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An introduction to money management

Everyone wants to make their money go further. Setting up a budget, staying on top of your bills and living within your means – it can all pay off. It’s a good feeling being in control of your finances. And managing money is a skill we should all have – but it’s often something we’re not taught at school. For most of us, we learn as we go, and this could involve a few costly mistakes.

Financial pressures can affect all of us. We’ve all reached the end of the month struggling to make ends meet. But without action, it’s easy for bad habits to form and problems to snowball. The link between money and mental health or wellbeing is a complex one.

Worrying about money can make our mental health worse, but poor mental wellbeing can also make it harder to manage finances. It can affect people in different ways, but starting to understand your behaviour can help you make responsible choices.

Key money worries

Recent research found that seven million Australians can’t sleep at night because of financial concerns. Around 40% of those asked were struggling to sleep soundly because of money worries, and more than 60% admitted to regularly feeling ‘hot’ and ‘stressed’ about their bank accounts.

It’s likely certain worries are shared by most people – for example, more than half were most concerned about household bills and funding day-to-day living. Other concerns seemed to depend on the age of those asked. The research found the most stressed group of Australians were aged between 35 and 54, something which they put down to the group being more likely to face peak mortgage debt, potentially due to upsizing to accommodate a growing family, and juggling careers and raising families.

Similar results have been found around the world. UK research, released to coincide with World Mental Health Day 2019, said many of the people who worry about money struggle to sleep soundly at night (32%). It found that 9.5 million UK adults have suffered from mental health issues as a result of financial anxiety.

For the younger generations (aged 18 to 24), worries were largely focused on the following:


Paying off student debts


Paying for a house

9.5 million UK adults have suffered from mental health issues as a result of financial anxiety.

How younger people behave as a result of these worries varies. 11% are so preoccupied with their finances that they check their balance several times a day. Others (18%) only check their account every few weeks – perhaps out of fear. The Aussie research, from online financial services company Spaceship, actually gaive this a name. “We call it FOFO, or Fear of Finding Out your bank balance.”

Whatever stage of life you’re at, money worries can affect you.

Talking about money and mental wellbeings.

For many people, talking about money is difficult. It’s a bit of a taboo subject. Almost a third of Australians never talk about money – with anyone. The research analysed almost 3,300 adults and found that embarrassment or the fear of being judged is a major reason why people keep quiet.

Baby Boomers are the generation least likely to engage in money talk, with younger generations being slightly more comfortable talking about the topic. The study developer, Patrycja Slawuta, explained that “money is more than just a number for most people. Our relationship with money is emotional, complex and personal and is influenced by many things.”

While society has made some great breakthroughs in discussing topics like mental health more openly, it seems there’s still some way to go with other issues.

If you avoid speaking about your finances, it can have a detrimental effect on your mental health. We’ve already discussed how many people struggle with sleeping. But it can also make life tricky for those around you – for example, if you have joint accounts or both you and your partner’s name are on the bills. Making mistakes could impact their credit rating.

But talking about it could make a difference. If you’re serious about a secure financial future, it’s important to open up the conversation. Many people have similar worries about money, so no-one is alone.

Talking about it can help everyone involved by breaking down the taboos, aiding understanding and even helping to find solutions to common problems. As Slawuta says:

The more people talk about money, the more motivated they are to learn about money and their financial behaviour to improve their situation and gain confidence.
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Tips for having difficult conversations
about money

Be wary of the emotions involved

It’s easy to get emotional when talking about things you find stressful. But some emotions might get in the way of making progress with the conversation. Make sure you give yourself time to address your feelings and have the conversation at the right time.

Appreciate that conversations are two-way

Once you’re ready, you might have a lot to get off your chest. But it’s important both people have time to speak uninterrupted. It might seem a little unconventional for a conversation with someone you speak to so often, but you could set some guidelines at the start. It’ll make sure everyone gets to speak. Just remember to stick to the topic.

Avoid judgements

Think before you speak or react (facial expressions can be judgmental too). Make sure you don’t make accusations, but instead focus on what you think and feel.

