Budgeting & saving

Helping clients manage money stress in the coming year

17 December 2019

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

Want to help clients start the New Year in a less stressed state of mind? Money is right up there with health and jobs as a key source of stress for many Australians. Podcast host John Purl AFP® shares his tips for helping clients adjust their money mindset and habits for less stress in the coming year. 

For a growing number of Australians, money concerns are getting in the way of a good night’s sleep. According to UBank’s latest Know Your Numbers survey, more than half of Australians (59%) are kept awake by money worries. But another piece of research into impact of financial stress shows the problem goes much deeper. With their 2017 survey of more than 1000 Australians, Financial Mindfulness commissioned Core Data to explore just how much money stress can affect quality of life. They reported almost one in three people suffer from significant financial stress. Not only is this causing lost sleep, it’s putting them at greater risk of poor health outcomes, angry outbursts, arguing with their partner over money and even turning to drugs or alcohol.

Is more money the answer?

As well as showing just how tough life gets when you’re anxious about money, the CoreData survey demonstrates that a higher income is no protection against financial stress. Survey responses showed that people on an income up to $150,000 and with investments up to $750,000 were only slightly less stressed about money than those earning up to $90,000 and with less than $350,000 invested.

“This goes to show a higher income and more wealth aren’t always the remedy for financial stress,” says John Purl AFP®, Senior Financial Adviser for Affinitas Capital and co-host of podcast Strive 168. “Your actual financial position can make a difference. If you don’t have enough to cover food, education, clothing and medical expenses and put a roof over your head, more income is definitely going to take away a major source of stress. But beyond that, more income doesn’t deliver greater happiness. Numerous studies show earning more than $100,000 a year just opens the door to buying more expensive things – a Porsche instead of a Nissan for example.”

Having worked with many people to solve financial headaches they have in spite of a high income, John has seen what drives them to keep spending to the absolute limit of their finances and experience stress as a result. “I’ve definitely seen clients who rely on borrowing to keep pursuing whatever it is that can shore up their status,” says John. “It might be a $20,000 bike they can ride with pride alongside others in their social circle or profession. Or buying the bigger house in a better neighborhood. Most of these purchases aren’t driven by genuine personal values or priorities. It’s about keeping up with the Joneses and that’s a goal they’ll never reach.”

This is why John takes a values-first approach to guiding his clients towards more considered spending choices and less pressure on their finances and mental health as a result. It’s an approach based on three key areas of the advice process – discussing values, planning for change and limiting the negative impact of peers.

Help clients understand what they truly value

John will always make a client’s values the first item on his agenda in his early meetings with clients. “It’s no good talking through the numbers until you’ve discussed why they’re spending that way in the first place,” says John. “A lot of the time these are people who didn’t come from money and they certainly didn’t suffer because of it. So when you ask them why all this stuff is so important, they start to question their behaviour. Of course it can be about giving children a better life, which is a very positive motive. But if that means having stressed, anxious and distracted parents, you’ve got to ask whether a more expensive lifestyle is really more important for kids than the wellbeing of Mum and Dad.”

Time for action

John has always found this values conversation essential for clients to succeed in following through with an action plan. “You’ll struggle to get anyone to stick to a cash flow, budget or savings plan, if it does not align with their true values,” says John. “The values conversation has the greatest impact on their motivation to make changes. Then I follow that up with a three-step process to determine what needs to change.

“It starts with a look at cash flow – money in and money out – to get to a realistic budget for expenses, one that doesn’t go overboard on luxury spends. Then we look at debts, good and bad, to develop a plan to reduce those, with the highest interest coming first. And the final piece is linking measures of progress with these plans to their agreed values and goals, giving the client a compelling reason to follow through and stick to their budget.”

Be aware of influencers

In John’s view, the people clients spend time with play an important role in fuelling or limiting their financial stress. “A phrase I’ve found to be really true is that we’re the by-product of the five people we surround ourselves with,” says John. “They’re just as critical to your client’s success in shedding money stress as the plan you’re working on with them. When a client is really committed to living a different way, it’s worth having a discussion about their social circle and how much these people can impact their money habits. It might seem harsh, but it’s important to understand that they’re going to influence how clients handle money. Encouraging clients to build an external council to lean on can significantly boost their chances of success in making financial and lifestyle changes.”

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