Uncensored Money Season Five: 5 Ways to Regain Financial Control During Times Of Financial Uncertainty And Distress
Melissa Browne: Ex-Accountant, Ex-Financial Advisor, Ex-Working Till I Drop, Now Serial Entrepreneur & Author, Financial Wellness Advocate, Living a Life by Design | 15/07/2024
Show Notes
It’s no surprise to most of us that things have gotten a little tougher financially in recent years. With so many indicators leading us to a measure of stress and uncertainty, knowing what to do to help things, can feel impossible.
In this episode of Uncensored Money, Mel and Lawsie discuss this uncertainty, giving us 5 things we can look at to regain control during times of financial uncertainty and distress. Because while we know that not all of us can get a second job to bridge a financial gap, nor can we put our heads in the sand to ignore a growing financial strain.
Tune into this episode where we go back to basics, and share the things you really should be doing to regain financial control.
Books and resources mentioned in this episode
If you're on insta, come play over at @MelBrowne.Money and make sure you’re signed up to Mel's Money Musings for more tips, tricks and ideas on how to best work with your money.
Finally, if you love this episode please make sure you subscribe and leave us a review.
Transcript
Mel: Hey everyone. I'm Mel Browne. I'm an ex-accountant and ex-financial advisor, so I have the theory, but I also have the life experience. I'm now financially independent in my own right after coming back from less than nothing in my early thirties. I want this podcast to be like a chat with your girlfriends about money. My aim is to help you discover why you're behaving the way you are with money, to suggest new ways you might behave that are a better fit for you, and to increase your financial literacy and financial confidence. I hope it inspires challenges, educates and empowers you with how you do money. So let's get into it. Welcome to Uncensored Money.
Mel: So today, I know that we've talked about this before, but there's been a whole lot of data that has come out in the last month. So I feel like it's really necessary to go back and revisited it because the indicators are that more and more people are feeling stressed and uncertain about their finances.
Mel: So if that's you, I want you to know today you're not alone. So here's a few indicators that are showing that I'm just talking Australia and I know that this is also the same throughout the Western world. So here's four. So data from ASIC, so the Australian and Securities and Investment Commission show that we're on track to record decade high numbers of collapsed businesses by the end of the year led by the building and food sectors. And I must admit, I looked at this and went, yeah, okay. I received three emails yesterday, so on the 1st of July from businesses that were saying goodbye and I was shocked, like quite a few of them. I'm like, what? No, that's where I get my teas from. So it was really surprised that I read this data and then received those emails. So I, I a hundred percent know this is coming.
Mel: The second lot of data or the second indicator is that the younger generations are facing a chronic housing shortage. Like we just, we know that the third, this is both rental and also supply of houses to purchase and the affordable houses to purchase. Number three is more than a third of Australians who earn six figures are living paycheck to paycheck with less than a month's worth of salary saved. So that's find a research like six figures living paycheck to paycheck. And the final one is that almost half of Australians with debt are struggling to make repayments. And probably one that I was surprised at is that the inflation figures for May was released last week and they showed that in Australia our inflation has moved from 3.6 to 4% instead of the 3.8 that the reserve bank had expected. And economists, as I said in my podcast last week, economists at my podcast episode are saying that their expectation now and the market is baking this in is that we will potentially see an interest rate rise before the end of the year.
Mel: So all of these indicators are leading to a measure of stress and uncertainty when it comes to money. But the problem is just knowing that you're stressed and knowing that that stress is fair, <laugh> isn't enough to turn your financial situation around because the truth is you can reduce your financial stress. And I'm not talking about getting another job, but what we don't wanna do is put our head in the sand, just put our spending on credit or just concentrate on paying off your mortgage and figure well do you know what? That's just gonna be enough. So Lawsie and I today are just going to go through five things that we think you need to be looking at when it comes to regaining control during times of uncertainty and stress so you can build that financial resilience that is so necessary at the moment. So, Lawsie, I thought we would go through these one at a time with you and I both taking one each so that, and as I said, we've talked about some of these before, but I think when we are in these times, I think we need to go back to the basics and really emphasize the things that we should be doing rather than what I think people are doing is putting their head in the sand or looking for that magic solution when the magic solution is, let's go back to the basics
Lawsie: You heard it here first with Mel. Go back to the basics.
