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Financial stress contributes to adverse behaviours

Money and minds are inextricably linked

Draw up a budget that ensures your expenses remain lower than your income.
Draw up a budget that ensures your expenses remain lower than your income.
Image: 123RF

Our mental state plays a significant role on decisions we make about money.

It is therefore important to note that when we are not in a good space mentally, our pockets suffer the most.

How often have you heard a relative, friend or colleague say they’ve been feeling depressed and how retail therapy left them feeling better?

In most cases, the line that usually comes after that is, “Now, I’m broke”.

Financial services provider, Momentum head of key accounts Wanita Isaacs, says when we are stressed or anxious, we are more likely to make impulsive purchases or take on debt.

“Stress and anxiety can lead us to seek immediate gratification rather than considering the long-term implications of our decisions. On the other hand, people with strong mental health are better at managing their finances and making sound investment decisions.

“They are less likely to succumb to impulse buying and more likely to be able to think through their decisions rationally before making them,” says Isaacs.

She says given this financial juxtaposition between mental states, it is important to take care of both our mental and financial wellbeing to be successful in both areas of life.

October is Mental Health Awareness Month.

“Taking some time out for ourselves – whether it is to meet a friend or take a relaxing walk – can help reduce stress levels. It can also help us to be mindful about how much money we spend every month,” says Isaacs.

Although it is usually never as easy as taking a walk, she believes seeking advice from a mental health professional when needed and a financial adviser can help with striking a healthier balance between mental and financial wellbeing.

Isaacs says “habitual decision-making is one way in which our mental health impacts our finances”.

People with strong mental health are less likely to succumb to impulse buying.
People with strong mental health are less likely to succumb to impulse buying.
Image: 123RF

“When we’re used to making the same choices, it’s easy to buy things without considering if they are necessary or not. The same applies to subscriptions, cars and entertainment,” she says, adding that decision fatigue also plays a major role in our financial decisions.

“We only have so much energy and focus when it comes to making choices. When it runs out, we are more likely to turn to bad spending habits.

“Instead of focusing on what we need and working slowly to achieve our financial goals, we may obsess over material possessions or the desire to become wealthy quickly. If left unchecked, both of these can leave us with debt or other financial problems. This exacerbates the stress and anxiety that triggered the behaviour in the first place, causing a spiral that erodes both mental and financial wellbeing,” Isaacs says.

Denise Neethling, marketing manager at earned-wage access provider, Paymenow, agrees with Isaacs and adds that financial stress can “impact your sleep, work, relationships and can contribute to a vicious cycle in which stress causes adverse behaviours which themselves increase stress levels”.

Isaacs advises people to speak to professionals in the financial sector who can provide support and insights.

“Talking to a professional can help you find a way out of a challenging situation and towards healthy mental and financial habits. Together, you can work towards achieving your goals. Our money and minds are inextricably linked. One impacts the other and we need to equip ourselves with the best advice to fuel our different journeys to success.”

Neethling gives these tips:

Expense tracking: The most important step you can take towards gaining control over your finances is understanding your spending habits. As a first step, keep a spending diary for 30 days. There are some great apps out there, but really all you need is a pen and paper. Don’t overcomplicate things: the idea is simply to understand what’s going where. Tracking your spending can be a real eye opener.

Once you have all the amounts tracked, add up the amounts in various categories (grocery shopping, transport, eating out, entertainment, clothing etc.) You will probably get at least a couple of surprises. Do I really eat out that often? Am I happy spending more on clothes than food each month?

Budgeting: Once you have a better understanding of your spending, it’s time to set some goals in a budget. Again, there are fantastic online or mobile apps that can help you do this (there are even apps specifically aimed at teaching children to budget), but all you really need is a notebook. In your budget you want to be explicit about how much you’re willing and able to spend on each category, in a way that ensures your expenses remain lower than your income.

Financial education: The more you understand about your finances the better your planning will be, and the less stress you’ll feel. There are incredible resources available to help you learn more about financial planning – free courses, websites, and videos.


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