduction techniques which we can use to help address financial stress.

These include exercise, maintaining positive routines, and getting curious about the things that do reduce your general stress – for instance, short walks and/or short meditation sessions.

The Financial Mindfulness app is a proven, evidence-based tool for reducing personal financial stress that packages together some simple but extremely relevant tools:  mindfulness, goal-setting, and financial literacy.

Its development has enabled us to tread new ground in the measurement of financial stress.

Why you need to get organised – on many levels

Reducing financial stress on day-by-day and week-to-week levels can be complex, with accounts, different income streams, expenses, taxation, investments, and other factors to manage.

So, developing personal systems that work for you is essential.

Being disorganised with finances will invariably lead to an increase in financial stress.

But getting organised with finances also means aligning what we think and how we feel with our actions.

“I constantly see with the clients I work with that someone might know that they need to start a budget,” says Ms. Clothier.

“They take action or the behaviour of implementing a budget. Yet on a thinking level, they have some challenging and limiting beliefs about budgeting. And then, on an emotional level, they feel disempowered, or they feel restricted, so whilst we’re taking positive action of budgeting, we’re not aligning that with positive thoughts and emotions.”

“And then we wonder why we don’t get the results that we’re seeking.”

The answer to this is to explore your relationship with money and your beliefs about it – including beliefs that might be holding you back.

Our relationships tend to be a good place where our money beliefs and values come to light.

For some people, it may be useful or necessary to do more personal work on these issues with a financial counsellor, a financial wellness consultant, and/or more specialised therapist.

Moving forward, there are many ways and means to manage financial stress, as we said.

This blog will cover a handful of tips, tools, and techniques that Ms. Clothier has found most useful in her work.

Accepting past decisions

Money is an emotional topic. Just look at the importance of it in almost everybody’s lives, that importance can create strong emotions.

“Like it or not, we are where we are today because of past experiences, decisions, and actions or past inactions or indecision,” Ms. Clothier says.

We have to accept the past and move forward.

Yes, there may be greed, shame, guilt to feel and let go of.

It can be painful to confront difficult emotions, but that’s normal too. Trying to not look at these emotions doesn’t work as a long-term strategy, even if it’s appealing.

At a practical level, our decisions are often made on habit.

When the habits are mindful and not reacting – especially to emotions – our trajectory with finances is usually positive.

But if our money habits tend to be reactive and we spend as a reaction to feelings and even urges and impulses, our money problems are usually chronic.

Accepting past financial decisions isn’t easy, but it’s important.

“We can make peace with the past; we can learn from the past, and then we can move forward and make better decisions,” Ms. Clothier says.

The importance of financial literacy

Don’t take this personally, but levels of financial literacy in Australia are “abysmal”, Ms. Clothier says.

A recent Melbourne University survey, the regular Household Income Labour Dynamics in Australia (HILDA) survey found that half of the respondents could not answer five simple questions about inflation, interest rates, compounding, and diversification correctly.

We are not saying you can’t answer those questions, but the point is financial literacy is fundamental, it underpins most of your money choices.

Again, remember how important money is to our lives, and our ability to make choices – it pays for our day-to-day lives and sets up or potentially undermines our futures.

Even worse there is a frightening gender gap relating to financial literacy. One in three female respondents couldn’t answer any of the HILDA questions.

Most fundamental lessons people learned about money were learned in the home, and partly by watching and learning.

Schools are getting better at teaching financial literacy today, thankfully. The media also contains a lot of information about finances in the form of clips, podcasts, articles, and blogs, such as this.

The good news is that there are many tools out there, free websites, free content, classes, books, and podcasts that you can listen to increase your financial literacy.

“I always say that learning finance is like learning a new language,” Ms. Clothier says.

“You speak the lingo, and once you know the speech, it makes it a lot easier.”

Learning new financial skills

Continuing on from the above point, learning new financial skills is an important way to help us manage financial stress.

Knowledge is only powerful when it’s applied, we actually need skills to get the most out of our knowledge.

Even if we know certain key facts and believe in a course of action, we can still slip up because money is so emotional.