Mel: <Laugh>, <laugh>, Go back to the basics.
Lawsie: The first one is to create a buffer. And so what we mean by that is we're wanting to create an emergency fund of three months worth of living expenses. And it's your living expenses. Your holiday is not an emergency. It might feel like it at times, particularly if you're stressed from work or under financial stress and you go, I just wanna escape. I wanna remove myself from adult world and go and have a lolly holiday. But it's not an emergency. Not in the definition of what we are looking at here. So this is three months of all your living expenses. So that would be your rent or your mortgage, your groceries, insurances, bills, all the non-sexy but kind of necessary stuff is what we are talking about there. And if you don't have the funds set aside, then it's about figuring out what that amount is for that three months worth of your living expenses, breaking that down to a fortnightly amount or a weekly amount depending whenever you get paid monthly amount and making sure then that you're putting money aside to be able to do that. Now we're certainly not saying that everybody is in a position to click their fingers and build their three months worth of living expenses buffer up in short
Mel: Period of time. I mean those stats showed that you know, more than a third of Australians on good incomes don't have this. So this is necessary.
Lawsie: Yeah. So it's just about being aware that this is actually a really crucial thing that you need to have in place because it'll buy you a bit more certainty, it'll help take some of that stress out because then we know, you know when things happen when it suddenly, you know, your hours get reduced to work or your fridge blows up or anything like that, you've got money there rather than still scraping by week on week to do it. Now this might take you a few years to build up, like there's nothing wrong with that. Like of course the sooner you can get it built up the better. I think you've just taking off, you know, a huge amount of stress with that. But I know obviously if you are struggling and if you're not, you know, if you're not used to doing this, if you're in that mindset of constantly living paycheck to paycheck or always putting things on your credit like we are challenging your financial behaviors, but it is just being conscious that this is actually one of the things that you really, like everybody should be doing, everybody should have this.
Lawsie: And so it's figuring out a way that you are able to do that. You know, obviously we have resources and stuff on your website including like a webinar, free webinar that people can access which is all about, you know, 50 plus ways to find 10 K. Like there's absolutely other things that you can do rather than having to rely just on your income to try and get this three months worth of living expenses. But it is gonna come down to you know, what are you prepared to suffer for? Is there some things that you can cut back on? You might have a goal of going, I just wanna get to a thousand dollars, like a thousand dollars is more than I've had for a very long time. So you might go guns blazing to get to that for example, and then go, okay, I do have a little bit of a buffer now I know that I've still gotta get that to 10 K or 20 k or whatever that amount is.
Lawsie: And then you might start doing a little bit more of a gradual build to it. But there's just having, yeah, I think the main thing that we want you to hear here is you've gotta have a buffer. It's going to just give you so much certainty, give you control all of the things and how you end up getting there. There's like everything, a million ways to get there and it's just figuring out what's gonna work for you. Yes, if you can automate a money, it's just going there, each pay great. If that's not possible at this point, then it's thinking outside of the square and going, well how else can you start to get this dollar? So you're starting to get some bit of a backup and a buffer for you. And
Mel: That webinar that we've talked a lot about before, you know if your buffer was 10 k, that you can get that in 12 months from outside money. So this is not impossible. And the other thing I would add to that is set up a bank account and call it your buffer or your emergency fund. Put it in another bank if that makes more sense to you. 'cause You know you're gonna raid it if you see it. So out of sight, out of mind, put it in your offset account if you've got a mortgage. But don't put that in with your everyday monies like make sure it's separate and your credit card is not your, your buffer, your credit card is not your emergency fund so let's just knock that on the head straight away. The second one is to get rid of bad debt. I think when we are looking at inflation, when we are looking at costs going up and people living paycheck to paycheck, it can be really tempting to just put your expenses on bad debt or credit or buy now pay later and then just figure, you know, you'll sort it out and then you just end get up in this cycle of bad debt and you might even be paying it off every month but you're actually not getting ahead.
