Avoid impulse spending – Black Friday and Cyber Monday sales.
Black Friday and Cyber Monday sales are upon us, with a marketing onslaught that can be hard to resist.
Continue reading “Avoid impulse spending – Black Friday and Cyber Monday sales”
Facing debt hangovers.
The first few weeks of the New Year is one of the best times of the year in Australia.
Don’t blow your savings.
The endless restrictions and lockdowns Australians experienced during the pandemic did more to us than make us want to socialise and dine out.
In many people, they create a pent-up sense of not being able – or allowed – to spend money on the things we want and love.
Compounded by the increased savings stored up by months of lockdowns, many commentators and financial experts are now expecting consumers to go on a sustained spending binge.
Online sales over the coming months – from Black Friday and Cyber Monday through Christmas past Boxing Day and right up to New year sales – are expected to hit record levels.
On top of that, hotels and restaurants have re-opened and the borders are re-opening. Airlines and tourist operators are tooling up to increase capacity – and that means a flood of overseas and inter-state travel marketing is about to hit the public.
Millions of Australians’ credit cards and buy now, pay later accounts look set to blow out.
But the resulting temptations – and pressure – to spend up holds a serious threat to something incredibly important to anyone wanting to improve their financial wellbeing and reduce their financial stress.
That precious asset is our savings.
Why shouldn’t I spend my savings?
Of course, you can spend your savings – especially if it’s yours alone.
But should you?
There are powerful reasons it’s very unwise to spend your savings.
Draining savings is a sure way to begin an unhealthy habit of living beyond your means – exactly the opposite behaviour that allowed us to grow savings in the first place.
Saving from a low base is hard, it’s like struggling up a tall ladder.
Living beyond our means has an inevitable outcome too: without the capacity to continually increase your income, it will lead to acute and probably chronic financial stress.
In other words, living beyond our means is trying to live in a fantasy.
Splurging from our savings is akin to tumbling down that ladder.
If it’s joint savings we are talking about, then spending from that without the consent of your partner is a breach of a relationship boundary.
What if you both agree to splurge your joint savings? See the opening point above – you can, but it’s unwise.
Why do I need to safeguard my savings?
A big reason spending your savings is a negative is you will fall further and further behind in wealth creation goals.
‘Hanging onto savings is an opportunity to get ahead financially which generally is what the wealthy are doing,’ says Hamish Ferguson, of Vision Property and Finance.
“They are purchasing assets and not spending as much proportionally on consumption,” he says.
Paying attention to successful wealth creation strategies is crucial for people who wish to do more than survive.
To put it crudely, how we save and what we do with those savings may determine which one of these two categories we fall into: the ‘haves’ or the ‘have nots’.
“If our desire is to be in the earlier category then we need to limit our consumption and ensure that a savings/investment plan is part of our budgeting,’ Mr. Ferguson says.
“If this is not the case, then we will end up in the have nots and as suggested only have enough to survive.”
Mr. Ferguson says there are financial ‘headwinds’ coming so keeping a buffer now is a sensible idea.
These include the bogeyman of the economy: a rise in inflation.
“Inflation is expected to rise so the cost of living is going up, interest rates are expected to rise which as well means mortgages and probably rent will go up over the next few years,” he says.
The power of a financial ‘buffer’
The final reason to hang onto savings seems intangible – but also something most of us can relate to.
Having a financial buffer or emergency fund improves our confidence, stress levels and gives us choices in life.
“The research suggests our stress levels are lower when we have a healthy buffer,” Mr. Ferguson says.
‘This, in turn, helps us to make better future decisions and have better relationships.’
Government guidelines are that a useful financial buffer is around three months’ worth of expenses.
‘Even if you can only save a little, make a start and keep saving. The more you can regularly save, the better,’ according to moneysmart.com.au
If you put $20 a week into a savings account, you’ll have over $1,040 by the end of the year. That’s the start of a good amount of savings to give you some financial breathing space.
Choice is an important concept in all this.
“Choice is powerful, but with choice comes the discipline and responsibility to make wise decisions,’ Mr. Ferguson says.
The power to choose wisely is something that comes to us when we can practice financial mindfulness.
Is there a way I can spend or treat myself safely?
