How to deal with and avoid financial stress

#ConsumerEducation

#FinancialAwareness

#DebtManagement

When Jawad was briefly hospitalized due to a fall, he worried more about his finances than about his health. He worried that he might lose his job. He worried that he would miss payments on his finance. He worried about children’s school fees and about rent.

About 50% of respondents to a survey said financial worries caused them to lose sleep. Research also shows that those dealing with financial stress are twice as likely to report overall bad health, and four times more likely to develop headaches, sleep problems, and other issues. Financial stress also affects personal relationships.

Jawad was able to resume work soon, and his medical expenses were covered by insurance. But he came back determined to work on his financial wellbeing. How can you avoid and deal with financial stress?

1. Make a plan: Instead of living from month to month without knowing what’s coming in or going out, creating a plan or a budget lets you see the big picture. Having a clear view of your expenses – including repayments, bills, grocery, fees, transport, etc. – and your income will give insight into whether you need to reduce expenses and/or increase income.

Create a short-term, medium-term, and long-term view of your income and expenses. Outline what you can save for meeting these expenses.

2. Speak up: Speaking to your spouse/family, your employer, or your bank can help you deal with financial stress realistically. For instance, your family may decide to cut back on extra expenses to pay back a mortgage. Your employer may have provisions for advance payments in extreme cases. Your bank may suggest ways to maximize savings and minimize debt.

Schedule regular money conversations at home, work, and with an advisor.

3. Be ready: When Jawad needed hospitalization, it helped that his insurance details were ready and he had emergency funds set aside. Being prepared for unexpected expenses – whether they are related to health, repairs, or job loss – makes you feel secure.

Create an emergency fund that addresses your major worries.

4. Deal with debt: Unchecked debt can impact your financial health. Make sure debt repayment is high on your list of priorities so that you don’t incur stress or penalties from missed payments.

The UAE Central Bank recommends that your debt burden ratio not be more than 50% of your income.

5. Automate: Worrying about missed payments is a major source of stress. Automating payments – whether of utility bills, card bills, repayments, or towards savings – can help minimize worry.

Ask your bank how to create mandates so you never miss a payment. For recurring payments, create reminders on your calendar so you are not surprised.

Your financial wellbeing improves if you invest the right amount of time.