The real cost of gift giving – part one

The tinsel and decorations might still be in a box under the stairs, but now is the time to think ahead so that you don’t join millions of Australians saddled repaying holiday debt well into 2022.

One of the leading pressures on many people’s already-strained financial position is the habit of over-spending on gifts; gifts that don’t necessarily prove our love for others.

In this three-part series, we will explore the size of our national gift-buying obsession, look at the health impacts of the financial stress that follows, and then explore how a targeted mindfulness practice can help change the auto-pilot approach to gift-giving while potentially bringing us even closer to loved ones.

There is also a real likelihood that gift-giving becomes retail therapy in these uncertain times – a set of behaviours we use to try and feel a bit better. But as Financial Mindfulness has found, overspending has the opposite effect on our stress levels.

Overall, Australian households spent an average of A$6,000 each over the Christmas season in 2020, the six-week spending frenzy from mid-November to the end of December. All retail spending, including food, alcohol, and gifts totalled a massive $55 billion spending binge, which made it a record Christmas for retailers.

The Reserve Bank of Australia estimated that over the four weeks of December 2020, $24.3billion was splurged just on credit cards. Tens of millions more were spent on so-called buy now, pay later accounts.

This year Christmas spending will follow similar patterns, possibly slightly exceeding spending in 2021, although there is expected to be a shift towards online spending.

What all this means is that nearly half a million of us will take up to six months of 2022 to pay off debts incurred in November and December 2021.

Those debt repayments will be on top of juggling usual repayments and bills, such as home loans, student loans and/or car instalments, insurances, and rent.

The national home loan bill in 2019 topped A$2 trillion for the first time, according to Illion, with an estimated 42 per cent of Sydneysiders with a home loan under mortgage stress.

But while we are dealing with debt repayments, the perceived pressure to buy gifts and to get a little retail therapy never lets up for long.

Retailers are so creative now they tend to attach a major sale to almost all significant dates in the calendar, including milestones that have not traditionally been associated with gift-giving and spending.

So Boxing Day and New Year’s Day become days to buy and even treat others. Australia Day sales will advertise Aussie memorability in the form of clothing, flags, food, and trinkets.

Back-to-school sales in mid-January are no longer just about what our kids need, increasingly they market to parents what children want.

In theory that sounds reasonable, but in practice, it can mean excessive spending on gifts such as technology, bags, and clothing as children try to maintain or create an image to garner popularity with their peers.

Without clear boundaries, pressure to indulge in this kind of gift-giving to materially bolster children’s self-esteem can occur whenever kids are set to return to school after holidays – so several times a year.

On February 14, Valentine’s Day is of course a major date on the retail calendar.

On average Aussies spent around $180 each for their significant others, while the nation splurged over $1 billion on Valentine’s Day gifts.

A new arrival on the retail calendar is ‘Cash Mob Day’ which falls on March 24 in 2022.

Cash Mobs are based on the viral trend of ‘Flash Mobs’, but instead encourage people to spend up to support local businesses. It’s a worthy idea, but again, a retail trend that creates a reason to buy something you actually don’t need.

Easter is next, in April. Luckily the major supermarkets stock around 50 lines of chocolate each, not counting millions of Easter buns.

In recent years retailers are encouraging consumers to buy more than chocolate or buns though.

In 2021 marketing heavily pushed the idea of ‘Easter baskets for adults and children’. Adult basket ideas included jewelry and kitchen accessories, while kids’ baskets could include collectibles, toys, egg-decorating kits, and activity books.

Aussies spent up to $250 each at Easter in 2021.

On May 8 comes Mother’s Day, when consumer spending spikes to around $2 billion, according to the Australian Retail Association.

From mid-year there’s often a string of birthdays to buy for: the most popular months for birthdays in Australia include May, July, August, September, and October, according to the Australian Institute of Health and Welfare.

Anyone who has hosted a children’s birthday party knows how expensive and high pressure they can be, with parents forking out anywhere between A$300 and A$3000.

Then there’s the angst over how to please teenagers and other loved ones, a worry which is almost always settled by spending at or above our absolute limit.

Winter sales ramp up in May and June too, with major advertising campaigns.

In recent years end-of-financial year sales, which were only significant for businesses, have been repackaged as major consumer events, usually with the prominent capitalised acronym EOFYS, on promoted on large banners.

Then comes Father’s Day is September 4 (on which about A$900 million is spent), followed by weddings and wedding anniversaries galore as the weather warms up.

Spring and autumn are the most popular seasons, with April, September, October, and November the most popular months to get married.

At the end of November comes the frenzy that is Black Friday and Cyber Monday. In 2021 early figures suggested we spent over $5.4 billion, nearly double what was spent over that weekend in 2020.

While it seems like the right thing to show our love by buying new toys, trinkets, treats, and gadgets for children, family, and friends the cost is in black and white in our online statements.

We spend thousands upon thousands of dollars each year to try and please loved ones, when if the tables were turned, most of us would be happy receiving thoughtful, inexpensive gifts – or even just spending time with friends and loved ones if we knew they were battling financially.

According to data from the Financial Mindfulness – Financial Stress Index (FSI) Report – the vast majority (89%) of us are worried about money.

Digging deeper, we are completely overwhelmed (79%), downhearted (82%), and distracted (77%) by our financial situation.

Financial Mindfulness estimates the resulting lost productivity costs Australian businesses is $32.14 billion per annum.

AMP’s 2020 Financial Wellness Report in November 2020 found financially stressed employees are ineffective at work for approximately 7.7 hours a week, and absent for a further 1.2 hours a week through sick days.

The report said nearly half of Australian workers are feeling financially stressed for an average of six and a half years or more.

To find out how financial stress affects our health, check out part two in this three part series.

Money, relationships and stress

Whether we like it or not we live in a world that runs on money, especially in OECD nations.

Everything has a cost and our capacity to pay market rates is constrained – and balanced – by our ability to earn and save.

What we want and what we can afford is limited by this. Fluctuating financial stress is somewhat inevitable in this continual ebb and flow.

One of the benefits of relationships – whether romantic or other kinds of partnerships – is that the costs for many things can be shared.

That can make life noticeably cheaper for people committed to shared objectives.

People in relationships can and do share the costs of everything from meals to furniture, from vehicles to houses, parenting costs and even business running costs.

Shared finances are traditional in romantic relationships, for good reasons.

“Working together as a financial ‘team’ and pooling resources makes more financial sense as a couple than having separate accounts – for one there are fewer bank fees and the opportunity to accumulate savings is doubled,” says Clinical Neuropsychologist, author and speaker Nicola Gates.

“Joint accounts also help maintain a sense of equality.”

The resulting financial enmeshment however creates difficult complex complications when relationships ad partnerships seek to disentangle.

A significant number of romantic relationships fall apart purely over money issues – as many as one in eight, according to comparison website Finder.

