Does financial anxiety make you wonder how you'll ever pay off your student loan and credit card debt? You're not alone if you're not sleeping well because of your finances. 53% of millennials and Gen Z adults develop anxiety about their finances, according to an Interac Corp survey in September 2020. And more than half of millennials (53%) say the pandemic has caused them to be more cautious about their debt. Moreover, for nearly 43% of workers, financial stress is so great that it undermines their job performance, according to a survey by the Canadian Payroll Association.
Money is the key to building a future and taking care of your family. But, on the other hand, if financial difficulties accumulate, they become an obstacle to happiness and fulfillment.
Is the fear of running out of money and your debt is a significant source of stress? Follow our five pieces of advice to limit your debt and better manage your financial anxiety.
How to manage your financial anxiety?
The pandemic has undoubtedly impacted your outlook on life and your finances. It may have even increased your fear of running out of money. We all have a perception filter called the SAR reticular activation system. If you think that you live in a world of hardship and that it is easy to lose everything, you will create experiences to support your beliefs. So here are two tips to look your fear of running out of money in the face and change it.
First of all, know that this fear of running out of money comes from our past.
Dive into your family history: what are the beliefs about money that run in your family? For example, were your parents and grandparents also afraid of lacking money?
Also, list your beliefs and thoughts about money. Some good example of these types of thoughts are:
So look at all these beliefs that come to mind, and identify the ones that come up most often. These beliefs are the root of your fear of running out of money.
Good news, you can change a belief! You can take these beliefs and destabilize them one by one by asking yourself, "Is this true?"
Then, find concrete examples that prove otherwise.
For example: for the widespread belief that "rich people are all thieves,” we have a counter-example in Canada. In 1973 a wealthy couple from Toronto created High Park in the city and gave it to the people of Toronto "for the free use, benefit and enjoyment of the citizens of Toronto forever." This generous act is an excellent example of wealthy people thinking of others!
So, for every belief you have, find an example that proves it is not the truth: it will be possible to believe something else for you.
Now that you are aware of the falsities of your beliefs, turn up the volume on the beliefs that will carry you and help you in your finances. For example, use positive affirmations such as "I can live debt-free" or "I can take back control of my finances and prosper."
Doing these two simple things will help you see life differently and to feel less financial anxiety.
Having a monthly budget is the key to managing your personal finances. But more than that, good budgeting will give you a sense of control and a better understanding of what's coming, rather than living paycheck to paycheck. Making a monthly budget, and sticking to it, will also allow you to see how much you have left for savings.
To make your budget, take a simple piece of paper and look at your after-tax income: this is the amount you should focus on. In one column, list your income. In the other column, list :
- Your fixed expenses (rent, and services like internet and phone, utilities)
- Variable expenses (like groceries, clothing, gifts, entertainment)
- Unexpected expenses: one-time expenses (repairs, vacations) that are difficult to plan for in advance
- Savings: what you have leftover after all of the above.
You should divide savings into two: one part should go to your emergency fund, and the other part should go to investments.
You can now eliminate the extra, unnecessary expenses and eventually think about how you could increase your income.
"Nearly six in 10 Generation Z adults (57%) and half of the millennials (50%) relied on the Interac e-Transfer service during the pandemic to receive or pay back money for everyday purchases such as groceries." according to the Interac Corp. survey.
And they are right! The credit card is a great tool to build your credit rating, but it should be used sparingly, because this money is not yours but is loaned to you by the bank. If you suffer a health problem or a loss of income, it can leave you no longer having the means to repay your credit card debt.
So, think about the purchases that bring you the most significant rewards, and spend only on those. Don't spend more than 30% of your credit and stick to it.
The more control you have over your finances, the more secure you will feel, and the less financial anxiety you will have.
30% of Canadians default on their credit card debt each month, according to a 2017 Bank of Canada report. If you're one of them, you're losing even more money than you think. You could invest the interest of your debt you pay to the bank in a savings account for your household.
So from now on, decide to spend no more than 30% of your credit and keep enough money in your debit account to pay off that debt each month. You'll have more money in your pocket at the end of the month by doing that!
Your ability to control your finances depends more on your ability to control your emotions which, in turn, condition your spending habits.
Here is a simple exercise to do when you are in a state of stress about money. Take a sheet of paper:
- Write down the thoughts that cross your mind and that cause you anxiety.
- Note the strength of the emotion measured from 0 to 10 (0 being not strong at all, and 10 being very strong.).
- Assign a % of belief in each thought.
- Find alternative thoughts for each thought and write them down next to it.
- Re-measure the strength of the initial emotion from 0 to 10.
- Now, re-measure the % belief in each thought.
The more you do this exercise when the emotion takes hold of you, the more you will find a rational solution to your situation and ease your financial anxiety.
Also, get into the habit of asking yourself the following questions before each purchase:
- Is this really necessary?
- Why am I making this purchase? Is there an unconscious reason?
- Can I find a cheaper alternative?
- Can I deduct this expense from my taxes?
- Does this expense help me?
In any case, always wait several days to think about a new expense and be sure it is contributing to your future.
40% of the Canadian population has a mortgage, which is the most common and most significant debt and the cause of a lot of financial anxiety. There are two ways to reduce your stress and regain a sense of control over your finances in this area: first, pay off your mortgage faster. To pay off your mortgage faster, you can use a broker to refinance with a new amortization.
You may have a solid financial income right now, but you may also have some minor health issues causing you to worry. There are ways to cover yourself and your family: a term life insurance plan will pay off your loan if something happens to you tomorrow. For a small fee, you can sleep soundly and continue to improve your savings. The advantage of term life insurance? It costs less than permanent life insurance, and you can invest the difference in your savings or pay off your mortgage faster.
To learn more and receive a no-obligation quote, please fill out a quick application form. We will be happy to help you discover a termite plan and its advantages!
Written by Diane Taes