How to tackle financial stress and plan for the future

By Katherine O'Chee ·
Woman contemplating and planning her financial future

If you’ve been losing sleep over your finances, you’re not alone. As many as 2.29 million Australians are currently facing financial stress - over eight times more people than pre-COVID times, according to wellbeing program Financial Mindfulness. 

So what exactly has been troubling Australians? New research from Financial Planning Association of Australia (FPA) shows that worries including job insecurity and loss of super and savings sit top of mind.

FPA’s survey with over 2,000 Australians reveals that due to unemployment or paycheck cuts from COVID-19, 11% now struggle to make ends meet while 31% are dipping into savings just to get by. 

Many respondents also said they carry money regrets, with 70% wishing they did things differently, such as putting aside more cash for a rainy day, avoiding impulse purchases, and prioritising debt repayments. 

But it’s not too late to take action now. This week is Financial Planning Week, which means it’s an opportunity for you to take a step back and revise your financial plans. 

“The COVID-19 pandemic has demonstrated the need to prepare for the unexpected,” said FPA’s chief executive, Dante De Gori. 

“Understanding your current financial situation and short and long-term financial goals - in other words having a financial plan - means you can better manage your finances, allowing you to live your today while making sure your tomorrow is planned.”

Tips for creating a solid financial plan

COVID-19 may have come with a silver lining: it has instilled healthier money habits of saving more and spending less into many people. One in 10 Australians even said they’re in a better financial position than before, thanks to cancelled holidays and working from home. 

While those good habits have likely arisen out of necessity, devising a solid financial plan can help you stick with them in the long run. Here are a few tips to get you started:

1. Separate needs from wants

If you’re running on a tight budget, you can give yourself a bit more financial wiggle room by figuring out which costs are essential and which are discretionary:

  • Wants: These are expenses you can afford not to have, e.g. eating out, streaming subscriptions, gym memberships.
  • Needs: These are expenses you need for survival, e.g. rent or mortgage repayments, other debt repayments, basic groceries, utility bills, transportation costs, personal savings.

The trick is to minimise how much you spend on ‘wants’ and redirect those funds into ‘needs’. This simple strategy will make paying off debt and reaching your financial goals a whole lot easier.

2. Rethink your financial goals

It’s no secret COVID-19 has put many people’s financial goals on hold. Recent AMP Bank research found that 60% of Australians postponed their overseas trip, 29% delayed a car purchase and 22% pushed back buying a house. 

But there’s a bright side to all this - now you have a chance to hit the reset button and re-evaluate your financial goals. Maybe you’ve dipped into your super and want to focus on rebuilding your nest egg. Or perhaps your dream is to start a small business in five years, or own your first home by 30. 

Whatever your goals may be, remember to keep it...

  • Measurable: Big goals are like mountains: they take a lot of time to accomplish. That’s why breaking down your goals into more manageable steps can be a great way to keep track of progress and help you stay motivated. Attach timestamps to each step, and figure out what you need to achieve by the end of each week or month to hit those smaller milestones.
  • Realistic: While goals should be challenging, it’s also important not to go overboard and set yourself up for failure from the start. For instance, if it’s easy for you to save $500 a month, try for $1,000, but don’t stretch for something impossible like $10,000. 

3. Build an emergency savings fund

What COVID-19 has proven is that unexpected things can happen and disrupt all your plans for the year. Having an emergency savings fund under your belt can protect you from the shock of these unforeseen circumstances. This is a money bundle designed to cover all your essential expenses for at least 90 days while you figure out your next steps. 

Looking for a place to stash your emergency fund? These high interest savings accounts could help you earn as much interest as possible:

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4. Consult an expert

If you aren’t confident mapping out your finances yourself, consider talking to a qualified financial planner or adviser. These are professionals who can assess your specific situation and guide you through how to best hit your financial goals. The FPA has a handy tool to help you find financial planners in your local area.

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Katherine O'Chee
Katherine O'Chee
Money writer

Katherine O’Chee is Mozo’s international money transfer and forex expert and business banking writer. She keeps Mozo’s readers on top of the latest news and writes in-depth features to inform and help Australians make smarter financial decisions. Her work has been published in major media outlets including Sydney Morning Herald, SBS News and Bangkok Post. She has a Bachelor of Arts (Media and Communications) from the University of Sydney.