For example, we know we should spend less than we earn. We know we shouldn’t big amounts of money on our credit cards.

We know we should be looking at our financial statements and bills and budgeting regularly.

But just because we know those things don’t mean that we do them.

“This happens because money is emotional and because it seems difficult,” Ms. Clothier says.

The problem is many of us don’t have the skill levels needed to practice good day-to-day management of money and financial stress.

“Learning new financial skills can be a straightforward way to reduce our stress levels,” she says.

It’s building a habit; it’s making a unique knowledge and skill base.

It can involve something as simple as learning how to manage a credit card better.

Or even how to manage and read a credit card statement.

“I’m often surprised how many of my clients cannot read a credit card statement and understand the impact of only paying the minimum balance on an ongoing basis and what that means to them,” Ms. Clothier says.

Starting to build those skills from a basic level up to a more advanced level can help create a better and healthier relationship with money.

Next week: How to manage financial stress part 2 (using goals, mindfulness, and progress).

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Disorganised finances

Disorganised Finances

Disorganised finances.

A persistent, nagging fear of money is all too real for many people.

The medical word for it is Chrematophobia, also known as Chrometophobia and its sufferers have a much higher likelihood than average to experience financial stress.

The individual reasons are probably as varied and nuanced as the number of sufferers, but it’s a reasonable assumption that we haven’t learned how to manage money effectively.

One way to consider the fear of money is to ask: how many with such fears are disorganised with their finances?

We’re not suggesting an answer to Chrematophobia – we’ll leave that to you, your financial counsellor, and even your psychologist.

But we can help encourage people to look at the widespread issue of disorganised finances.

Why does it happen?

For some, it will be deep-seated issues, and again, we won’t go into that. But it’s worth considering whether you do fall into that camp before considering the next point – and getting extra help if you do.

Avoiding our finances to the point they become disorganised can feel strangely empowering in the short term.

We all know that feeling: ‘I don’t have to do this difficult thing if I don’t want to or maybe ‘This is boring/hard/exhausting, so I’ll get back to it tomorrow/next week/next month’.

This is avoidance, with more than a little misguided rebellion at its heart.

Whatever is underneath our avoidance of maintaining our finances, the result is often the same: it’s a bit of an ‘own goal’.

‘It can be a bit like a teenager not wanting to clean their room. They don’t see a need for it,’ says Hamish Ferguson, a Director at Vision Property and Finance.

It is frustrating when they can’t find an important document or number, but unless it becomes a large enough pain point, people generally don’t – or won’t – understand the need and don’t make it important.

One thing we all have, of course, is plenty of distraction these days.

There are usually too many other things we believe need to be done now or make more important – and we focus on those instead of our finances.

“Examples could be keeping the boss happy, dealing with children or a spouse that wants attention or even just allocating time to more pleasurable activities such as TV, time with friends or outdoor activities,” says Mr Ferguson.

The link between financial stress and disorganised finances

If we don’t pay attention to our finances, they don’t usually improve. This may seem obvious,s but it’s important to act on it.

Paying no attention to our financial situation means some form of financial stress, and even distress becomes inevitable.

If you can’t see this coming, you probably need some new habits with money!

“Generally, the more stressed we are, the less logical we think and or the more disorganised we become,” Mr Ferguson says.

With a stressed mindset, we don’t tend to manage our time well because we spend more time on the stressor than the solution.

“We often fail to realise that being organised with money will reduce the time that we tend to think about money, which should give us more freedom and time to spend in more pleasurable areas,” Mr Ferguson says.

The importance of regular routines around money

The busier we are (or more’ time poor’ we are), the more important having healthy routines are.

Most people can recognise that sense of not having enough time in the day.

“So, building structure and routine around our finances is essential,” Mr Ferguson says.