For most people, these conversations will happen with friends and family. If you can’t talk, or don’t feel comfortable talking to your family or a friend, consider talking to the following people:

  • A health professional
  • Mental health charities
  • Student services if you’re in education
  • Peer support (groups of people using their own experiences to help each other e.g. support groups or online communities)

Why you need to manage your money

Recognising when you or someone else needs support isn’t easy. But Money Advice Service suggest there are things people do which suggest there could be a problem.

If you’re worrying about whether your financial decisions may be linked to how you’re feeling, ask yourself:

  • To make yourself feel better, do you spend large amounts of money on things you don’t really need?
  • Do you have gaps in time where you can’t earn because you must take time off work, or can’t work due to poor mental health or wellbeing?
  • Do you avoid opening post that contains bills or bank statements, or avoid checking them online?
  • Do you avoid face-to-face or phone conversations about money?
  • Do you worry about making day-to-day financial decisions?
  • Do you still worry about spending and debt, even if you’ve got enough money?
  • Do you struggle with concentrating when faced with money matters, or find it difficult to take in all the information you need to make financial decisions?

You can also use these questions to spot signs that someone else’s financial decisions may be linked to mental health or wellbeing.

These behaviours don’t necessarily mean someone has a financial problem. But over time, they could lead you to lose control of your money. Working on the relationship between financial choices and wellbeing can prevent that.

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How money can affect your mental health

According to the Royal College of Psychiatrists, “debt can cause – and be caused by – mental health problems.” Money problems can make people feel uncomfortable, guilty or even hopeless. As tempting as it is to avoid talking or thinking about your finances, sorting problems out will make you feel better.

Tips for managing the effects of money pressures

Recognising when you or someone else needs support isn’t easy. But Money Advice Service suggest there are things people do which suggest there could be a problem.

If you’re worrying about whether your financial decisions may be linked to how you’re feeling, ask yourself:

  • If you can’t face the thought of opening bills, ask someone you trust to look after your post.
  • If you are unable to go to work, make sure you contact your HR team. An increasing number of companies provide extra mental health support for employees, so find out what’s available.
  • If you’re tempted to ignore creditors, don’t. Make sure you talk to them about what’s going on – more on this later.
  • If you need additional control measures, consider temporarily blocking websites you might spend money on.

The amount borrowed in payday loans by Australia is on track to be worth $1.7bn by the end of 2019

A big part of managing money pressures is encouraging healthy habits. Unfortunately, payday loans have been hitting the headlines in recent years. With applicants typically accepted within the same day, payday loans are advertised as a solution for anyone looking for money to tide them over until they get paid. The loans offered are usually for fewer than 30 days and the amount borrowed in Australia is on track to be worth $1.7bn by the end of 2019.

But payday loans are controversial. Payday lenders have come under criticism because of the high interest rates that many struggle to pay back – sometimes as high as 407%. Many customers feel misled and mistreated.

While lenders are warned that they should only approve loans to people who were capable of repaying the money, they are not a good way of managing the effects of money pressures – especially for unnecessary purchases.

Understanding why you might overspend

Instead, one thing you should try to do is understand your spending. For most people with a difficult relationship between wellbeing and money, similar patterns emerge. It’s common for people to shop while they feel down, in an attempt to improve their mood. If you can work out triggers for your spending, you could feel more in control.

In’s Mental Health & Debt 2019 guide, they suggest doing the following to analyse your spending habits:

  • Look for spending triggers (situations, feelings, thoughts). Keeping a diary might help. Identifying these triggers can highlight ways to change.
  • What are your reasons for spending? If low mood is triggering the spending, maybe it would be useful to get help from your GP or a mental health professional.
  • Sometimes spending is triggered by feelings of loneliness, so try asking a friend or relative to visit you rather than heading for the shops.
  • Use parental controls to turn off internet shopping and TV shopping channels if these are a particular temptation.
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Taking control after poor mental wellbeing

If you’re trying to re-balance your finances after suffering from poor mental health, Money Advice Service say you need to do two things:


Correct any damage caused


Protect yourself from any future damage

The table below shows some practical steps you should start considering when you feel ready.