Mel: Getting caught in that bad debt trap or cycle just adds another layer of stress, which means you don't have financial choice. So if you're already feeling stress from everything that's happening at the moment, we don't want this added in as well. So the solution is to cut up your credit cards, cancel your buy now, pay later, and to make a plan to repay that debt within 12 months. So automate your payments so that that debt's gone within 12 months and even jump onto your online banking every time you make a payment you can actually reduce the limit of that credit card and that way you're not tempted to, oh I've paid some off, I'll spend that now. So drop the limit. So you can't touch those funds. If you can't repay that debt within 12 months, then consider a zero interest credit card. So you can jump onto any sort of comparison site to find out what the best deal is.
Mel: Find it for as long as possible. So it might be a couple of years and you can usually move 80% of the balance, in which case you would not activate the new card, cut up your roll card, get rid of that one first with the one with the interest rate interest being charged and then figure out, okay, if it's two years to pay off the zero interest card, I'm gonna work out how quickly to pay it off in 18 months. 'cause Then if life happens, I'm not stuck with this big interest charge at the end and I'm gonna automate it. So that's gone before the end of the interest free period. If you can't even see the wood through the trees through that, then consider talking to a financial counselor. You know, that's why they exist. They can help you negotiate terms. So that is please talk to them.
Mel: But getting rid of your bad debt. If you are someone that is using bad debt but have never paid a cent of interest, again, we've talked on here a lot about how there is an overspend that happens if you use bad debt that's robbing you of choice. So for a credit card Dun & Bradstreet have showed in their independent research that if you are using credit cards you are overspending by 18% on average. If it's buy now pay later it's 18 to 40% on average and you're gonna shop twice as much. So be aware of that. If I looked at what the household average household spend in Australia according to a BS or the Australian Bureau of Statistics, it's 32.5k. That 18% means an overspend of five grand. There's some of your buffer right there <laugh>. So we can find choice by removing some of this stress that we think is convenient that's actually trapping us. Yeah,
Lawsie: So that's number two. Adding in on that as well is if you are not able to get, you know, roll balances onto zero interest cards and things like that, it could also be looking at a personal loan. Now this isn't something that we'd be widely advocating, but if it's, you know, if you're looking at these other options and you're not making any headway with it interest rate, something that you could be doing, then you is going, okay, well at least if I can get a personal loan it's gonna have a lower, you will make, make sure shouldn't say it will make sure it does have a much lower interest rate than what you're getting charged on your credit cards. And then look to see if you can get your credit cards rolled onto that. Yes, you're still paying interest but if you can halve the amount of interest that you're paying on your credit cards, then all well and good.
Lawsie: And I think the other thing too is if you're struggling to make those repayments and stuff on your credit cards as well, like call the credit card providers and see what you can do. I've been speaking to a lot of people recently and they've had varying success with the different credit card providers. Some have been great and gone, yep, we're gonna give you a three month respite on this. No interest is gonna be charged in that time. Which allows you just that chance to get ahead, you know, obviously don't do that and then don't make any extra payments 'cause you're not getting ahead. Others have gone well yes actually we can reduce your interest. That's getting charged by a few percent. It's still costing you a lot of money to have it, but all of those small wins that you can have will make a difference.
Mel: Yeah
Lawsie: in terms of paying down your, you know, getting rid of that credit card. So I think it's just, if you are in a position to advocate for yourself and being able to do that, then definitely put that in play. Because often you'll find if you're going to a financial counselor, they're gonna ask, have you done these things? So make sure that you done some of those things and looked at the other options. And then of course if you have been knocked back with that or you're not getting any luck and absolutely then a financial counselor can get in and help. But it's all just about doing whatever you can to obviously get that, you know, pay no interest or reduce the interest and then be really committed and disciplined to be able to get rid of it while you know, and of course still trying to save for that buffer so you're not stuck in that loop as well.