Some examples of healthy routines with money are:

    • ​Review bank statements and credit card statements every month so we know what we are spending money on and the amounts;
    • Review repeating expenses and reflecting on whether we are using what we are paying for effectively. Gym memberships are a good example, as are streaming subscriptions;
    • Compare bills to prior ones so that you can be aware of any increasing expenses and spend some time thinking about why this is occurring;
    • Review all significant items that may need to be renewed over time. This could be a car, fridge, hot water system, maintenance on the house. Come up with an estimated time before money would need to be spent and start to put a savings plan in place around this; and
    • Start and maintain a budget.

What’s a good place to start if my finances are disorganised?

“Being disorganised with finances is often an indication that bills are not being paid on time, savings are limited (or even non-existent) there isn’t a savings habit or goal,” Mr Ferguson says.

When we experience any bill as an unexpected expense, we need new habits with money and quickly.

In the most basic terms, a person disorganised with finances often doesn’t know how or where to allocate money helpfully over the long term.

Becoming organised would mean thinking about the following:

    • Knowing where all my documents and paperwork are – physically, digitally and online;
    • Having a regular time to sit down and examine the bills or expenses that I am incurring;
    • Understanding what my costs in life are;
    • Having financial goals; and
    • Managing the difference between my income and expenses

Once or twice a year, it is helpful to sit down and analyse three months’ worth of transactions.

If this seems too onerous, looking at some software to help you be proactive here may be worth considering.

Also, many banks now offer basic cashflow analysis.

“Are you using the free tools available to you? There are plenty,” Mr Ferguson says.

A final word on goal setting.

‘This is very, very important,” he says.

Financial goal setting actions can be as simple as looking at major expenses on the horizon and breaking down the need into weekly or fortnightly amounts to putting away can help become organised.

But they can also be empowering when we look forward to what we want to do with the next 5-10 years: buy a property? Travel? Open a business?

The possibilities become almost endless when our finances become organised, and we can start making financial goals and achieving them.

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Money and relationships

Money and relationships

Money and relationships.

Many elements can lead to relationship tensions and even breakdown.

One of the most difficult to change can be disputes or differences over money.

Perhaps strangely, often ‘opposites’ attract when it comes to money and relationships.

“You’ll often see a spender/saver dynamic in a couple,” says Lea Clothier, a Behavioural Money Coach.

The reason for this can be based on deeply set value systems. Money can be tied to, for example, freedom, security or success.

“Money can represent all three to us, but we often have a dominant main value system around it,” says Ms Clothier.

Value systems and money

Understanding the underlying values in your relationship will give us insight into our behaviour and what is happening when there is tension over money.

Someone who sees money as a means to freedom is likely to be more of a spender, Ms Clothier says.

They are also less likely to stick to or use a budget (which they find restrictive). They may enjoy spending money on experiences and enjoying life.

On the other hand, someone who sees money as all about security may use their money more restrictively.

They are likely to be more savings-focused, manage money more tightly, and stick to a budget.

‘For these people, having a cash reserve gives them peace of mind and reduces financial anxiety,’ Ms Clothier says.

Those who see money as a measure of success may display their wealth through their choice of career, the car they drive, and the clothes they wear.

They may have big financial goals and see money as the tool to achieving these, Ms Clothier says.

Money is likely to be at the centre of or influence many of their major life decisions.

Conflict over money

Conflict can happen in partnerships and relationships when people have conflicting money values.

Imagine a relationship where one person is freedom-focused and the other security-focused.

The actions one person takes could be seen to compromise the other’s need for freedom or security.

Where money values are fundamental to us and clash with someone else’s equally strongly held beliefs, conflict seems inevitable at some point.

Understanding each other’s values around money can help reduce conflict and diffuse conflict.

“Many couples don’t manage money together as a team,” Ms Clothier says.

Getting ‘on the same page’ financially means both are taking an interest in finances in the relationship. Ideally, both also have an active role.

Ultimately a shared household spending plan is a great idea, so both partners work together towards joint financial goals.

Keeping some financial independence is also a good idea, perhaps in the form of having a small amount managed separately, so each can choose to spend independently of common money goals and actions.

But this should be transparent: any habit of hiding money will undermine trust.

Financial stability, relationship stability

Financial stress and financial instability are leading causes of stress globally and often contribute to marital and relationship breakdown.