Correct any damage caused
Protect yourself from any future damage

If you have overspent, remember you can always return purchases or cancel orders.

Remove auto-filled card information on your browsers. Online shops often remember them to make it an easier experience, but it can encourage impulse purchases.

Analyse your spending and household costs. Try to start creating a budget.

Consider getting rid of credit cards altogether if you find them difficult to manage.

Ask your bank to add a note to your credit file. This doesn’t affect your credit record, but may make them more aware of your history with spending.

Start thinking about saving.

But what if you owe and are being chased for money? A creditor is any individual or institution you owe money to – for example, your bank or credit card company. These are the most obvious types of creditor, but a creditor can be anyone that you owe an outstanding amount. So if you’ve ever paid a utility bill or made a payment on a car loan, you’ve had a creditor. All of us could have several creditors at one time.

One way creditors make money is charging interest on the credit (not typical for creditors who extend lines of service). They can also charge fees on things like late payments. If you don’t pay under the agreed-upon terms, they can chase you for the money. This can be extremely stressful if you’re struggling.

That’s why there are certain advantages to telling your creditors about your mental wellbeing. It allows them to make reasonable adjustments and treat you fairly. Money Advice Service say the pros of letting creditors know include:

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  • They should refer you to a specialist team. They’ll have training to understand how you’re feeling during these difficult times.
  • You’ll be given reasonable time to get the information you need to make decisions.
  • Any banks should keep the debt in-house. If you don’t tell them, sometimes they’ll sell off unpaid debt to a credit agency. These agencies might chase you.

Could you qualify for mental health benefits?

Everyone should make sure they get the money they’re entitled to. Anyone with a disability may be entitled to some benefits – disabilities can include mental health problems.

Be sure to check with the Department of Social Services.


Practical financial skills to take control of your finances

Owing money is normal. Common debts include:

Most of us need to rely on lines of credit for day-to-day living. And debt can be advantageous because it smoothes spending over time and allows us to buy things that it wouldn’t be possible with wages alone.

Indeed, in recent years, Australian households have become comfortable with debt – largely thanks to rising property prices, declining interest rates and easier access to consumer credit. In 2016, Australia’s total personal debt was around $2 trillion and the average Australian household owes $250,000. It remains one of the highest averages in the world.

The statistics don’t paint a good picture, especially as there are risks with too much debt – mainly because of the increased vulnerability if something happened (increases to interest rates, job loss, illness or injury, or a drop in asset prices). Most of us would like to cut down household debts and control our spending.

Secured debt

The loan is secured with an asset. This piece of collateral could be a home or car, or anything of high value. The lender can take possession of this if you don’t repay as agreed. Examples of secured debt include a mortgage or car loan.

Unsecured debt

The loan is not secured with an asset. If you don’t pay, they can’t take anything of yours – but there could be associated charges. Examples of unsecured debt include credit cards or student loans.

In 2016, Australia’s total personal debt was around $2 trillion and the average Australian household owes $250,000.

Making money management a habit

Where did you learn how to manage money? A lot of us are never taught what to do, and mistakes can be costly. So where do you start? Firstly, get a grasp on what you’re spending. Get all your important records, such as payslips and bank statements, and see where your money is going. Once you’ve got all this information, ask yourself:

Where could you save money?

It’s possible to save money on loads of your monthly outgoings, including mortgage, utility and phone bills. Make enquiries and use comparison sites to see if you can reduce what you pay. For example, do you need all your TV packages?

Could you reclaim any money?

It’s easy to assume it won’t be you. But lots of people have had money taken without them knowing. In Australia, there is approximately $1.1 billion in lost shares, life insurance and bank accounts. You can check for free here if you have any unclaimed money.

Can you change any payments to direct debits?

Where possible, consider switching your bills to direct debit. The amount will be automatically paid from your account on a certain day. Not only does it make sure your bills are paid on time, it can help with budgeting – knowing exactly when you pay what. Some companies will even offer you a discount for paying this way. But others – such as home and car insurers – can charge you more.

In order to make this kind of money management a habit, set aside a regular time to look into money and bills each week. Think of it as the same as other healthy habits, such as regular exercise or cooking fresh ingredients, which you need to put effort into.

