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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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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.