As fuel prices and interest rates continue to rise amidst an already high cost of living, many individuals are experiencing significant financial pressure.
If you find yourself anxious about your finances, you may be actively seeking ways to reduce your expenses.
This financial anxiety can lead to distractions, such as worrying about money when you should be focused on driving or work, indicating that there may be deeper issues at play.
Specifically, financial stress can negatively influence your decision-making abilities.
Recognizing this impact can be challenging, but it is crucial for taking proactive steps to address it.
Financial stress can cloud your judgment.
When finances are a concern, your mind often preoccupies itself with persistent worries.
You might find yourself asking:
“What should I do if my landlord increases the rent? I might have to move back in with my parents.”
“Which meals can I skip this week?”
These thoughts are not just hypothetical. A friend recently shared that she had to choose between buying toilet paper and tampons to ensure she could afford food for the month.
What strategies have you implemented to alleviate financial stress?
While these thoughts circulate, they consume valuable cognitive resources, which are essential for making sound decisions.
This phenomenon, referred to by researchers at Princeton University as “poverty brain,” can significantly impair your cognitive capacity.
The impact is comparable to a loss of 13 IQ points, similar to being over the legal alcohol limit for driving or experiencing 24 hours of sleep deprivation.
Just as you would be unfit to drive or work on a construction site under such conditions, financial worries can similarly impair your ability to perform daily tasks effectively.
Moreover, poor decision-making is not limited to financial matters; it can also affect your work, relationships, and health.
The positive aspect is that this state of impaired decision-making is temporary. Once the financial stress subsides, your capacity for making sound decisions can return to normal.
So, what can you do in the meantime?
Seeking professional assistance may be necessary.
There is a lot of discussion about financial literacy as a solution to these issues.
While education is important, expecting someone under significant stress to resolve their problems solely through self-study is unrealistic—much like asking a drowning person to save themselves by reading a swimming manual.
Now is not the right time for self-education; you need immediate assistance to navigate your current difficulties. Once you feel more secure, you can focus on learning how to avoid similar situations in the future.
So where can you find help?
Financial counselors can be an excellent resource.
These professionals are often overlooked in Australia’s personal finance landscape. Their services are free, they do not sell products, and anyone can access them.
You can connect with a financial counselor through the National Debt Helpline (NDH) by phone or locate a local counselor for in-person or online meetings.
These counselors can help you explore options such as requesting financial hardship assistance from creditors like banks and utility companies.
They can also advocate on your behalf and refer you to complementary services that may suit your needs.
Specialized financial counseling services are available, including those listed on the NDH website, such as Mob Strong Debt Help for First Nations individuals and services for rural financial counseling or small businesses.
Choose the service that best aligns with your circumstances.
While you’re waiting for assistance, NDH offers informative articles on various topics, which can serve as a helpful starting point for those currently feeling financial pressure.
If you haven’t yet reached a point of severe financial stress, consulting a financial counselor can still be beneficial as a proactive measure.
Additionally, you might consider creating a risk management plan, especially during anxious times.
Worry often stems from a lack of preparation. To alleviate stress, follow these three steps:
1. Write down your financial worries—those thoughts that keep you awake at night or distract you during the day.
2. List any preventative measures you could take to avoid these issues in the future, such as considering an insurance policy.
3. Outline what you could do to reduce the impact if your concerns materialize. Identify services or individuals who can provide assistance, which is known as mitigation. Documenting these steps will provide a reference if challenges arise.
If you are uncertain about how to prevent or mitigate your financial concerns, reaching out to a financial counselor is a great starting point.
Lacey Filipich, a financial educator and author of Money School, emphasizes the importance of seeking guidance in managing financial stress.
This article serves as general information only. It is advisable to seek independent professional advice tailored to your specific situation.
