The Newspoll found that two thirds of Australians are stressed about money, second only to being stressed about work. Does that include you?

The Lifeline poll reminded me of research published last year by Relationships Australia, which found that financial stress was the second largest contributor to relationship breakdown, affecting 35 percent of relationships.

This may be a stretch, but if we can work together to reduce our financial stress we may be able to lower the divorce rate and bring more joy into everyone’s lives.

Causes of financial stress

I started writing a list of what has caused financial stress among people I’ve met. Most of the causes fell into two broad categories:

1. Not enough money (to do, buy or retain)
2. Doing it for the money

In this article I’ll share some tips for reducing your stress caused by “not enough money”. Later, I’ll write about “doing it for the money”, but if you’re keen to learn how to earn money doing what you love then please call me now.

Stress about not enough money

Our stress seems to rise when we don’t have enough money for something that is really important to us. For example:

• To join our close friends on a big interstate or overseas holiday (maybe to celebrate a milestone birthday)
• To buy a bigger house when our family has well and truly outgrown the current shoebox
• To keep our car and house when we lose our job and fall behind in the mortgage repayments

Our stress doesn’t appear to rise when we decide we can’t afford the $2 chocolate bar or $15 movie ticket. I believe that is because those things aren’t really that important to most of us.

Financially related decisions can also stress us, and I believe they fall into this broad category. Our stress level is affected by the materiality of the loss or by the consequence of a wrong decision. If we get the decision wrong it may mean we won’t be able to upgrade our shoebox house when we want to, so then we stress about the decision.

Save for the Significant. Minimise the Insignificant

To reduce your financial stress plan to have enough money for those things that are most important to you. This is a personal thing and is based on your values.

Once you have plans to be able to afford the most important things in your life you can spend the rest of your money on whatever you want, guilt free.

You need to move your thinking from “next pay” to “next year” and then onto “next decade”.

I believe it is through spending too much on daily insignificant things that we end up not having enough for the significant things. This is often because the significant experiences and achievements are lumpy and irregular, so they can sneak up on us.

Bring far away important things into focus

Here’s an exercise that you can do.

Get a blank piece of paper and place it in landscape orientation. Across the middle from left to right draw a thick line. The left represents now; the right represents your passing, say at age 100.

Divide this line representing the remainder of your life into bite size chunks. The length of each chunk is not fixed, just make it meaningful to you. You may like symmetry and therefore make each chunk an even five years. Or each chunk could be of different length representing different life stages you have in mind.

Next fill the rest of the page with all of those achievements and experiences that are really important for you in each of those meaningful chunks of life. For example:

• Career transitions you’d like to make
• Places you’d like to see in the world
• Experiences you’d like to have with your family
• Time out of the workforce to study, reflect or travel
• Contributions you’d like to make to your community and world

For inspiration on what is really important reflect on your personal values.

Now implement plans

Implement a clear plan to manage your money so that you achieve and experience what is really important to you. Then you can happily spend the remainder on whatever insignificant pleasures you want, guilt free.

This is how you can achieve what I call financial fulfilment. And this exercise is part of the process that I call Fulfilment Financial Planning. To learn more call me on 1300 669 101. I take clients from all around Australia and would love to hear from you.

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“Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.

Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.”
(Read the full interview here)

Earlier that morning my esteemed colleague Bill Milburn had enlightened me as to the technical difference between a recession and a depression:

A recession is when your mates lose their jobs.
A depression is when you lose your job.

Following are some tips to help you place yourself in a stronger position should we enter a recession.

Repay Debt Faster

If a recession hits you are probably going to need to pull in your belts just to continue to meet the minimum debt repayments.Get a head start and build a substantial buffer by boosting your repayments now.

It is when you fall behind in repayments that the banks will start to repossess your car, boat and house. If you are ahead in your repayments that will give you a buffer if your income stops temporarily.

Refinance

If you recently locked in a fixed interest rate on your loans and that now seems high in the current environment consider refinancing to a lower rate and a more flexible package. Check the break fees before doing so and include them in your cost/benefit analysis.You will have more options if you refinance now while you appear to have a more secure income and before your property value has plummeted. Don’t wait until both you and the lenders get even more nervous.

If you do achieve a lower interest rate keep your repayments at the same (or even higher) dollar level to help you build a substantial buffer.