Why can money become a big issue in relationships?

Financial security is a basic human need, and an essential aspect of health according to the World Health Organisation but how we each interpret that varies significantly.

“Finances can become a big issue in relationships because we all have our own emotions around money, wealth, savings and have different financial behaviour,’ says Ms Gates.

“When couples have different emotional relationships with money and have different financial behaviour conflict can easily arise.”

This is exacerbated by a trend towards each adult in the relationship to manage their own finances and the couple dividing expenses.

Whilst this can work there is a huge risk that it leads to inequality and potentially disadvantages one partner.

Most of us would agree relationships work best when both partners feel respected and equal.

“Resentfulness can arise if there is significant inequity, and separate accounts also divide spending power, halves cumulative saving potential, and potentially disadvantage one member of the relationship,” says Ms Gates.

The biggest money issues in relationships

Money issues become divisive in relationships when there is a loss of transparency and honesty.

Some of this comes down to misguided priorities.

Ideas about personal freedom are so compelling that people can mistakenly seek to exercise personal freedom beyond where it is helpful.

For instance, they make what they see as personal financial decisions without consulting or even considering their partner.

Unwittingly this person could be corroding the sense of teamwork that relationships thrive on.

“I know someone where the joint financial goal was to save for a long holiday together but the one partner could not restrain from acts of immediate gratification and could not save for the long-term goal,” Ms Gates says.

“As a result, there was only money to purchase one airline ticket and the holiday did not occur.”

Separate accounts can also lead to perceived or actual financial infidelity when one partner hides money, or debt, from the other.

Financial infidelity ranges from lying to your partner or spouse about money to hiding things such as cash, bills or a purchase.

“Any lack of trust and transparency regarding finances is an issue, from secret spending or hidden savings, or debt is dishonestly hidden, as they all break a commitment to honesty,” says Ms Gates.

Sadly, it is not rare behaviour.

According to a poll of 2000 Americans by the National Endowment for Financial Education, a massive 43 per cent of adults with combined finances in a relationship said they’ve committed an act of ‘financial deception’.

Financial deception will undoubtedly erode trust in a relationship.

More than a fifth of respondents admitted directly lying about money, while 39 said they hid a purchase bank account, statement or cash.

It’s worth fully considering the seriousness of financial infidelity; in many scenarios, such acts amount to financial abuse, which is today recognised as a type of domestic violence.

A definition of financial abuse occurs when a perpetrator uses or misuses money which limits and controls their partner’s current and future actions and their freedom of choice.

It can include using credit cards without permission, putting contractual obligations in their partner’s name, and gambling with family assets.

The link between personal financial freedom and financial infidelity does not automatically mean any financial independence is unhealthy for people in relationships.

So long as absolute honesty and openness – in all things – are foundation stones of a relationship, then some independence is not a risk.

“If you choose to have separate finances make sure you talk about contingencies when one of you is in financial stress.”

These situations might include losing employment, being ill, supporting parents, raising children, or returning to study.

“Consider how to support a feeling of independence for the non-earner such as giving them an agreed amount so they don’t have to ask,” Ms Gates says.

What can we actually do if our partner has big money problems?

So, what happens when one partner cannot manage their finances, cannot save or has hidden transactions and money?

Sooner or later this behaviour will place enormous stress on that individual, then their partner and then eventually the relationship.

Can a relationship survive in those circumstances?

Yes, it can, but again, the answer lies in each partner’s willingness and ability to open up and work together for mutual benefit.

“Honesty, communication and total transparency are essential,” Ms Gates says.

How individuals, partnerships and couples manage financial stress when one partner is in acute stress will be determined by the quality of their relationship and how they communicate and support each other.

“How a couple manages the tough times is the best indicator of how close they are and how well they can communicate and problem solve as a team,” Ms Gates says.

If there has been dishonesty, trust issues will need to be resolved and to do that, moving to shared finances or 100 per cent transparency will likely be needed.

In a society that needs money to survive, it makes sense that people sharing a life – or a business – must have shared solutions to the challenges posed by the need to continually make and spend money.

How to avoid impulse spending during Black Friday and Cyber Monday sales

Black Friday and Cyber Monday sales are upon us, with a marketing onslaught that can be hard to resist.

The ideal mindset when faced with the temptation to spend is to be financially mindful – fully aware of your financial position and real needs.

The word ‘frenzy’ is not the optimal environment to maintain financial mindfulness and avoid financial stress. But a shopping frenzy is exactly what is being expected, beginning next week.

‘Australian retailers can look forward to a sales frenzy over the Black Friday and Cyber Monday shopping period, with a record $5.4 billion predicted to be spent in stores and online according to research from the Australian Retailers Association’, research firm Roy Morgan reported.

The four-day shopping period from November 26 (when Black Friday sales begin) to November 29 (Cyber Monday) began in the United States and has gone from strength to strength in Australia.

The marketing for ‘hot deals’, designed to draw in shoppers, has already began, with Amazon among companies already seeking to entice spending.

Consumer spending is good for the economy, but with a frenzy about to hit, ‘strength’ is being replaced by ‘mania’.

Frenzied behaviour when shopping, especially when the payment methods are the deferred – such as buy now, pay later accounts or the ever-popular credit card – can mean sustained impulse spending.

Impulse spending is a recipe for financial stress, especially when bills begin to fall due.

Let’s drill down to the specifics of why we should pull ourselves – and our households – back to a mindset of mindful spending next week – and keep that mindset right through Christmas and beyond January sales.

The first thing to get real about is whether you already have disorganised finances. If you – or your household – does, then a period of sustained impulse spending is likely to cause problems.

What is impulse spending?

Impulse spending is when you purchase something that you weren’t planning to.

It is your unplanned spending, or when you purchase something without considering the consequences of the purchase and are acting on ‘impulse’, i.e. a sudden strong and unreflective urge or desire to act.

At this time of year that could range from extra Christmas decorations to hotel deals to the latest smartphone or putting a deposit on a brand-new car.

Everyone behaves impulsively at times and it’s not always bad. It can be fun and harmless, so long as it’s measured and your finances are in order.

But we need to be clear. Regular impulse and unplanned spending can ruin your budget, create a debt spiral and impact on your ability to achieve your financial goals.

If your goal is getting out of debt, then impulsive spending is damaging.

The same goes for goals like paying off your mortgage, saving for a holiday or investing for your future.

Buying on impulse and overspending will use up money you could otherwise put toward your goals.

Let’s look at spending via social media, which has been growing in recent years.

According to a study by Finder, the average Australian spends $860 per annum on purchases made through social media , that’s $71.66 per month.

Investing $71.66 for 10 years at 8 per cent pa would grow nearly $13,000 over 10 years.

That type of equation is known as ‘opportunity cost’ – the cost of one item is the lost opportunity to do or consume something else.