Improving our sense of financial security and stability provides peace of mind and invariably helps to steady many partnerships, Ms Clothier says.

“It can create a platform for individuals to pursue their dreams and for a couple to achieve shared goals,” she said.

Financial stability is also the foundation for a stronger financial future and makes goals and dreams more affordable.

Financial stability is created through two essential elements: communication and cash flow, Ms Clothier says.

Money is a very emotional topic, which can make communicating about it difficult.

Learning to be open and transparent about money matters and communicate clearly about them is essential to remove the tension that money often causes in relationships.

Managing cash flow is the foundation of all financial plans.

“It’s about being mindful of every dollar that flows into your life and intentional with the very dollar that flows out,” says Ms Clothier.

When we have a system and process in place to manage our cash flow and ensure we are spending less than we earn, paying off debt as quickly as possible and building a cash buffer, we can begin to focus our attention on growing our wealth investing it.

Many people go straight to the investing part, only to find they are building on a shaky foundation.

If you are doing this, seek some help getting your fundamentals right – improving your cash flow situation to spend less than you make.

The dealbreakers of money and relationships

A major dealbreaker regarding money that will undermine a relationship, perhaps surprisingly, is poor communication.

Even worse is lacking transparency – which to a partner can quickly erode that most important element in any partnership: trust.

This applies to all stages of a relationship – including the beginning of one.

A partner with an undisclosed historical debt is a partner with a burden that can harm a relationship.

Hiding purchases and spending habits and having secret stashes of money will also destabilise a relationship.

Teamwork and shared responsibility regarding joint finances are essential. It’s constructive, but its absence is a big negative.

Working together on a joint budget, a spending and saving plan builds a sense of partnership – and trust because the goals are shared. Both partners can enjoy the feeling of achievement that comes from successful planning with structure and clarity.

If there’s debt, work out a debt management plan either together or with complete transparency.

“Lacking a plan means that our finances often control us, rather than us controlling it,” Ms Clothier says.

“It also means we are less likely to achieve our goals and dreams because we don’t have the means or method to achieving them.”

Another huge dealbreaker is procrastination.

So many typical money milestones fall on a particular date, so that that avoidance can be very costly.

So don’t put off paying the credit card bills or the insurance – that will create tension in a couple and family.

This also applies to investment. The saying goes: the best time to invest is yesterday and the second-best time is now.

Some regret over financial behaviours and decisions is inevitable and painful, but communication over shared goals can help prompt action rather than avoidance.

Another look at communication

In countries where the cost of living is high, money is one of the most emotive regular topics we face.

Shame, guilt, fear, anxiety, jealousy – all big emotions – are all common around money.

We can feel anger, too and even slip into useless or even damaging fantasies over finances.

And most of this happens in one place – inside our heads.

Learning to be open and transparent about money matters and communicate clearly can remove significant triggers for tension and disagreement.

It’s important to remember that a lot of financial behaviour is habitual.

“Most of us don’t bring much awareness or mindfulness to what we do with our money on a day to day basis,” Ms Clothier says.

Our money habits, particularly negative, can be detrimental to our finances and cause conflict in a relationship.

If you or your spouse notice some unhelpful financial behaviours, it’s important not to launch into judgement, blame or attack. Instead, offering support to see what is driving the habit or behaviour is more beneficial.

It’s important to explore – with honesty – if there are ways that one or more bad money habits, we have either individually or as a couple could be reduced or replaced with something healthier.

Suppose money is a source of regular conflict in your relationship. In that case, it may pay to consult with a financial counsellor, money coach or financial adviser who could support you to get back on the same page with your finances.

Often, they can provide perspective, an objective view, great support and practical tools to work together and master the art of managing money as a couple.

It’s important to note again that money challenges can reveal significant underlying issues, such as the need for security, freedom, or success.

Suppose the behaviour of one or other partners in a relationship is controlling or obsessive in pursuit of these values, leading to major relationship clashes. In that case, marriage counselling or couples therapy might also be helpful.