This is a great point and an important one. Life should not be relentlessly difficult and it is not meant to comprise only self-denial.
But before we prepare to treat ourselves it’s important to understand one of the universal truths of wealth creation:
“’Save then spend, don’t spend than save’,” is a great famous quote that might be helpful here, Mr. Ferguson says.
The key is having a plan to reward yourself, that is the healthy way to go.
But what does that look like?
Here’s an example. If you can set a goal and boundary to save $12,000 before rewarding yourself with a $2,000 holiday, your net benefit is $10,000.
But that benefit disappears if you ‘spend then save’.
Don’t play catch-up with money, it’s fraught with danger: it’s far better to save than spend.
Returning to the above example, once you reach $22,000 savings you can have another $2,000 holiday, or reward yourself to the tune of $2,000.
Saving before spending can be a win: win strategy.
For this strategy to work, you must – must – prioritise savings over spending, every day, every week, every month.
Get to know simple ways of how to manage credit cards.
Who doesn’t like spending money on things that they want to buy? It is during these purchases that credit cards are used.
The very first thing that we need to know is what exactly are credit cards? Let us find out. In simple words, a credit card is a metal card that is rectangular, sometimes made of plastic that financial institutions issue.
Do you know this card helps you borrow funds from a pre-approved limit to pay as you make any purchase?
This article will help you understand How to Manage Credit Cards and take care of financial expenses.
There lies a difference between credit cards and debit cards. This is basically when you use a debit card; the amount gets subtracted from the bank account; on the other hand, when you use a credit card, your money gets reduced from the pre-approved limit.
Credit cards can be used to make online payments too.
What are the different types of credit cards that are generally available?
To know How to Manage Credit Cards, it is essential first to get acquainted with credit cards. Customers engage in a variety of activities that require different types of credit cards to purchase various things.
Let us check out some various credit card types.
1. Travel credit cards – Who does not like to enjoy discounts on airline ticket bookings, cab bookings for regular travel? Everyone does! Right? So travel credit cards help you do just this! And add to this the fantastic reward points that are gained during every purchase!
It is exciting to know that complimentary access to VIP airport lounges and booking tickets at lesser rates is possible. So what is keeping you from learning How to Manage Credit Cards? Learn the tricks and live an easy life.
2. Shopping credit cards – Shop for your favorite things from the comfort of your home. Cash-backs, discount vouchers are available all year round. These credit cards can be used for online and offline transactions alike.
3. Secured Credit Cards – Enjoy a secured credit card against fixed deposits to avail of great interest rates. If you make the right usage of these credit cards, then you can increase your credit scores.
Managing credit cards is a matter of practice and also patience. Are you aware that your credit score gets affected by the way you manage your credit card?
Learn expert ways of How to Manage Credit Cards with the expert team at Financial Mindfulness.
What are some of the effective ways to manage your credit cards? Get to know about this right here!
1. Learn how to use credit cards effectively- The first thing that you need to know when you want to manage your credit cards is how to use them in the proper manner.
Credit cards can be used effectively by making timely payments and not keeping any dues.
Keeping expenses due will eventually harm your credit scores since payment history is considered the most significant factor while calculating credit scores.
2. Keep track of your budget- In simple terms, a budget is a plan which helps you to track your money. This tracking is both ways earning and spending. A budget enables you to get a clear picture of your financial life.
If there is a question of debt management, you have to be aware of the availability of free cash flow. You have to put additional funds towards debt payments.
3. Learn how to spend- Learning to live within your means is one of the best habits you can build. If you spend more than you earn, you learn how to keep control of your expenses.
If you know how to curb your costs, you might learn how to manage credit cards in a better fashion. Take help from the officials regarding this matter.
4. Build an emergency fund- It is always a better idea for people to get an emergency fund so that if any financial emergency crops up, you can choose not to use your credit cards for expenses.
A simple way to achieve that is to transfer a part of your amount from your checking account to your savings account every month. You can review your budget and figure out how much you can save aside every month.
Who likes to live in debt? Obviously nobody! A debt free life is also a part of How to Manage Credit Cards, and stay financially secured. You can learn How to Reduce Debt in simple yet efficient ways. This will help you lead a financially secured life.