Impulse spending is one of the main underlying money habits that creates financial stress – which we know from research creates feelings of shame, guilt, confusion, anxiety, fear – and relationship issues.

If we cannot deal with these feelings and an emerging issue in our finances, some people turn to dysfunctional strategies like using short-term loans or even gambling to try and solve their problems. Or they may begin to drink more alcohol or return to smoking cigarettes to cope.

What drives impulse spending

Your emotions play a huge part in what you buy and how you buy.

Impulse spending occurs when we make spending decisions based on pure emotion.

Knowing your personal motivations and main triggers to impulse spend will help you to better manage your money and impulse spending habits.

Your personal finances are just that: personal, so it makes sense that when something’s going on in your personal life it is likely to show up in your spending habits too.

Triggers that can lead to impulsive shopping include:

  • Excitement, including ‘bargain’ revelations
  • Avoiding reality
  • Stressed, overwhelmed
  • Bored, distracted
  • Celebration
  • Comparing self (as inadequate) to others, jealousy
  • Frustration
  • Guilt, feelings of failure
  • Loneliness
  • Rebellion

Research suggests that more extroverted personality types, status or image conscious people, those who prefer to live in the moment, and make quick decisions are more likely to be impulse shoppers.

Regular social media users and those who treat shopping as a hobby are more likely to have impulse shopping tendencies.

There is also evidence that people who are cautious, have self-confidence, feelings of fulfilment and a sense of being ‘in control’ of one’s life are less likely to spend impulsively.

Red flags pointing to impulse spending tendences include:

  • Regularly buying without planning to
  • A chronic inability to save money
  • Trouble with regular financial responsibilities
  • Tendency to use money to change feelings
  • Guilt and regret over shopping decisions
  • Owning items that barely get used
  • Regularly return items due to a change of heart

How to manage impulse spending

The key mindsets to develop – and hold on to – are based in awareness and planning.

To begin with, we need to be in reality. So, you do need to get real.

A great place to start is to review your last three month’s spending, comparing how much of it was planned and how much was impulse spending.

It’s essential to acknowledge which habits are helpful and which are not.

Creating a budget and knowing what you spend should be your first priority.

Knowing where your money is going will help you to determine where you need to cut back.

Budgeting is not a ‘set and forget’ task. A budget needs to be reviewed and revised. Maintaining your budget is an essential skill to learn.

You need to directly deal with temptation too. We’d suggest unsubscribing from store email lists that tend to flood you with ‘on sale now’ messages and try to make you feel like you’ll miss out on something important.

If an item on sale was something you truly needed, you would already be aware of it.

Clearing your computer cookies is a good move too. Otherwise they will any online retailers you have browsed will constantly remind you.

It’s also important not to attempt to totally deny yourself any spending. It won’t work.

Build some splurge/ fun money into your budget that allows for occasional spontaneous spending.

Providing a limit for this type of spending allows you to give in to an impulse buy every now and then without feeling guilty or worrying about overspending.

The amount of money you set aside should be determined only after you’ve taken all the essentials like rent, groceries and bills into account and will depend on what your budget can reasonably afford.

But it’s essential to track all spending to ensure you can see patterns in your spending that might need to be reined in or reversed.

Weekly check-ins to stay accountable will help support this.

How to deal with the ‘need’ to shop

Whenever you feel the urge to buy something new, or spend money, replace the urge with something that brings you joy.

Making a list of healthy activities and rewards that you enjoy or feel satisfying.

Things like seeing a loved one, cooking your favourite meal, walking by the ocean or in the bush, gardening, or phoning a great friend you haven’t seen for ages are almost certainly more rewarding than impulsively spending.

If your impulse spending is driven by your comparison of what you have (or don’t have) to others, take a step back and be thankful.

Learn to be grateful for what you do have and see from this more abundant perspective.

There’s plenty of science and practical suggestions out there on gratitude – but in essence it’s about feeling thankful for simple things in your life, which in turn creates feelings of wellbeing and contentment.

Try to adjust your behaviour with money towards medium-term and long-term thinking.

Rather than just saying: “I can’t buy that because I’m saving money.”  Think in terms of the opportunity cost i.e. “If I spend $100 on this, I can’t put that money towards the trip next year”.

This reframing makes it a choice rather than a feeling of missing out.

Create reminders for yourself to act as reinforcement of your goals and encouragement towards saving. I.e. if you’re saving for a holiday, save images of your dream destination in places you’ll see them: your screensaver on the phone, or computer, rename your password for internet banking to your savings goal.

Some other strategies to reduce impulsive spending

Try avoiding use of credit – its not easy but it’s a great aim.

Credit cards aren’t inherently bad, but if you’re prone to impulse shopping, they may make your situation worse.

Getting rid of your credit card is equivalent to getting rid of the thing that enables you.

Learn to spend within your means and only use money you have i.e. use your debit card or cash for purchases instead.

Buy now, pay later is essentially another form of credit. BNPL platforms allow you to enjoy your purchase straight away but defer the payments down the track.

There’s a reason some experts dub them ‘buy now, pain later’.

One way to begin radically changing our money behaviour is to experiment with a ‘no spend challenge’.

A no spend challenge is a personal spending challenge where you cannot spend any money on non-essential items.

They can be a good strategy to implement to break spending habits. You can choose a category such as eating out, clothes or going out, or you can make it for all non-essential spending. You set the time frame and challenge.

Accountability is always a useful tool when changing behaviour – especially reducing potentially harmful behaviours.

The people you live with or spend the most time with can be a support for you. Be open and share with them that you’re trying to spend less and ask them to support you if they see you making an unnecessary purchase.

See of you can think of someone non-judgemental in your life that you trust who might be an ‘accountability buddy’ for you around your spending.

Do you have a sibling or friend who’s willing to get in your face and tell you not to buy something? Bring them on your shopping trip. Tell them what you plan to buy and ask them to talk some sense into you if you start straying from the strategy.

Practice financial mindfulness

When you are feeling a strong pull to spend money, try to take a mindful pause by asking yourself these questions:

  1. Why am I here? (In this store/ or at my computer, online shopping)
  2. How do I feel?
  3. Do I need this?
  4. What if I wait?
  5. Can I afford it?
  6. Where will I put it?
  7. Do I really need it, or is it a want?

If you find your impulsive shopping behaviour returns or is uncontrollable despite your best intentions and attempted actions, you may be dealing with a genuine shopping addiction.

Sometimes this is known as ‘oniomania’. Yes, there’s a word for it – that means it’s real.

That might take some more help, but it’s not impossible to get under control. A good place to start is a therapist trained in treating addictive behaviours.

Don’t blow your savings

The endless restrictions and lockdowns Australians experienced during the pandemic did more to us than make us want to socialise and dine out.