Mel: I don't know about you, but sometimes I wish there was an easy way, a silver bullet, a magical unicorn, a fairy godmother ready to grant me three wishes. I mean, think of all the miracle diets, fitness fads, promising a six pack in six weeks, or finance bros promising riches by following this easy formula. Do you believe a word of it?Well, the part that longs for a quick fix might be taken in, but you are smarter than that. Personally, what I believe in is consistency, educating myself, finding an expert to help me, surrounding myself with a community who are going to motivate me to keep going and make me feel like I can do it because they're doing it too or are further down the road than I am. That's exactly what we've created inside the My Financial Adulting Plan. If you feel like you're on top of your finances, you have a plan for this year that you're super comfortable with and have everything you need to make that happen, then just ignore this ad. But for the rest of you, make sure you check out my life-changing 12 week course or for less than the price of a cup of coffee a day. Head to the show notes to join the wait list for the next round. Or you might be lucky enough to find that the doors are open and you can join now.
Mel: Now I'll add in a quirky one too. So if you've been in the subject of DV in Australia in the last 10 years and you've had those credit card debts because you've left and you've kind of had to start again and kind of build your income and you've either brought that with you or you've had that as you go in Australia, there's something called the no interest loan scheme where you may be entitled to zero interest loans and again you might be able to use that to get rid of those sort of debts. So it's just being aware that these things exist that a lot of people don't, aren't aware of.
Lawsie: So yeah, just don't take it for granted that you just go, oh I've got a credit card debt and I'm now stuck in that forever. It's like really just challenging it I guess. And yeah, seeing what you can do. But our third one is all about plugging the leaky bucket. So what we mean by that is invariably you'll end up with expenses that you are just paying. I mean subscriptions are probably the most obvious one for all of us to look at. I mean, how many people have got multiple streaming services or apps on their phone that they don't even realize are renewing and all of these things. So what we recommend for you to do here is to go back through at least six months worth of expenses, look at what you're spending on and ask the question for each of those expenses. Can you swap, pause or cancel any of your expenses?
Lawsie: And some of that might be, you know, like we just said, obviously it's the subscriptions and things, they're kind of, I think the sneaky ones that are just infiltrating and you go, oh it's only 7.99 a month for this and 10.99 a month for that. But suddenly have 10 of those and you've got large chunks of cash that are leaving your bank account that for the most part you're probably not using most of those things. So it's just you are going through and having a look at that, looking at, you know, gym memberships, looking at all like just be really objective with everything and just really question it. There's going to be some things in there that you were like, nothing is gonna make me stop using this. And I do and I know I use it all the time and that's great, but if you've got those other ones, you're just like, I'm just not sure that I'm actually doing that.
Mel: Cost per use or cost per,
Lawsie: Yeah to have whatever. And even if you can to look at, you know, there might be things where you are just paying it monthly and if you are in a position where you do have a bit of savings behind you, then it might be looking going, what would it be if I actually switch that to annual, if that's something that you really use all the time, you know you're gonna keep using it. Is there a benefit to switching that one to annual? Yes, of course you're gonna have that upfront hit, but over obviously that 12 month cycle that is actually a way for you to help reduce your expenses as well as well as canceling all the other ones that you're not using that we know you're not using <laugh> and you just need to get rid of. Exactly. And it is just being savvy with things as well. Like even your groceries, like I think every single person in the whole entire planet knows that groceries and all of those things have gone up. Like it's, that's not new to anybody, but it is just, again, not just taking it for granted and just being a little bit more savvy with what you can do for it. Like I know some people that clearly got more time and dedication than I do, but they'll go to multiple different supermarkets and and fruit veg shops and all the things to get their groceries
Mel: And there's apps for that.
