Monday 11 December 2017

How to reduce the harsh effects of financial stress

Bankruptcy can be a better option sometimes
Bankruptcy can be a better option sometimes

Ian Mitchell

POET Edward Estlin Cummings summed up the financial condition of many people when he said: "I'm living so far beyond my income that we may almost be said to be living apart."

The comment makes us smile, but its reality was summed up by the research of psychologist Paul J Lavrakas, when he said in 2008 that between about 10 and 16 million Americans "are suffering terribly due to their debts, and their health is likely to be negatively impacted".

Translate that into the Irish population and it comes out at between 150,000 and 200,000 people. Furthermore, Lavrakas was referring to 2008, before the pressures created by our austerity programme began to bite.

Lavrakas was speaking about a health poll by Associated Press-AOL at the time. The poll found that 27pc of those who reported high debt stress had ulcers or similar problems, compared with 8pc of those with low levels of debt stress, whilst 29pc suffered severe anxiety, compared with 4pc of those with low debt stress. Alarming figures.

Financial stress is caused by much more than debt, as will be confirmed by anyone who's ever been 'downsized', seen their retirement savings plummet in value or watched helplessly as the equity in their home disappeared.

Money provides feelings of security, independence, and freedom. When our income, savings, or pension pot is threatened, we can experience feelings of loss of control, anxiety and other mental and emotional distress – all of which can lead to increased workplace absenteeism, diminished workplace performance and depression.

Not to mention the truly frightening data regarding the long-term damage caused to the children of those parents who themselves are struggling with economic stress.

So what can you do to reduce financial stress? I would suggest that, with your financial adviser's help, you use a simple coaching model that will allow you to move forward from a place of financial stress, first into a place of equilibrium and, from there, into having long-term financial control. Here are five steps which you should then take.

  • Take a detailed, honest, look at your affairs and see exactly where you need to take action. You can do this by using a free analysis tool similar to the Financial Wheel of Life ( resource/fwol/).
  •  Set some clear and simple goals. For example, aim to bring your expenditure into line with your income. This may be challenging, but the wisest financial comment I ever heard was that 'the pain of not having something is minor compared to the pain of having it but not being able to afford it'.
  • Take precise stock of your current reality in relation to each goal – if you're overspending by €500 a month, own up to it, at least to yourself; it will give you a clear picture of the shift you need to make.
  • Identify the obstacles in the way to your achieving these goals. What are the beliefs that you have about your financial behaviour that need to be altered? What are the behaviours that you need to change?
  • Then, take action. Cut expenditure where it needs cut, protect your lifestyle where you agree it needs protection and put in place some sort of financial freedom plan for the future.

Ian Mitchell is managing partner of Eighty20 Focus; an executive and financial coaching practice

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