In many people, they create a pent-up sense of not being able – or allowed – to spend money on the things we want and love.

Compounded by the increased savings stored up by months of lockdowns, many commentators and financial experts are now expecting consumers to go on a sustained spending binge.

Online sales over the coming months – from Black Friday and Cyber Monday through Christmas past Boxing Day and right up to New year sales – are expected to hit record levels.

On top of that, hotels and restaurants have re-opened and the borders are re-opening. Airlines and tourist operators are tooling up to increase capacity – and that means a flood of overseas and inter-state travel marketing is about to hit the public.

Millions of Australians’ credit cards and buy now, pay later accounts look set to blow out.

But the resulting temptations – and pressure – to spend up holds a serious threat to something incredibly important to anyone wanting to improve their financial wellbeing and reduce their financial stress.

That precious asset is our savings.

Why shouldn’t I spend my savings?

Of course, you can spend your savings – especially if it’s yours alone.

But should you?

There are powerful reasons it’s very unwise to spend your savings.

Draining savings is a sure way to begin an unhealthy habit of living beyond your means – exactly the opposite behaviour that allowed us to grow savings in the first place.

Saving from a low base is hard, it’s like struggling up a tall ladder.

Living beyond our means has an inevitable outcome too: without the capacity to continually increase your income, it will lead to acute and probably chronic financial stress.

In other words, living beyond our means is trying to live in a fantasy.

Splurging from our savings is akin to tumbling down that ladder.

If it’s joint savings we are talking about, then spending from that without the consent of your partner is a breach of a relationship boundary.

What if you both agree to splurge your joint savings? See the opening point above – you can, but it’s unwise.

Why do I need to safeguard my savings?

A big reason spending your savings is a negative is you will fall further and further behind in wealth creation goals.

‘Hanging onto savings is an opportunity to get ahead financially which generally is what the wealthy are doing,’ says Hamish Ferguson, of Vision Property and Finance.

“They are purchasing assets and not spending as much proportionally on consumption,” he says.

Paying attention to successful wealth creation strategies is crucial for people who wish to do more than survive.

To put it crudely, how we save and what we do with those savings may determine which one of these two categories we fall into: the ‘haves’ or the ‘have nots’.

“If our desire is to be in the earlier category then we need to limit our consumption and ensure that a savings/investment plan is part of our budgeting,’ Mr. Ferguson says.

“If this is not the case, then we will end up in the have nots and as suggested only have enough to survive.”

Mr. Ferguson says there are financial ‘headwinds’ coming so keeping a buffer now is a sensible idea.

These include the bogeyman of the economy: a rise in inflation.

“Inflation is expected to rise so the cost of living is going up, interest rates are expected to rise which as well means mortgages and probably rent will go up over the next few years,” he says.

The power of a financial ‘buffer’

The final reason to hang onto savings seems intangible – but also something most of us can relate to.

Having a financial buffer or emergency fund improves our confidence, stress levels and gives us choices in life.

“The research suggests our stress levels are lower when we have a healthy buffer,” Mr. Ferguson says.

‘This, in turn, helps us to make better future decisions and have better relationships.’

Government guidelines are that a useful financial buffer is around three months’ worth of expenses.

‘Even if you can only save a little, make a start and keep saving. The more you can regularly save, the better,’ according to moneysmart.com.au

If you put $20 a week into a savings account, you’ll have over $1,040 by the end of the year. That’s the start of a good amount of savings to give you some financial breathing space.

Choice is an important concept in all this.

“Choice is powerful, but with choice comes the discipline and responsibility to make wise decisions,’ Mr. Ferguson says.

The power to choose wisely is something that comes to us when we can practice financial mindfulness.

Is there a way I can spend or treat myself safely?

This is a great point and an important one. Life should not be relentlessly difficult and it is not meant to comprise only self-denial.

But before we prepare to treat ourselves it’s important to understand one of the universal truths of wealth creation:

“’Save then spend, don’t spend than save’,” is a great famous quote that might be helpful here, Mr. Ferguson says.

The key is having a plan to reward yourself, that is the healthy way to go.

But what does that look like?

Here’s an example. If you can set a goal and boundary to save $12,000 before rewarding yourself with a $2,000 holiday, your net benefit is $10,000.

But that benefit disappears if you ‘spend then save’.

Don’t play catch-up with money, it’s fraught with danger: it’s far better to save than spend.

Returning to the above example, once you reach $22,000 savings you can have another $2,000 holiday, or reward yourself to the tune of $2,000.

Saving before spending can be a win: win strategy.

For this strategy to work, you must – must – prioritise savings over spending, every day, every week, every month.

The pandemic put young families under a huge financial stress burden

Even if you don’t have children, you may be aware through your friendships and networks of the burden that the Covid-19 pandemic has placed on families.

Parents had to somehow find time to simultaneously work from home, manage, motivate and teach their children all day long – losing most of the very little time they had to themselves.

Many had to work into the evenings to complete their paid work, resulting in lost sleep, or cut their work hours, resulting in reduced household incomes.

The stress placed on those parents was literally extraordinary – and it was widely reported to be leading in some families to relationship breakdown.

Now new research has emerged showing that families with children – especially young children – appear are a cohort facing some of the highest levels of financial stress.

A Melbourne University study, done in in collaboration with the Centre for Community Child Health at the Murdoch Children’s Research Institute, and the Brotherhood of St Laurence, found over two thirds (68 per cent) of Australian families with children under the age of five have persistently reported barely being able to make ends meet – or worse – during the pandemic.

The data came from Melbourne Institute’s Taking the Pulse of the Nation which surveyed about 1200 Australians aged 18 and over every two weeks between June 2020 and September 2021.

It found that stress was not diminishing with an end to the pandemic in sight.

The proportion of these families reporting high levels of stress has risen in September 2021 to 37 percent, compared with 34 percent a year earlier, the study authors found.

Just under two-thirds (63 per cent) of families with older children and 60 percent of families with no children at home reported financial stress during the pandemic.

The reported financial stress was worse for families living in ‘moderate’ levels of poverty.

The survey’s authors found the last 12 to 18 months has likely exacerbated the financial problems faced by those living in poverty or on low incomes.

Poverty is not the only cause of financial stress – it is possible to suffer from profound financial stress at average or higher income levels – but it is undoubtedly a factor.

Financial stress can arise during short term specific financial demands such as change in employment, or from a chronic and long-term financial concern, such as increasing debt with interest repayments or difficulty repaying a home mortgage.

The problem with financial stress is that it does not just impact our finances, it can have a significant effect on our wellbeing including our physical and mental health along with our relationships, work, behaviour and potentially our environment.

Financial Mindfulness research has shown that you haven’t got financial security, you actually can’t meet your health requirements and that financial stability has an impact on health and wellbeing.

Our research also showed shows that poor financial security and financial stress lead to a lot of aggression in people’s interpersonal relationships, and we know it has a significant impact on relationships.