1. Keep small numbers of credit cards- Please keep limited numbers of credit cards.
2. Check the bills very carefully- Keep a check on your accounts and ensure that the rates remain the same.
3. Stay vigilant- Once you have managed to clear off the debts, make sure not to get into debt once again. The best thing that you can do is use debit cards and cash instead of credit cards.
Learn quick and easy ways of how to reduce debt.
Finance is a large part of a person’s life. Who doesn’t require substantial amount of money to lead a happy and fulfilling life.
When someone faces a financial crisis and experiencing financial stress, they take help from institutions that can help them out.
The first thing that you should know is what is debt.
In simple words, debt is defined as an amount of money that is borrowed by one party from another party in order to make payments that seem difficult to do so under normal circumstances.
It is interesting to note that the money that is borrowed with the condition that it is always paid back with the added interest at a later date.
Interestingly, there are various types of debts, and each one is different from the other. If you get a complete knowledge of what these debts are and how you can handle them it becomes easier to learn How to Reduce Debt effectively.
So what are the various types of debts?
There are different types of debts. It is not only for a single purpose that a person borrows an amount of money. Since the idea is different, so the name also differs.
This is done to segregate one kind of debt from another. It becomes easier to understand why a particular debt is taken and also needs to be paid off within the stipulated time.
So let us check out the variety of debts and their meaning.
Secured Debt, this type of debt can be defined as any debt that is issued against any asset that can be defined as collateral.
In order to know How to Reduce Debt it is important to know that a credit check is needed in order to understand how well the debt has been handled in the past. If the person who is borrowing the loan fails to repay the debt then the asset is to be handed on to the lender.
A classic example of secured debt is a car loan. Money is supplied to buy the car but also claims to get ownership of the title of the car. If the money is not returned, then the lender can repossess the car. The rate of interest of these loans is quite reasonable.
1. Unsecured Debt
This loan comes without any collateral. When any amount of money is lent without any asset attached, the money is leant purely on the belief that the borrower will repay the loan with the added interest.
A contractual agreement is made to repay the funds. If there is any delay or default in the payment, the lender can ask for any money he wants. This can be done by taking legal steps.
Examples of such debts include; credit cards, medical bills, credit cards.
2. Mortgages
This is the most common type of debt that people carry with themselves. Do you know why mortgage loans are taken?
It is generally taken to buy homes. In this case, the real estate serves as the collateral. It is interesting to note that mortgages have the lowest rate of interest.
The interest is tax-deductible for the people who itemize the taxes. You can pay for 30 years every month for your mortgage loans.
So what are the ways that will help you reduce your debt?
It is always a pragmatic thought that you should have enough funds to make it through for your leisure life when you retire. This is the forethought of a person when he is working so hard throughout his life.
There are various ways that will help you stay debt-free and enjoy a pleasant life. Let us look at the ways you can avail a debt free life.
Start a debt management plan
This includes prioritizing the debts in order of urgency, creating a healthy budget, cutting down on extra spending, etc. How to Reduce Debt knows your entire budget.
Set a budget
Always check how much income you make monthly and your monthly expenditure. This is very important. This will help you to manage your debts if you have any and enjoy your life as well.
Avoid using your credit cards
Please try and use cash whenever possible. The logic behind this is simple. If you pay in cash, you will tend to think before you spend.
Save as much as you can
It is highly recommended that you stop spending on things that are not very necessary. It is very tempting to do away with this habit, but once you try your best, things will indeed work out in your favor.
There are simple ways you can design for yourself to save on monetary spending.
What you need to know to be a mindful shopper.
The pandemic has placed enormous pressure on the global supply chain, which has led to retailers warning goods will take longer to arrive than they would have before the pandemic.
This message has been distilled in recent weeks and days into attention-grabbing headlines, such as ‘start Christmas shopping NOW, retailers warn’.
Another one, is ‘Christmas is just around the corner’. Or maybe you’re seeing ‘don’t miss out!’ reminders about the upcoming Black Friday/Cyber Monday shopping period, from November 26 to 29.
While it’s a fact that the movement of goods will be slower than usual, it is not an objective fact that people need to rush, ‘get in early’ or even panic about their shopping and gift-giving as some people do.
