We are reminded every day that we are living in less-than-ordinary financial times – if not by the state of our personal finances and worrying about how we will make ends meet, then simply by reading the news headlines.
The message is clear: people everywhere are struggling with money. We know it from our data, too; we consistently find from running Wellbeing Assessments with organisations around the country that at least half of all employees are experiencing financial stress at any given time.
There are a few ways to tackle this. First, we can tackle the systems that determine macro-level economic trends, challenges, and inequities. This is important, and a topic that we don’t have time to cover here (but we recommend this article as a starting point).
Second, we can tackle individual skills and resources, helping each of us to build our financial knowledge and confidence. This is often the target of financial wellbeing or education programmes, equipping people with the raw knowledge to budget, invest, save, buy homes, build retirement funds, and more. This is crucial, but not always enough.
The third side to financial wellbeing that we often forget is the psychological part – how we think, feel, and act when it comes to money. This represents one of the biggest challenges of psychology: how we translate knowledge into behaviour.
According to research by Te Ara Ahunga Ora, the psychological side of financial wellbeing involves feeling confident about our money skills and feeling as though we have some ownership over our financial future (locus of control). It also covers a range of other psychological factors like our self-control, our ability to think in the long term, and the extent to which we tie money to our own perceived social status. Any good financial education programme also needs to consider these factors, not just how much someone knows or does not know about finances, when trying to enhance financial wellbeing.
All of the above – feeling confident, feeling in control, and thinking in the long term – are difficult to do when you are treading water in a sea of acute financial stress. We need solid, stress-busting tools to find our footing, to regain confidence, and to think clearly. Only then can we take steps towards wrangling our thinking and building our knowledge. Here are our best tips:
- Dial down the stigma of financial stress and talk to someone. Remember earlier that we said that one out of every two employees is experiencing financial stress? We all find money difficult at some point in our lives. Shift your stress from an individual problem to a collective problem. Try talking to a friend, partner, colleague, EAP, or a financial advisor (many larger workplaces offer free access to these). If you’re finding it hard to talk about this kind of stuff with mates, check out our tips here.
- Schedule in low-stress money time. We all go through peaks and valleys with our money and how we feel about it. If you are in a peak at the moment, or know that one is coming, use this short moment of relief to sit down and really think about your finances, and try to do this regularly. This gives us a chance to think rationally, even objectively, about our money when the stress isn’t already dialled up to level 10. This helps us to build our knowledge, see things clearly, and harness the confidence boost when things are going OK to keep that momentum going (some psychologists call this building a positive upward spiral).
- Identify and challenge your thinking traps. Cognitive distortions, often called thinking traps, are common for all of us when it comes to money. These are the messengers in your head that offer unhelpful commentary, especially during times of high stress – saying things like, “You’ve never been able to stick to a budget before, what makes you think it’s going to work now?” or “I must be the only fool on this planet who can’t figure out how to invest”. What are the thinking traps that come up regularly for you? Try to write them down, challenge them (“Is this really true?”), and gently nudge them away the next time they show up during a moment of financial stress.
- Keep up healthy habits. Finally, here’s the boring truth that you’ve heard a thousand times before: when we are stressed, this is when we need good, strong, healthy habits the most. If you are going through a stressful time at the moment, take stock of the last time you moved your body, ate a nutritious, home-cooked meal, or slept for more than 7 hours. These tools are tried and tested to help us clear the fog, bring our problems into focus, and help us figure out a way forward. They are also easy to let slip!
For more on building good financial behaviours, and working with your psychological barriers (instead of against them!), check out our other article on forming good financial habits.