‘Financial security is a fundamental aspect of health and wellbeing, and some people say it’s a fundamental right,’ said Financial Mindfulness’s Dr Nicola Gates.

According to the Melbourne University study’s authors, higher levels of reported stress by families with young children is likely to be associated with the challenges presented by the pandemic, including limited access to childcare and schooling, especially in areas that have faced continued lockdowns.

‘Having to balance working-from-home and caring for children inevitably leads to changes in hours worked and/or employment circumstances,’ wrote Professor A. Abigail Payne, University of Melbourne.

The study’s authors saw big implications for children’s’ development in families living in poverty.

Critical to shaping and supporting children’s futures is their family’s ability to afford essential goods and services.

There is a broad consensus that early family environments are the main predictors of children’s cognitive and non-cognitive abilities.

‘The pandemic should be a catalyst to consider how those living in or dangerously close to poverty can be better supported,’ wrote Professor Payne, noting that statistically poverty is persistent.

She noted community and peer support networks could be utilised to supplement government policies and programs.

‘Have we sufficiently considered the importance of providing a financial helping hand during particular periods of need that can result in positive outcomes over both the short and long term?’

Paying bills

Back in 2017 when the Financial Mindfulness journey began we asked our growing army of Facebook followers what were the biggest financial stressors in their lives.

Paying bills – including card and loan repayments, energy bills, groceries and other recurring obligations – were among our followers’ main contributors to financial stress.

Further work we did into looking at financial stress showed correlations between people who struggle to keep up with bills (and even avoid financial obligations) and financial stress.

People who identified at suffering financial stress were seven times as likely to struggle with mortgage repayments, and four times as likely to avoid financial obligations and struggle with regular bills than people who did not suffer financial stress.

That is why paying monthly bills was included early on as a module in the Financial Mindfulness app.

The stress caused by keeping up with bills remains a major stressor. Dozens of other studies and research papers into financial stressors have similar findings: that staying on top of bills can be a big driver of financial stress.

This week we unpack the stress of dealing with bills and look at how to get on top of them.

The difference between regular and variable bills

Not all bills are created equal. There are basic but significant differences many of us don’t take into account when managing our money.

Some bills recur at the time for the same fixed amount (with perhaps usually small incremental increases). These include mortgage, rent, rates, insurances, car registration, school fees and health insurance.

Other bills are variable, meaning the payable amount and date due can changes significantly.

These include servicing a car, paying for trades to fix something in your home.

Even though you know they are coming, you won’t know exactly when they will occur or how much they will be.

When it comes to managing your bills, always pay for your essential needs first. These usually include:

    • mortgage repayments;
    • rent;
    • food;
    • power; and
    • transport.

From what is left over you can then pay for discretionary items or wants, such as:

    • eating out;
    • streaming services;
    • magazine subscriptions;
    • restaurants;
    • holidays; and
    • house cleaners with what is left over.

A vital first step in managing bills is to identify the difference: which bills are for your needs and which are for your wants.

Think carefully about this: is the bill for something you want or need?

Then there’s spending money out of habit – spending based on emotions, impulses and sometimes without much awareness.

That can often leave us wondering at the end of the month exactly where all the money has gone.

Budgeting as an important tool

For people who have struggled to budget, even the word ‘budgeting’ can be difficult to accept. But what is budgeting really?

It can help to think of budgeting as forecasting your household cashflow.

Doing this will help you become more intentional with your spending and encourage you to spend the way you planned, on purpose rather than by habits.

A good budget will help you to prioritise paying for your needs first and wants and values second.

If you have a surplus left over, you can then use this towards other things such as your savings goals, paying off debt, investments, holidays and retirement savings.

Budgeting requires ‘mindful spending’.

Mindful spending is not about restricting your spending, but instead being conscious of how, when and where you spend your money – every day, every week, until this becomes your default way of spending.

One way to become a better spender is by doing a spending audit.

This is a simple process of taking a good look at your bank statement or online banking transaction history, download or your paper statements and assess where you have been spending your money

You can also download an app to track your spending.

There are also many apps out there that you can download and they will classify your spending into categories for you!

As you pay bills it is important to keep an eye on whether the amount was what you expected.

If it is larger than you planned for then review the bill to understand what has changed.

If there is nothing untoward then ensure you increase your allowance for this bill so that it does not surprise you next time.

How to pay bills

To get control of household bills it’s important to have a full master list of bills – including regular and variable. Note the likely amounts payable and likely due date.

Consider taking some time to think about those items that are essential, but not regular. Think about the frequency that you would like to plan for those items and what amounts you might need to put aside

At the beginning of each month, create a checklist (separate from your master list) of the bills you are expecting to pay and the approximate amount.

It is wise to do this not just for the current month but the following month as well.

This list can be handwritten or electronic. Allow space on your checklist to mark if the bill was received and when the bill was paid.

This is what you should do when bills arrive – either in your mailbox, inbox or by SMS notification.

    • Don’t ignore your bills.
    • When they arrive open them.
    • Read and ensure you understand them. Is the bill correct according to your records?
    • Check the amount and time to pay.
    • If it’s urgent, pay it as a matter or urgency.
    • Keep all your bills together so it’s easier to keep track of them and pay them.

Set aside some time each month to pay your bills in line with how often you get paid. An hour is usually enough.

Mark each one as paid and keep a copy in a paid bills folder, whether this is electronic or physical.

Set up a calendar reminder for a convenient time that works for you.

The easiest way to deal with bills is to automate them, so set up a direct debit on your online banking account.

Do this for expenses that do not change every month, for example mortgage or rent payments. You can also set up regular direct debits for your ongoing expenses such as telephone, electricity and water rate accounts.

Create a calendar reminder for due dates of your bills. Check your calendar at the beginning of each week to see what bills need to be paid.

Set up a filing system to store your paid bills. Use a folder and have separate tabs for each of the bills you pay. Alternatively keep track by a similar filing system on your computer.

What if I’m behind on bills?

Being behind in payments can be very stressful and may feel overwhelming. Don’t panic.

If you can’t afford to pay all of your bills this month here are some things you can do to take control of the situation.

It’s inevitable to worry, but try not to spend a lot of time worrying about future events that haven’t happened. No matter how much you worry about potential consequences you do not actually know if those things will occur.

Stay focused on the things you can do today to improve your situation and regain control of your finances.

Identifying what is making it difficult to make your bill payments involves some basic detective work. Some helpful questions to check in with yourself include:

    • Are you spending more than you earn?
    • Are you forgetting to pay your bills?
    • Have you had an unexpected expense?
    • Are they variable or even steadily increasing and you are underestimating them?
    • Is there any other reason you can’t pay that you don’t want to face?

Write down the reasons that prevent you from paying bills and brainstorm solutions to each one. Spend some time doing this.