This week we look at the sense of urgency created by warnings to ‘get shopping’ – why this happens, how it can affect us – and our personal finances – and why we need to exercise caution and practice a little healthy scepticism.
Understanding what is behind public messages from retailers
Public messages from retailers about buying anything originate from marketing department.
While it is true that good marketing identifies consumer needs and brings buyers and sellers together, as a discipline marketing falls short if it doesn’t increase sales.
Ultimately the main point of almost messages about shopping is to encourage you to increase or at least maintain your spending.
“Marketing tactics such as one time only sales offerings, promotions and discounts are all designed to get us to spend big,” says Lea Clothier, a money behaviour coach who helped design the Financial Mindfulness program.
“Tactics such as the use of time, or volume-based limitations and ‘buy now or miss out’ messages create a sense of scarcity and trigger a fear of missing out (FOMO).”
Creating a perception of scarcity is a successful way of making goods and services seem more appealing. Big companies spend millions unlocking the psychology of shoppers, because doing so is worth billions.
Generally, red flags include words, phrases and images such as:
The consequences of shopping with high urgency
When we are rushed into any decision, we are more likely to base that decision on emotion, rather than logic.
“Scarcity and FOMO are emotional triggers that play on our sense of not having enough and our fears of missing out and therefore not ‘fitting in’ or belonging,” Ms Clothier says.
Any financial decision made from a place of emotion or fear, particularly when spending, can bring negative consequences to our finances.
For a decision to be rational and balanced, it requires time and consideration of whether we truly need or want it, whether we can actually afford it, and whether it is planned purchase or not.
This is the essence of mindful shopping online.
When we are rushing to shop online, or we are emotionally driven to purchase, we are more likely to impulse buy.
Impulse buying is exactly as it suggests, when our impulses or urges drive our spending habits.
Impulse spending can lead to many consequences such as overspending, ‘buyer’s remorse’ leading to emotions such as guilt and shame, difficulty paying bills, financial disagreements and financial stress as well as increased credit card debit or buy now pay later debt hangovers.
These kinds of consequences will invariably create financial stress in our lives.
Financial stress is complex, but when it is a constant in our lives it can put pressure on relationships .
Mindful behaviour with money
Faced with such powerful sales and marketing strategies, it’s important to be mindful of how they can drive our spending habits.
Why? Because we much as you might trust a brand or a store, or online retailer, it is not their brief to help you avoid financial chaos, let alone build wealth. That is up to you.
What does being mindful with money mean?
We refer to it as financial mindfulness.
Financial mindfulness means being aware and paying attention to your finances, and that may mean seeking help.
The help required will vary from individuals. It may be practical financial support, or learning budgeting skills, or seeking assistance to manage the stress of money worries.
The first step to being financially aware is to determine how stressed you are by your finances.
You can do this by measuring your current financial stress using our Financial Stress Indicator, which you can access in the Financial Mindfulness app.
You can read more about the Financial Mindfulness app here and download it from the Apple Store or Google Play store.
You can also read more detail about the complex problem of financial stress here.
We also have more information about techniques to lower financial stress and stress in general.
But what about those supply chain issues?
Marketing messages often do contain universal truths, or real facts about the world, that is partly what makes them seem important.
News of supply chain difficulties in late 2021 caused by the pandemic are not fake news.
Deliveries of gifts may take more time to arrive and no-one wants to have to say ‘sorry your present is in the mail’ at Christmas.
There is a balance to be struck with online shopping – which applies any time of the year.
“The key is to plan ahead,” Ms Clothier says.
“There is still plenty of time between now and Christmas. The better planned you are, the more chances you have of being able to shop around and find the item you’re looking for.”
It can pay to have a plan “b” or “c” for gifts for your loved ones. That way you won’t feel pressured into purchasing something purely on urgency or scarcity basis.
Ms Clothier suggests getting creative about gift-giving.
There are many ways you can give a gift.
“Gifts don’t necessarily have to be product or something you purchase brand new.”
“In fact, there is a lot of research to say that the best gifts are shared activities and experiences that create memories and a sense of longer lasting happiness.”