Secure Your Income

Twenty per cent unemployment sounds really bad. But remember that means eighty per cent are employed. So make sure you are one of the people who keep their job.Ask yourself what you can do to ensure you continue to be of massive value to your employer. How do you ensure that you only lose your job if your employer goes broke? What can you do to help your employer not go broke?

• Can you be more personally productive by improving personal systems and eliminating personal waste?
• Can you increase your expertise by completing additional, relevant and valuable professional development?
• Can you help your employer win new (unexpected) business and retain existing business?
• If your industry looks to be hit hard (e.g. retail) can you up-skill now and be prepared to change to a more robust industry?

Ensure you are very employable to both your current and other employers, so that if you do lose your job you don’t lose your income.

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If you prefer to learn in fun, interactive ways (as many of us do) then check out the SuperAnt website, developed for TasPlan. It has lots of budgeting tips that will be useful for your teenage children too.

You are never too young, or old to learn how to make your money work harder for you. 

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2. Almost $12 billion in lost superannuation
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I curb my spending by calculating how long I have to work to earn enough money to pay for each purchase! My husband loves KFC but I am no longer an easy push over. I would have to work three hours for our family to enjoy one meal that is gone in just 30 minutes!

Instead of looking at the dollar value of an item, I look at the ‘work value’ of an item – this is what it will really cost me. To do this, work out your net hourly rate (after tax and minus expenses such as babysitting). When you are tempted to buy something, divide the purchase price by your hourly rate to see how long you will have to work. It can be a real turn off – especially when buying takeaway food!

If you have not done so already, check out Simple Savings and consider subscribing to their free newsletter so you get tips like this every week.

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One Friday evening in December I met three mates at The Como Hotel for a drink to celebrate the spirit of the festive season. Around us there were many other jovial groups obviously enjoying the season, which is often characterised by eating (and drinking) to excess.

Pretty soon we too were discussing ordering some bar snacks when one of the mates confessed that only a few days earlier his wife had put him on the Sacred Heart Diet. You may have heard of the diet under a different name, but in essence it is one of the strict meal plans that prescribes what food you eat and slowly introduces a new food or two each day.

In confessing, my mate – let’s call him No-More-Fun-Man – was actually looking for a reprieve. You see, one of the other mates happens to be a very experienced and respected dietitian – let’s call him The Health Saviour.

Fortunately, No-More-Fun-Man got his reprieve when The Saviour declared that all of these fashionable, prescriptive weight loss diets are rubbish. Sustainably losing and then maintaining weight is as simple as eat less & exercise more. Control your calories so that energy out equals energy into your body. The rest is just finesse around the edges.

This simple truth equally applies to creating wealth

Just like diets, there are an abundance of wealth creation books, seminars and websites professing to teach you the secrets of creating great wealth fast. But most, if not all of it is just finesse around the edges.

The core of wealth creation is to ensure money out is less than money in – spend less than you earn.

Before worrying about all the fancy finesse of advanced wealth creation strategies, focus on consistently and sustainably controlling your cash flow.

Tracking your cash flow

Interestingly, in the last two years I can recall only two clients who came to me with a clear idea of how much and where they spend their money. When I recommend to the other clients that they track their spending for at least one month their body language betrays their reluctance.

It seems that controlling our cash flow and controlling our calories are concepts that make us very uncomfortable.

Those four blokes are still at the bar…

And that brings me back to those four blokes sitting in The Como Hotel.

As it turns out my third mate present at the pub was also on a diet. He is participating in a CSIRO research project. As part of the research all he has to do is control his calories and include one specific food in his diet each day (the subject of the research). The recommended tool for helping participants track their calories is CalorieKing.com.au and he spoke highly of the tool.

The mention of CalorieKing caught my attention as another close friend has lost over 20kgs in the past 6 months by simply eating less and exercising more. The tool she has used to track her calorie control and inform her eating decisions has been CalorieKing.

So over the Christmas holidays I signed up on CalorieKing to see how it can help me get back to within my health weight range (as judged by the body mass index). And what a fascinating experience it has been.

The right first step

There are so many similarities between the quest to maintain a healthy weight and the quest to maintain healthy finances.

