Top three money stressors - and how to tackle them
Money is a huge stressor for most people, whether its saving up for a house, getting out of debt, anxiety over bills to be paid, or simply not making enough money for what your financial goals are. While we can’t make that stress disappear entirely, there are three big ways you can tackle the most common money stressors by turning them into manageable goals that you can follow step-by-step.
Stressor one - Debt
Debt is probably the biggest money stressor for people, and it’s one that seems nearly impossible to tackle, especially once you look at the numbers. The average Australian household debt has quadrupled over the last three decades, according to the AMP/NATSEM income and wealth report, with average household debt now sitting at almost $250,000.
How to tackle it: First, you have to know exactly where you stand. Checking your credit report is a great start as it may show you how much debt you have, and you can also ensure there aren’t any errors or worse, instances of identity theft that could be ruining your credit history. The better your credit report, the more likely you’ll be to get better terms on future loans or lines of credit.
Stressor two - Financial emergencies
The next step: Make a list of all your outstanding debt, including key facts like how much you owe, your minimum payment amounts and the interest rates you’re being charged. Set up your account to automatically pay the minimum payments so you’re never late on a bill. Try to focus on paying down one loan or line of credit at a time, starting with the one that charges the highest interest rate. Use tools like loan repayment calculators to see how long it will take you to be debt-free, and set your budget accordingly. Additionally, setting achievable goals for yourself, like reducing a $40,000 debt to $30,000 in three years, will help you to work towards your end goal of being debt-free and give you a sense of achievement along the way by accomplishing each goal.
Financial emergencies can happen at any time and often have severe consequences, especially without a financial cushion to help soften the blow. Things like needing to repair your car, or getting laid off at work, are things that need to always be considered and prepared for, just in case the worst happens.
How to tackle it: Many banks now offer high interest savings accounts that reward you with a high interest rate for not withdrawing money from them. Opening one that’s not connected to your primary bank to serve as your emergency fund is a great idea because it will make it harder for you to tap into that cash unless a real emergency strikes, and the added interest will help your savings grow faster. After opening up the bank account, set up weekly automated transfers to that account, even if it’s as little as $10 a month. Your initial goal should be to save one month’s worth of your take-home pay. This is a good level so you can gain some peace of mind and feel like you can weather some financial curveballs without having to use your credit card.
Stressor three - Retirement
The next step: Review your progress every six months to see how your emergency fund has grown. Ideally, you’ll want to work toward saving about six months of your income, although this amount can differ depending on whether you have access to a financial safety net like family or friends who could help out in a pinch and how steady your income is.
Retirement is probably one of the biggest things that any of us will save for, and just thinking about it makes most of us want to run the other way and just let super funds do all the work without making any investment.
Getting Started: You may have heard someone talking about 'salary sacrifice' at the last family barbeque, but what does it actually mean? If you earn more than $37,000, salary sacrifice can be a good way to grow your super. It involves giving up some of your pay and putting it into your super instead. You will save tax and boost your super. After-tax contributions, or the contributions that you make from your after-tax income, are the simplest way to add to your super as you simply deposit your personal money into your super account. If you can spare the money, you can really boost your super savings by making after-tax contributions. Additionally, if you earn less than $51,021 per year (before tax) and make after-tax super contributions, you are eligible to get matching contributions from the government.
The next step: Talk to your employer about salary sacrifice, if that is the direction you want to go. If you want to sacrifice some of your salary to super you should enter into a formal agreement with your employer. It is best to include the details in your terms of employment. This ensures your employer calculates their 9.5% super guarantee contribution on your original salary. If you don’t want to go down this route, consider making after-tax contributions of a percentage of your salary – even if it’s only 1% - to go into your retirement savings. The earlier you start to contribute, the better off you’ll be later in life.
We hope you enjoy these tips and we encourange you to talk to your accountant or a financial professional for advice specific to your situation.
If you're struggling with your financial situation and need help to get your life back on track - make a safe choice and talk to one of our specialist debt relief consultants today. For more information, simply enquire online or call us on 1300 661 991.