Some of these ideas might include:
There is also a considerable amount of research that shows how highly we value something that has no pricetag – time. So even if you are broke, calling someone regularly and making time to visit someone, listen and talk together, will almost certainly strengthen relationships with loved ones.
The Golden Rules of mindful shopping
If you are paying attention to the real purpose of marketing, open to becoming more financially mindful and to examining your behaviours with money, positive changes are possible.
You will hopefully be able to start shopping for what you really want and need rather than be dragged into buying by emotions, or hooked by urgent-sounding messages.
We’ve come up with a checklist of ‘Golden Rules’ to use when online shopping that may be useful as you try to navigate the busy shopping season ahead.
Being mindful with online shopping is about being awake and alert and aware of what we are doing before we do it and while we are doing it.
When we can do that, we tend to buy what we actually need or truly want and almost certainly spend less than we do when we are mindlessly spending.
And we avoid painful regret around money.
Good luck with your online shopping, enjoy!
Financial stress and under-earning.
When people think about answers to financial stress a lot of energy and attention is paid to our spending. Where does all our money go, we are urged to ask of ourselves and our partners.
The implication is clear: if we suffer financial stress we share a flaw – impulsive and sometimes reckless spending. We can easily go straight to the conclusion that we are over-spenders, who use spending to numb out boredom and difficult emotions. We might even think we are greedy.
For some people, sadly, those are harsh truths. But just as many people try with all their willpower and attention to detail and live within their means, and cannot seem to make ends meet. For many people, a polar opposite problem to over-spending applies under-earning.
Earning less than your skills suggests it wouldn’t be a major problem if it wasn’t so damn expensive to live; so huge numbers of people are driven into debt.
It isn’t cheap to live in Australia, especially in a capital city like Sydney.
According to Numbeo (the world’s largest cost of living database), the cost of living in Australia is 17.6% higher than in the United States. In fact, it’s cheaper to live in countries such as France, United Kingdom, Germany and Canada.
US households on average carry US$145,000 (A$187,400) in debt, according to the personal finance website The Ascent. In Australia the figure is even higher, skyrocketing beyond A$250,000. Much of those debts are mortgage repayments, an essential cost and also an investment in our futures.
But what about credit card debt? In the US, the average credit card debt per household is US$7,000 according to nerdwallet.com, while the average American with a student loan owes $56,000 and the average car loan is $27,000.
Card debt is lower in Australia, around A$2500 per cardholder, while car loans are slightly higher here.
It’s not yet known what the average debts owed to credit services like Afterpay and ZipMoney are as they are too new, but the national bill in Australia is thought to be over $1 billion.
“Many people believe that card and personal loan debts come from heedless spending, and to get out of debt you have to stop buying luxuries and living a lifestyle beyond your means,” says Andrew Fleming, Founder and CEO of Financial Mindfulness.
These assumptions are often wrong he says. “Often people use cards, credit services and loans because their incomes don’t match their expenses, especially when an unexpected expense comes along,” he says.
In most western economies it is well known that the cost of living – let alone the price of major life expenses like property – has outpaced inflation and wages for many years.
One answer to how we cope with going back even when we have the best of intentions is to confront the issue raised near the start of this article: under-earning.
But beyond a state, most of us find difficult, even shameful to talk about, what is under-earning, exactly?
First, it’s useful to identify what under-earning is not.
Barbara Stanny, author of Overcoming Underearning: A Five Step Plan for a Richer Life wrote in Forbes in 2011 that an under-earner is not someone who chooses a low income or a simpler life without much work.
“It is always a CONDITION OF DEPRIVATION[sic] not just of money, but of time, joy, freedom, choices and self-esteem,” Stanny wrote.
Under-earners are often drowning in debt and vague about money, she wrote. They might even have an “anti-money attitude”, unwittingly sabotage their own career prospects and underestimate their value at work. Often they are also co-dependent (meaning they put others’ needs ahead of their own).
Under-earning is a chronic condition that’s not going to be fixed in a day, let alone by reading an article, but awareness of it can start to break decades-long negative cycles.
People work through deep-seated issues like using anything from various forms of therapy to mindfulness practice.
The latter approach can help alleviate financial stresses and strains at two levels. “Mindfulness practice won’t necessarily change your earnings,” says Andrew Fleming.