How to do a budget

With 86% of the Australian population not knowing how much money they are spending every month, it can pay off to keep a regular budget.

If you’d like to create a budget, there are three main steps:

Work out how much money you have coming in.

This will be your normal salary or wages, as well as any welfare benefits or tax credits.

See what you’re currently spending your money on.

It’s easier if you break this down by:

  • Household bills
  • Living costs
  • Financial products e.g. any insurance you have
  • Family and friends
  • Travel
  • Leisure – your social costs on going out or what you spend on hobbies
Work out the difference between the two.
Create a budget.

This must address either the imbalance between incomings and spending or how to use any leftover money.

If you have money left at the end of the month, this doesn’t mean you shouldn’t be looking for ways to cut back costs further. You could still save money on bills. But you can also work out how to use this money – either paying off any debts or saving. It’s always good to put money aside for events like Christmas or unexpected emergencies.

If you’re spending more than the amount you have coming in, you need to look back at the outgoings to find areas to reduce spending. You need enough money to cover your spending or problems will start to arise.

But it’s not all about cutting back. Perhaps you could be increasing your incomings. For example, do you have grown-up children who still live with you? If they’re working, they could be contributing to household expenses.

Could you save money on key household expenses?

Managing your money could be easier if you know what outgoings can and can’t be negotiated. These are some of the common bills households have to manage:

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Gas and electricity

Most suppliers will give you the option of monthly or weekly payments. Although usage can vary, if you have a pre-payment meter and you’re putting a lot of money in every week, you could be paying towards a debt as well as paying for what you’re using. Talk to your supplier about reducing that amount.

Any household could also try to cut their usage. Some quick wins from The Energy Saving Trust include:

  • Switch your appliances off standby – almost all electrical and electronic appliances can be turned off at the plug without upsetting their programming.
  • In the kitchen, use a bowl to wash up, try to do one washing cycle a week and only fill the kettle with the amount of water you need.
  • Do some DIY draught proofing to avoid losing as much heat through draughts around doors and windows, gaps around the floor, or through the chimney.
  • Consider turning your thermostat down by just one or two degrees.
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You can also cut down on your water usage by being aware of how long you’re spending in the shower, or fitting an efficient shower head.

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Landline, mobile and broadband

Negotiation is key with these bills, as packages and offers vary hugely. It’s always worth calling your supplier and asking about cheaper packages. Think about what you actually use, and what you could do without. But switching suppliers can also save you money.

How does your weekly spending compare to the Aussie average?

The average households spend $1,594 each week on household expenses. Housing expenses vary if you’re a homeowner ($124.07 a week) or a renter ($115.12). Other general household expenses are:

  • $34.57 on electricity
  • $34.25 on property maintenance
  • $23.39 on property rates and fees
  • $18.89 on insurance
  • $16.28 on water and sewerage
  • $30.83 on car maintenance
  • $44.39 on fuel

We’re still treating ourselves too with overseas holidays ($50.24), trips around Australia ($42.67), eating out ($52.94) and takeaways ($40.76) contributing to weekly costs.

Source: Australia: How well are we really doing report, CommSec

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How technology can help

People do strange things in order to control their spending. For example, putting their credit cards in a zip lock bag and placing this in a tub of water in the freezer. Apparently having to wait for the water to defrost can help with impulse spending. Although different solutions will work for different people, you might have come across a whole host of new technology looking to help people with their money too.

Here are some of the best ways to make use of technology to manage your money:

Take control of your energy use

More and more homes are using smart heating controls with displays or energy monitor to increase awareness of energy use.

Block the websites that encourage you to spend

If you need a little extra help with impulsive shopping, then technology can remove the temptation for you. With an overload of advertising on our screens, it’s no surprise some of us just want to block entire websites. Tools like Cold Turkey a will let you add an unlimited number of websites to a blacklist for as long as you need.

Save in a way you can afford

There are loads of apps which can connect to your current account, monitor your spending and suggest how much to save. You can set them up to do this automatically, for example Pocketbook, MoneyBrilliant or Spendee. Other apps like Raiz have options to round each payment up to the nearest dollar. This money is then invested into a mix of exchange traded funds (ETFs).