We seem to accept that a first step to losing weight is to start tracking what we eat. Every diet I have ever seen starts with identifying or specifying what and how much you eat. We may be reluctant to do so, but the act of tracking what we eat actually serves a second purpose of informing our future decisions

The same principle applies to creating wealth. Fortunately identifying what you spend is much simpler than tracking your calories. The key measure you need to track – dollars – is openly disclosed at each purchase.

The even better news is that with both calories and money you’re not required to minutely track them every day for the rest of your life. But it is a very useful place to start. Especially if you are not happy with your current situation and want to accelerate the transition to a more comfortable, sustainable lifestyle.

Stories to help you

Through my health journey I am noticing many similarities to wealth creation. These similarities may be very helpful to you on your wealth journey, so I will be sharing my observations with you right here on my blog. Subscribe to be advised when I share new insights and tips.

If you are already very good with health then you already have the capacity to also be very good with wealth. The insights from my journey may help you apply the skills to your wealth creation.

If you don’t feel that you are already good at either health or wealth, don’t despair. I bet you are good at lots of other things. So you too already have the capacity to be very good with wealth creation. As you read future blog posts my story will spark your mind at how what you are already good at can be applied to wealth. (When it does so please write to me and share your story – or leave a comment.)

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Discover your financial fitness by completing our brand new Financial Fitness quiz now. (It’s free and takes about 70 seconds).

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“A phenomenon in recent years has been the way the price of electronic goods just seems to be getting lower. This is attributable to a combination of ceaseless technological advances; Asia’s cheap manufacturing costs; and the strong Australian dollar.

Just blink and the prices of laptop computers, digital cameras, DVD recorders and flat-screen TVs seem to drop another hundred dollars or so.

But there is another factor that is pushing the cost of some electronics way down: the increasing use of smart salary-packaging techniques by employees from senior executives down through the employee hierarchy.

Employees these days would need rocks in their head – or an employer with an extremely inflexible remuneration policy – not to buy their next laptop computer through their salary packages. The tax savings are breathtaking.”

Wow, this issue of “Smart Investing” by Robin Bowerman of Vanguard Investments (Australia) has several good articles. The above is an excerpt from a good article on salary packaging a laptop computer. Read the full article here.

If you need a new computer then perhaps it is worth asking your employer about their salary sacrifice options. For the way most people use their home computers a modern laptop has plenty of computing power and is compact. “Be a Smart Spender” is one of the behaviours of Money Masters that I talk about in my seminars.

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This morning I interviewed expert Mortgage Professional, Damian Day of Ardent Finance to uncover some of the loan options that may be available to you if you are concerned about your repayments.

You will learn about:

• The value of refinancing to consolidate debts at a lower rate
• Where and how to shop around for a lower interest rate
• How fixed interest rates can be used to provide cash flow security
• The important traps of refinancing and fixing rates that could cost you much more than you gain in lower interest

The interview goes for 20mins 20 secs and could save you thousands of dollars in loan interest. I encourage you to make a cup of your favourite beverage and listen now.

For expert assistance on creating your debt structure contact Damian Day by telephone on 1300 793 813 or e-mail dday AT damianday DOT com

You may also enjoy these related articles:

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With a bit of forethought it does not have to be that way. In this interview on Wake Up Perth I reveal fun and quick ways to avoid the New Year Debt Hangover.

If you have know of other great ways to cut the costs of Christmas whilst boosting the fun please leave your suggestions as a comment below.

Ho Ho Ho Merry Christmas!

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I was complimenting Kylie on her wonderful ability to have lots of fun and control her spending within what she had defined as their budget. She then revealed one of her “secrets” – a website called Simple Savings.

Budgeting doesn’t have to equate to sacrifice, even though that is what your money mindset may lead you to believe. Often there are ways to keep your current lifestyle but shave dollars off the cost by just being in the know.

Simple Savings has a terrific free newsletter that highlights at least one tip per week.

If you want to search the archive of tips Simple Savings also has a members vault jam packed with great insights from other members about how they have become smarter consumers. I have been impressed by the ideas and I’m sure you will be too. (There is a $47 joining fee for the members vault.)

Do you know of any other resources?

Do you use other resources to help you become a master of your money? Maybe other sites with tips for smart spending? If so, please let me know by leaving a comment below as I’d love to share them.

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