Review your list of bills and identify which ones you can stop, replace or cancel that isn’t essential.

Things that can be paused until you are ‘on top’ of your issues with bills might include:

    • Pay TV;
    • Streaming services;
    • Subscriptions;
    • Extra phone features; and
    • Paid memberships (especially if you rarely use them).

Mark all bills that are necessary for your survival as a top priority (i.e. mortgage or rent, food, electricity etc). Pay these first.

Then identify any debts you have as your next priority and pay these.

Any remaining bills are the ones where you could potentially cut back or speak to the creditor about alternative payment plans or arrangements

Be honest with your creditors and let them know your situation.

There are options that can help you out. Call each one up before your bill is due and explain your situation.

Ask if you can negotiate a deferred payments scheme, or reduce the payment amount, have a late fee penalty removed, or have an extended due date.

The longer you leave this task the worse it will get. Leaving debts, never ever makes them easier to resolve.

If it is possible to speak to all of your creditors before you pay any of your bills for the month, you’ll be in a better position because you’ll know what the terms for each of them are which will help you to prioritise.

Prevent bills from becoming a problem again

Creating a buffer is a great way of minimising the chances of bills becoming a big problem again.

Save some money each pay, even if only a small amount so that you have a buffer.

You can start with saving as little as $5 or $10 a week. Over a year that could give you over $500 towards an unexpected bill.

Brainstorm ways that you might be able to make more money or bring in some extra cash.

Paying bills on time means you don’t have to pay penalties or additional interest and this increases the amount of money you can save.

All of us have experienced at some time a nasty unexpected expense.

Check out our blog on ‘Unexpected Expenses’ for advice ad suggestions on dealing with these.

Become a mindful spender

Unfortunately the world we live in seems to encourage us to spend ‘mindlessly’.

Online shopping is a good example.

The pandemic has placed enormous pressure on the global supply chain, which has led to retailers warning goods will take longer to arrive than they would have before the pandemic.

This message has been distilled in recent weeks and days into attention-grabbing headlines, such as ‘start Christmas shopping NOW, retailers warn’.

Another similar message, is ‘Christmas is just around the corner’. Or maybe you’re seeing ‘don’t miss out!’ reminders about the upcoming Black Friday/Cyber Monday shopping period, from November 26 to 29.

Faced with such powerful sales and marketing strategies, it’s important to be mindful of how they can drive our spending habits, especially when shopping online.

Why? Because we much as you might trust a brand or a store, or online retailer, it is not their brief to help you avoid financial chaos, let alone build wealth. That is up to you.

What does it mean to be mindful with money?

We refer to it as financial mindfulness.

Financial mindfulness means being aware and paying attention to your finances, and that may mean seeking help.

Mindful shopping is not natural for people who spend to enjoy spending to deal with boredom or other uncomfortable feelings.

The good news is mindful shopping can be quite a systematic process that works by following a few simple steps:

    • Here are some steps to help you become a mindful shopper;
    • Allocate set amounts of your income to spending categories (creating a plan for your spending);
    • Plan your purchases;
    • Shop with intention and not just for something to do;
    • Take a list and stick to it;
    • Unsubscribe to the constant sales emails and offers;
    • Ask yourself questions like “do I really need this?” before buying;
    • Wait before you buy something;
    • Don’t buy something if you’re not 100% sure you really need or want it;
    • Choose your shopping buddies wisely; and
    • Remember your goals and weighing up if a purchase will get you closer or further away.

Good luck with improving your management of bills. You can do it!

Get to know simple ways of How to Manage Credit Cards. Give this a read!

Who doesn’t like spending money on things that they want to buy? It is during these purchases that credit cards are used. The very first thing that we need to know is what exactly are credit cards? Let us find out. In simple words, a credit card is a metal card that is rectangular, sometimes made of plastic that financial institutions issue. Do you know this card helps you borrow funds from a pre-approved limit to pay as you make any purchase? This article will help you understand How to Manage Credit Cards and take care of financial expenses. You can pay a visit to the official website of Financial Mindfulness and learn the simple ways to do the same.

There lies a difference between credit cards and debit cards. This is basically when you use a debit card; the amount gets subtracted from the bank account; on the other hand, when you use a credit card, your money gets reduced from the pre-approved limit.

Credit cards can be used to make online payments too.

What are the different types of credit cards that are generally available? Check these out!

To know How to Manage Credit Cards, it is essential first to get acquainted with credit cards. Customers engage in a variety of activities that require different types of credit cards to purchase various things. Let us check out some of these types in brief! Learn the tips and have a hassle-free life. Our experts are here to help you out. Would you mind checking out the official website of Financial Mindfulness? Thank you.

1. Travel credit cards- Who does not like to enjoy discounts on airline ticket bookings, cab bookings for regular travel? Everyone does! Right? So travel credit cards help you do just this! And add to this the fantastic reward points that are gained during every purchase! It is exciting to know that complimentary access to VIP airport lounges and booking tickets at lesser rates is possible. So what is keeping you from learning How to Manage Credit Cards? Learn the tricks and live an easy life.

2. Shopping credit cards- Shop for your favorite things from the comfort of your home. Cash-backs, discount vouchers are available all year round. These credit cards can be used for online and offline transactions alike.

3. Secured Credit Cards- Enjoy a secured credit card against fixed deposits to avail of great interest rates. If you make the right usage of these credit cards, then you can increase your credit scores.

Managing credit cards is a matter of practice and also patience. Are you aware that your credit score gets affected by the way you manage your credit card? Learn expert ways of How to Manage Credit Cards with the expert team at Financial Mindfulness. Would you mind following the updates that are regularly posted on the official website?

What are some of the effective ways to manage your credit cards? Get to know about this right here!

1. Learn how to use credit cards effectively- The first thing that you need to know when you want to manage your credit cards is how to use them in the proper manner. Credit cards can be used effectively by making timely payments and not keeping any dues. Keeping expenses due will eventually harm your credit scores since payment history is considered the most significant factor while calculating credit scores. The team at Financial Mindfulness will teach you How to Manage Credit Cards properly.

2. Keep track of your budget- In simple terms, a budget is a plan which helps you to track your money. This tracking is both ways earning and spending. A budget enables you to get a clear picture of your financial life. If there is a question of debt management, you have to be aware of the availability of free cash flow. You have to put additional funds towards debt payments.

3. Learn how to spend- Learning to live within your means is one of the best habits you can build. If you spend more than you earn, you learn how to keep control of your expenses. If you know how to curb your costs, you might learn how to manage credit cards in a better fashion. Take help from the officials regarding this matter.

4. Build an emergency fund- It is always a better idea for people to get an emergency fund so that if any financial emergency crops up, you can choose not to use your credit cards for expenses. A simple way to achieve that is to transfer a part of your amount from your checking account to your savings account every month. You can review your budget and figure out how much you can save aside every month.