These are just some of the examples. With technological capabilities always expanding, it’ll be interesting to see how we can use apps and tools to embrace healthier money habits.


How to combat debt

Combating debt can feel like a huge task. But the big message from the Money Saving Expert is that “no debt problems are unsolvable.” His advice can be summarised in three key rules:

Stop borrowing

Don’t add to your existing debts by borrowing more. See whether you spend more than you are earning and start budgeting. This is easier to do once you work out where your money is going and see whether you can cut back.

Cut interest rates

If you can reduce the amount of interest you pay, your repayments will be clearing more of the actual debt. You can do this with a balance transfer (a new line of credit used to pay off the debt but with a new, cheaper interest rate). Many people are tempted by the 0% credit card deals, where you get interest-free deals for a set period. But remember these rates can shoot up after this time is over. Depending on the amount you need to clear and how quickly you can do it, you could be better off with a cheaper longer-term deal.

Pay off the highest debt rates first

It might be tempting to split the amount you can repay each month between various debts. But you should actually be focusing your spare money on clearing the debt with the highest interest rate first. That’s because it’s costing you the most. For the others, just pay the minimum repayments. Once you’ve cleared one debt, move on to the next most expensive.

The sooner you begin to tackle it, the better.

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Managing your finances during difficult times

What financial support has been available during COVID-19?

Fortunately, there has been recognition that the current coronavirus pandemic is affecting people’s financial wellbeing. Depending on your situation, there are ways you can get additional support.

In Australia

Coronavirus supplement: If you’re eligible, you could have been getting $550 every fortnight. You should have been automatically paid this if you get one of the following income support payments:

  • JobSeeker Payment
  • Partner Allowance
  • Widow Allowance
  • Sickness Allowance
  • Youth Allowance
  • Austudy
  • ABSTUDY Living Allowance
  • Parenting Payment
  • Farm Household Allowance
  • Special Benefit

You will have been paid this additional support as part of the usual payment from 27 April 2020 if you qualified. If you’ve only very recently been able to claim for one of these payments, as soon as that claim is approved, you’ll also get the coronavirus supplement.

For more information on this support, see Services Australia.

Economic support payments

On 12 March, the Australian Government announced eligible existing payment recipients and concession card holders would be getting an economic support payment of $750. If you were eligible, you should have already received this money via Services Australia or the Department of Veterans’ Affairs.

A second payment, again of $750, is to be paid from the 13 July onwards.

To find out if you’re eligible and for more information, see Services Australia.

Extensions to existing support

The qualification criteria for certain payments has been extended so that more people, those affected by the coronavirus pandemic, are eligible for the support they may need.

From 25 March 2020, eligibility for JobSeeker Payment and Youth Allowance for job seekers has been expanded. The following people can now get support:

  • Sole traders and self-employed people
  • Permanent employees who have been stood down or lost their job
  • Anyone caring for someone infected or in isolation because of coronavirus

Source: Department of Social Services

JobKeeper payment

Designed to help businesses keep people in their jobs, even if they have to cut their hours because of coronavirus, you can ask your employer if they’ve registered for JobKeeper payments. If they have and you’re eligible for it, they will pay it to you. Most employees won’t need to do anything.

$1,500 a fortnight for 6 months is available to eligible business and self-employed people. It’s about 70% of the national median wage, according to the Guardian.

Crisis payment

If you find yourself in a crisis because of extreme circumstances, you may be able to receive a one-off payment from the government. This has always been available, but has become particularly prevalent in recent times.

According to Services Australia, to get this payment you must:

  • Be eligible for an income support payment
  • Be in severe financial hardship
  • Have an extreme life change
Early access to your super

People affected by coronavirus may be able to have early access to their super. You could apply and access up:

  • $10,000 of their super until 30 June 2020
  • A further $10,000 from 1 July 2020 until 24 September 2020

But remember these are your retirement savings and other support may be available, so do think carefully before considering this.

Check your eligibility with the Australian Taxation Office.