Financial stress and its causes

What is Financial Stress?

Financial stress is the emotional or physical outcome that one suffers when they are worried about the state of their finances.  Financial stress can affect someone’s mental and physical health. Below we discuss some of the strategies to alleviate or  manage financial stress. There is strong like hood that if one is under financial stress, they end up delaying seeking medical help which further affects their physical wellbeing.

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. The unemployment rate in SA is currently at 32.5%. When faced with a job loss you can claim Unemployment Insurance fund (UIF).  Then evaluate your finances and create a realistic budget that will assist you to stay on track while you figure out your next moves. It is important to note that you cannot apply for debt review when unemployed.

• Reduced work hours or income

When seen an influx of applications for debt review from couples applying for debt review because of reduced income because a spouse has lost his/ her job. 

•  Carrying debts of partners, spouse, and family members

When a loved one passes especially in a case where one is married in COP, they can leave you carrying all their debt. Taking a life insurance policy covers this situation. 

• Lack of savings

Putting money away for rainy days is a very good plan. Should an emergency arise you have some money put away to cover the unforeseen situation. If you are homeowner, it’s a good idea to have savings because anything can break anytime, and this happens frequently. 

• High cost of living 

The hiking of interest rates by SARB has pushed up the cost of living significantly. Households are under pressure due to high debt servicing costs especially home loans and vehicle finance debt servicing costs have skyrocketed.

• Separation, divorce, or the loss of a partner

Divorce is a top cause of financial stress. In some cases, the financial issue is exacerbated when maintenance is not being paid to a spouse to cover household expenses or education costs. A divorce decree is required when applying for debt review.

• Health care 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 financial challenging situation. Private hospital price levels in SA are exorbitant for the level of income of the country and are at par with the levels observed in the first world countries such France, United Kingdom, Germany which have higher GDP levels (OECD, 2016). If you do not pay your medical bills for a period time, your health care provider might handover the account to a debt collector and this will affect your credit scores should it appear on your credit report.

• Education costs

If you do not pay your school fees for yourself or kids for a period time, the school/university might handover the account to a debt collector and this will affect your credit scores should it appear on your credit report.

How To Cope With Financial Stress? 

There are steps one can take to overcome financial stress. A key starting point is developing good habits with money shows that you are taking back control.

1. Find ways to earn extra income

Bringing home, the extra bacon always helps to cover daily expenses and help build a savings kitty. 

2.  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 spending your money and how much.

3.  Keep track of your money with a budget

4.  Set financial goals

Set future financial goals and stick with them. Whether it is starting an emergency fund or paying down your debt.