If you want to learn effective ways to Reduce your Debt, please check this out!

Who likes to live in debt? Obviously nobody! A debt free life is also a part of How to Manage Credit Cards, and stay financially secured. With the team at Financial Mindfulness, you can learn How to Reduce Debt in simple yet efficient ways. This will help you lead a financially secured life.

1. Keep small numbers of credit cards- Please keep limited numbers of credit cards.

2. Check the bills very carefully- Keep a check on your accounts and ensure that the rates remain the same.

3. Stay vigilant- Once you have managed to clear off the debts, make sure not to get into debt once again. The best thing that you can do is use debit cards and cash instead of credit cards. We at Financial Mindfulness will teach you How to Manage Credit Cards efficiently.

Follow this blog and know How to Reduce Financial Stress in simple ways.

The current blog tries to look into financial stress and find out solutions related to the problem. Every human being aspires to gain financial independence. In times such as these, facing financial pressure is a reality. The typical mindset says that the more money you can earn helps to keep you are satisfied and stress-free. Let me tell you, that is not a reality. If you want to know How to Reduce Financial Stress in effective ways, get to us at Financial Mindfulness. Check out the various mechanisms that will help you to cope up with this kind of stress. If you need any help, do feel free to consult the experts who are thoroughly trained in this field.

Overall any stress can affect your health, both mental and physical. Financial issues can give rise to pressure that can be labeled as toxic. Let us talk about some of the ways that can affect your health:

1. Problems in healthcare: Scarcity of money often makes people neglect their health. We know it is often said ‘Health is wealth,’ but at times when you face a financial crisis, you tend to overlook the most important aspect of your life. People try to include homemade remedies which may provide temporary relief, but these are not long term solutions. Learn How to Reduce Financial Stress and at the same time take care of your health from the experts at Financial Mindfulness. Check out the various ways that are discussed and expert opinions and apply the ones that seem the most useful.

2. Mental health issue: There have been many cases where it has been found that the mental health and financial status is interlinked. If the financial condition is found to be unstable, then it has adverse effects on mental health. Gradually problems like depression, anxiety, and the likes of health conditions set in. Get to know all the easy and effective ways of Reducing Financial Stress from the team of professionals who have the expertise in Financial Mindfulness. Check out the official website and get in touch with the team. We will be delighted to help you out. We hope you have a good day. Keep safe and remain stress-free.

3. Physical Health: Stress can have an impact on physical health as well. Maintaining a healthy equilibrium between mental health and physical health is of utmost necessity. It has been found that shortage of financial security has given rise to stress that have a significant effect on the whole. Migraines, sleep disorders, and many more abnormal physical conditions are found. Learning How to Reduce Financial Stress in the most effective and straightforward ways from the connoisseurs at Financial Mindfulness is easy. Check out the official website, and we are sure you will find all the useful and strategic information stored with us. We look forward to interact with you soon.

4. Problematic Coping Behaviour- Behaviour in people is affected due to financial stress. Due to financial stress, people tend to resort to certain habits that are dangerous to their health. Such habits include overeating, binge- eating and even resorting to alcohol. A large percentage of people have been found to consume unhealthy food items to cope up with stress. Allow Financial Mindfulness to help you fight out How to Reduce Financial Stress. Head over to the official website and check out in details. We are sure you will find the most useful ways. We are here for you.

What are the various ways you can cope up and reduce your financial stress? Check out here!

Difficult times are inevitable in life. While facing a crisis, you may find it hard to visualize any way to tackle your financial stress. However, it is very important to think and assess the situation. It is never too late to learn any skill and also applying it. Here are some of the ways that can help you know How to Reduce Financial Stress. Check this out!

1. Extra Income- this is very important. Make sure that you do not stick to only one source of income. Acquire enough skills in various avenues that attract you and try to gain financial support out of these streams. If you feel that you have a shortage of money, turn your hobby into a side hustle. This will help you keep engaged in an additional vocation without creating an extra stress.

2. Take control over your expenses and revenues- More money certainly does not mean happiness. It is a continuous process of the incoming and the outgoing money from your bank. You need to be very careful about where you want to place your money and in turn, devise methods of How to Reduce Financial Stress. There is always a need to keep a check over the money and channelize it in the best way possible.

3. Spend on items that are immensely essential- Cut down on your extravagances if you are experiencing a financial setback. May be clear the debts if there are any. Make a list of expenses that are not extra but essential. In this manner it will helpful to channelize the money and keep the financial stress off for a certain period of time.

4. Lessons from financial tools- Financial management is a huge task. It is always advised to know about any financial dealings before you can actually get your hands on it. Choose a particular financial tool like medical insurance and become thorough with all the aspects of it. We at Financial Mindfulness will help you know all about How to Reduce Financial Stress in the proper ways.

5. Do not compare- Please do not compare yourself to others. Everybody has his/her demands and wishes. Each individual is different. Try to chalk out a plan for yourself. This will help you tackle the Financial Stress and Mental Health. If you want take expert advice from the team at Financial Mindfulness. Check out the official website. We wish you good luck with managing your finances and leading a tension free life.

6. Identify the cause of your stress- This is one of the most important and the primary step to tackle any kind of stress, be it emotional or financial. Once you have successfully completed this step, it becomes easier to sort out a plan and work on it. Get to the official website of Financial Mindfulness and learn How to Reduce Financial Stress easily.

Easy ways to know about Financial Stress and Mental Health are right here!

In a grief-stricken world by the raging pandemic, it is pretty natural that our lives have been affected in a way like never before. Our methods of working and the way to look at the world have changed drastically. When there is no limit to the number of deaths that are taking place daily, it is but natural that people around the world are facing a crisis. This article is dedicated to talking about Financial Stress and Mental Health. Here we will help you understand the basic causes of the particular stress. Apart from that, we will also help you out with the remedies to the ever-growing problem. You can visit the official website of Financial Mindfulness and get in touch with a group of experts. We are here to help you out.

Financial stress is stemmed from money. It is the shortage of money but sometimes not knowing where to invest the money to keep it safe also causes a lot of trouble. There are times when financial stress can result in affecting an individual mentally. Learn how to deal with Financial Stress and Mental Health in simple ways from the experts at Financial Mindfulness. Check out the details and stay safe.

The following tips will be helpful to keep a check on the financial stress and take care of the mental health:

1. Create a routine of self-care- Due to the pandemic, there has been a constant fear in people’s lives, which has been given rise to a different lifestyle throughout the world, which is fashionably called the “new normal.” This is done to provide a ray of hope to the people across the globe. The phrase new normal has been used to look at life and give a fresh start to it. People should take this opportunity to create a new routine of self-care to help them take control of Financial Stress and Mental Health. Try engaging in activities that are indoors but at the same time are interesting enough to keep you occupied. Take care of your sleep schedule and try to get enough sleep to keep you feel fresh throughout the day. If you want to do something challenging, you can try out learning a new skill and try excelling at it. Try to include simple physical exercise.