“But it will give you a new awareness of what you are doing and help change your approach to what and how you spend and what you earn.”
He says regular mindfulness practice will help people clearly see the reality of their situation, “instead of being stuck … with your mind racing 100 miles an hour” – and will give you the calm to deal with it.
And you’ll need that calmness because negative, even painful feelings are likely to come out of seeing the realities behind your financial stress.
“Frustration and discomfort can be a sign of a breakthrough, a new awareness,” Fleming says.
“It might help you take action, perhaps asking for a pay rise and being confident when doing so, having an authentic conversation with the boss or it might put you into gear to pursue a better-paid vocation, either within the same company, the same industry or by doing something totally new.”
How to stop spending too much at Christmas.
Christmas is by far the busiest time of the year for shopping and many of us deal with the pressure and financial stress of the annual retail frenzy with an increasingly popular new behaviour – self-gifting.
If you’re not familiar with the concept of self-gifting, you might be just a bit in denial. Think of it as December retail therapy: we all know that feeling – we are out shopping for Christmas gifts and we see a sexy new gadget, T-shirt with a funny slogan or a stylish home accessory in a store and realise the person it would be a perfect present for is actually ourselves. So, we buy it, you know, as a treat!
Retail therapy sounds nice – we fool ourselves it’s ok because it’s a type of therapy and we are told: “Therapy: Good!”
Retail therapy is of course popular all year round, especially after a shocking week at work, or an argument with our partner, or when we’re just feeling the blues.
But is it therapeutic if we buy non-essential to just manage predictable and recurring stress? Or is it really impulse spending?
Spending money impulsively can make us ‘feel better’ and ‘more alive’. But it can be a serious problem if this is something we begin to do regularly, especially with expensive items, as a way of coping. And let’s face it, jobs and relationships – and life in general – can be stressful for extended periods. New COVID-19 lockdowns are also very stressful especially on the eve of Christmas.
Data on impulse spending is contradictory – with one survey showing Aussies claim to have reduced our impulse buying while another shows that more than three quarters of us impulse buy when we shop via mobile. So it’s helpful to define it: when react to temptation by mindlessly spending money we haven’t budgeted on.
According to a poll of 1003 consumers by US website creditcards.com, five out of six Americans admit to impulse buying. One in five people had spent more than US$1000 on impulse, which rose to one in three for people earning over US$75,000.
Seven strategies to manage your impulse buying
It’s not a huge leap to switch from a default state of mindless impulse spending to one of financial mindfulness– which means having awareness and paying attention to your finances and financial behaviours.
Working through complex and difficult problems that may trigger impulse buying is of course not easy. But let’s not forget what a hugely painful thing financial stress is. Ask yourself honestly, is your impulse buying adding to your financial stress? It’s a question worth pausing to consider honestly.
Financial worries are now accepted as a leading cause of stress in people’s lives throughout the western world. Impulse spending therefore just compounds the problem.
Credit card giant Mastercard reported a major shift in consumer behaviour that has seen 44% of Aussies decrease their use of cash when making purchases in-person since the outbreak of the coronavirus pandemic, as shoppers fear germs on cash.
The research found that more than half (52%) of Aussies are more aware of the dirtiness of cash as a result of COVID-19, while one in five (21%) said the risk of germs has made them not use cash at all.
Eight in ten (79%) of Australians agree contactless payments are a cleaner way to pay.
Founder and CEO of Financial Mindfulness Andrew Fleming said the combination of reduced incomes and a move away from using cash is the “perfect storm” for credit card debt which could drive up financial stress.
You can read the full article here.
Perfect storm of credit card debt brewing for Australians during COVID-19.
Rapidly falling incomes, a move to card-only payments and a complete avoidance of cash is creating a “perfect storm” for Australians to find themselves in deep financial ruin.
Andrew Fleming, CEO of financial stress busting app Financial Mindfullness, says many Australians are unaware of the debt they are getting into by relying solely on personal credit.
“There is almost one credit card for every adult Australian. In January 2020 just before the crisis, there was $42.6 billion owing on credit cards with $28.4 billion accruing interest,” explains Mr Fleming.
Read the full article here.
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