Financial stress can affect someone’s mental and physical health. Below we discuss what causes this stress and how to alleviate or manage financial stress. Like all stress, if you don't address it early enough and let it fester, it accumulates harm to your wellbeing, until you eventually break down. For that reason, it's important to address your financial stress as early as possible. Speak to one of our experts to see how Debt Sage can help you.
The Most Common Causes of Financial Stress
Here we discuss some of the most common causes of financial stress.
- Excessive Debt: Accumulating too much debt is a leading cause of financial stress. Consider debt counselling/ debt review if you are over-indebted as a financial stress coping solution.
- Poor Spending Habits: Impulse buying is central to poor spending habits. Lack of planning prior to spending money feeds into poor spending habits.
- Job Loss: The unemployment rate in SA has been trending upwards. It is currently at 32.5%. Many individuals have lost their jobs, especially in the wake of the COVID-19 pandemic.
- Reduced Work Hours or Income: During the COVID-19 pandemic, we at Debt Sage saw an influx of applications for debt review from couples, applying because their work hours and salary had been reduced by their employers.
- Carrying Debts of Spouse, Partner, and Family Members: When a loved one passes away, especially in a case where one is married in community of property (CoP), they can leave you carrying all their debt. Taking a life insurance policy is essential to preventing this being a financial catastrophe. In this regard, it's important to have open discussions about money with your partner.
- Lack of Savings: Putting money away for a rainy day is a very good plan, so that you have a buffer to cover the unforeseen situation, should an emergency arise. If you are a homeowner, it’s especially important to build such an emergency fund, because essentials (e.g. geyser, fridge) can break at any time and massively affect your quality of life.
- High Cost of Living: The South African Reserve Bank (SARB) hiking interest rates has pushed up the cost of living significantly. Households are under pressure due to skyrocketing debt-servicing costs, especially for those with home loans and vehicle finance.
- Separation, Divorce, or the Loss of a Partner: Divorce is a top cause of financial stress, especially because it goes hand in hand with emotional stress. Your finances can also be put under significant pressure if you have to pay maintenance to a spouse to cover household expenses or education costs. A divorce decree is required when applying for debt review.
- Healthcare Costs: We have had numerous consumers put themselves under debt review due to accumulating expensive medical bills after an injury, illness or surgery, which has left them in a financially challenging situation. Private hospital prices in SA are exorbitant for the level of income of the country and are on par with the levels observed in the first-world countries such France, the United Kingdom, and Germany. If you do not pay your medical bills, your health care provider might hand over the account to a debt collector. This will negatively affect your credit score, should it appear on your credit report.
- Education Costs: If you do not pay your school/university fees for yourself or your kids for a period of time, the school/university, too, might hand over the account to a debt collector, damaging your credit score.
How To Cope With Financial Stress?
The key starting point to address financial stress is to develop good money habits, to show yourself and others that you are taking back control. Then, you need to:
- Find Ways to Earn Extra Income: Bringing home the extra bacon always helps to cover daily expenses and helps you to build a savings kitty.
- Control Your Spending: Eliminate impulse spending habits. Plan before spending your money. A budget will go a long way in making sure you know where you are, and should be, spending your money.
- Claim UIF, if you Become Unemployed: When faced with a job loss, you can claim Unemployment Insurance fund (UIF). Then you have to evaluate your finances and create a realistic budget that will assist you to stay on track while you figure out your next move. It is important to note that you cannot apply for debt review when unemployed.
- Set financial goals: Set future financial goals and stick with them. Whether it is starting an emergency fund or paying down your debt.