2. Connecting with friends and family virtually- Connections nowadays are of utmost importance. In such times of medical emergencies, you never know when the need for a particular service might crop up. If you remain well connected with the family members and check on them at regular intervals, the feeling of isolation might seem lesser. Engage in Skype calls and zoom calls to provide hope to each other. Find out more ways to deal with Financial Stress and Mental Health from the officials at Financial Mindfulness. Check out the various links that provide help to people worldwide. Help is just a click away. Make sure you are connected to the different societies that might need help.

3. Online Therapy- Since everything has turned online, you should make the most available online therapies. Sometimes speaking it out to an expert might help you gather knowledge and find solutions regarding the problems you are facing. There are individual therapy sessions as well as group therapy sessions. You can engage in online sessions till the situation is brought under control. After that you can join in a counselling course offline. This will help you tackle Financial Stress and Mental Health.

4. Government Programs- The government has launched various programs related to how to combat the trauma of the COVID situation. Some of these include economic impact payments, extended unemployment benefits. Make proper use of the help that is made available. These can be stressful if you do not know the correct ways of processing these programs. Reach out for help if you are in need any get informed thoroughly.

5. Understand the money you are using and use it wisely- Money is directly proportional to financial stability. Make it a habit to think and check out the ways that you can stop spending more than that is required. Keep a record of what you spend on and try to cut down on your expenses if possible. Seek out Financial Stress and Mental Health solutions with the professionals at Financial Mindfulness.

6. Stay motivated- A positive lookout and mindset helps to fight battles like no other. Always try to find out something positive from your actions. Spend wisely. If you have debts to clear, make sure you do them only after repeated calculations.

7. Avoid Alcohol- Getting addicted to alcohol is one of the common problems people face while they are not being able to manage their finances. It might provide a temporary relief, but later on, it might get all the more difficult. The monetary expenses might create Financial Stress and Mental Health issues. Seek help while it is not too late. We are here to help you know How to Reduce Financial Stress? Check out the official website of Financial Mindfulness and learn more about it. We look forward to hear from you.

What are some of the signs that imply that you are facing financial stress?
Here is a list which helps to determine if you are suffering from monetary stress. Read it up.

1. Loss of control: Activities are not under the control of the individual. You might end up doing things that give you momentary pleasures to keep your problems at bay. This is a temporary way to deal with Financial Stress and Mental Health.

2. Loss of concentration: Every work needs the right kind of concentration. There are time limits that are set for each task to be completed. Without the right level of concentration, we cannot focus on our job. This might cause financial loss and in turn set in stress. If you face such problems, this might signify mental health issues. If you wish to learn more about the ways to tackle Financial Stress and Mental Health get to us at Financial Mindfulness. Please check out the official website and get to know more.

If you are interested in learning quick and easy ways of How to Reduce Debt please check this blog out!

Finance is a large part of a person’s life. Who doesn’t require substantial amount of money to lead a happy and fulfilling life? Everybody does, right? When someone faces a financial crisis, they take help from institutions that can help them out. In this article, we tend to discuss various ways of How to Reduce Debt.

The first thing that you should know is what is debt? Let us find out in detail. In simple words, debt is defined as an amount of money that is borrowed by one party from another party in order to make payments that seem difficult to do so under normal circumstances. It is interesting to note that the money that is borrowed with the condition that it is always paid back with the added interest at a later date.

Interestingly, there are various types of debts, and each one is different from the other. If you get a complete knowledge of what these debts are and how you can handle them it becomes easier to learn How to Reduce Debt effectively.

So what are the various types of debts? Find them out right here!

There are different types of debts. It is not only for a single purpose that a person borrows an amount of money. Since the idea is different, so the name also differs. This is done to segregate one kind of debt from another. It becomes easier to understand why a particular debt is taken and also needs to be paid off within the stipulated time. So let us check out the variety of debts and their meaning.

Secured Debt This type of debt can be defined as any debt that is issued against any asset that can be defined as collateral. In order to know How to Reduce Debt it is important to know that a credit check is needed in order to understand how well the debt has been handled in the past. If the person who is borrowing the loan fails to repay the debt then the asset is to be handed on to the lender. A classic example of secured debt is a car loan. Money is supplied to buy the car but also claims to get ownership of the title of the car. If the money is not returned, then the lender can repossess the car. The rate of interest of these loans is quite reasonable—Trust Financial Mindfulness to learn How to Reduce Debt.

1. Unsecured Debt

This loan comes without any collateral. When any amount of money is lent without any asset attached, the money is leant purely on the belief that the borrower will repay the loan with the added interest. A contractual agreement is made to repay the funds. If there is any delay or default in the payment, the lender can ask for any money he wants. This can be done by taking legal steps. Examples of such debts include credit cards, medical bills, credit cards. Get to know How to Reduce Debt effectively from us at Financial Mindfulness.

2. Mortgages

This is the most common type of debt that people carry with themselves. Do you know why mortgage loans are taken? It is generally taken to buy homes. In this case, the real estate serves as the collateral. It is interesting to note that mortgages have the lowest rate of interest. The interest is tax-deductible for the people who itemize the taxes. You can pay for 30-50 years every month for your mortgage loans.

If you are interested in finding out about the other types of debts, please check out the official website of Financial Mindfulness. We will help you to figure out How to Reduce Debt in the most effective ways.

So what are the ways that will help you reduce your debt? Check it out here!

It is always a pragmatic thought that you should have enough funds to make it through for your leisure life when you retire. This is the forethought of a person when he is working so hard throughout his life. There are various ways that will help you stay debt-free and enjoy a pleasant life. Let us look at the ways you can avail a debt free life.

1. Start a debt management plan- This includes prioritizing the debts in order of urgency, creating a healthy budget, cutting down on extra spending, etc. How to Reduce Debt knows your entire budget.

2. Set a budget- Always check how much income you make monthly and y9ur monthly expenditure. This is very important. This will help you to manage your debts if you have any and enjoy your life as well.

3. Avoid using your credit cards- Please try and use cash whenever possible. The logic behind this is simple. If you pay in cash, you will tend to think before you spend.

4. Save as much as you can- It is highly recommended that you stop spending on things that are not very necessary. It is very tempting to do away with this habit, but once you try your best, things will indeed work out in your favor. There are simple ways you can design for yourself to save on monetary spending.

If you wish to learn more on How to Reduce Debt, please visit Financial Mindfulness and check out all the tricks we have in store for you. We will be glad to help you out. In addition, there are various exciting and accessible ways regarding How to Manage Credit Cards. So if you want to be effective and financially secure, get in touch with us right away.