Lawsie: I'm not going to do that, but I'm still gonna be savvy with what I am doing because it's, you know, we've all got decisions on how you're gonna spend your time and energy and all of the bits and pieces. But there's still things that all of us I think can do that can be a bit more savvy in all of those things. No, it doesn't mean that you are poor. No, it doesn't mean necessarily anything. I know some people, I mean you get it all the time, people going, why would
Mel: You be trying, oh my god, why do you do cook ups, blah blah blah. I'm like, 'cause I value sustainability. I don't value Uber Eats. I don't wanna overspend on food like it's, and my Chinese one side and Scottish on the other side going, no <laugh> frugality is my love language. Yeah.
Lawsie: So it's just, and we're not saying that every like that you have to go back to stripping everything out for some people you absolutely need to like you need to rip that bandaid off. Yes. And you do need to be plugging every hole and be really mindful with your expenses, particularly if you need to focus on getting rid of your bad debt and building up the buffer. But if you don't have that and if you've got a buffer, you still can be doing more with your finances, which ultimately is gonna mean you've got more cash to spend more strategically on the things that you actually really value. So as boring and as, and mundane as it might sound, we still believe that everyone needs to plug that leaky bucket. Review your expenses, just make sure that you are actually really happy. You know, make sure that what you're spending on brings you joy. Not that I think groceries brings you joy, but.
Mel: agree
Lawsie: You know, just really sort of look at those things to make sure I'm done. You're working hard to earn your money. Let's make sure that you're being really conscious with what's going out and that that is in line with your values and all of those things and you just don't have extra little things that are just eating into that unnecessarily
Mel: Not agree. The fourth one is to invest for the long term because the danger during times of financial stress and uncertainty is that you press pause or you freeze your investing and that you just concentrate on paying off your mortgage and that's it. But it's really important to continue to build for the long term because then we are dealing with the urgent, but we're also looking at the important, now we wanna put the fires out but we also wanna keep building. So this is, you know, the leaky buckets, putting the fires out, but the investing for the long term still building. So I was to look at, you know, if I could only do 10 bucks a day, you know, if I went, you know what if I got rid of my second coffee and I did this and that, I could probably find 10 bucks a day for investing.
Mel: You know, let's just take a drum roll please. I'm just gonna put that into a compound interest calculator and you can do this yourself. We've got one in our site so you can see, alright, is this even worth it? So 10 bucks a day, I'm gonna say over 30 years, you know, let's make, we are doing this for the long term that's going to give me over 30 years, half a million bucks. It's worth freaking investing small amounts even for the long term. And again, it's setting it and forgetting it. If you could only afford half that five bucks an day, that's a quarter of a million bucks over the long term. And if you go, oh yeah, but I dunno if that's worth it, I'll have that money then thank you very much. Like that's a lot of money. So continue to yes, look at the urgent and the now and also continue to look after future self because the stats are like if we we talked about leading indicators at the start of this episode.
Mel: In Australia alone there's 450,000 women in their forties at risk of homelessness. At this moment women over 55 are most at risk of homelessness and let's not even talk about immigrants or aboriginal population. So this is something your future self desperately wants you to care about. She does not wanna live in a car, she doesn't wanna be sitting there on a Friday night and instead of thinking, oh, should I go out to dinner and order Uber Eats to be thinking can I afford to put the heat on? Like this is things that your future self desperately needs you to care about today. And I don't mean to scare you, but I also do because for me it is about enjoying today and having choice tomorrow. It's not one or the other, it's both
Lawsie: So I've got something to add to that too is we totally acknowledge that at different times you're not necessarily always going to be able to continue to invest. So you might be someone that routinely has been putting, let's say 500 bucks or a thousand bucks a month into investing and suddenly you lose your job. Like we get that that could be a reason why you go put the handbrake on,
Mel: I'm gonna pause it for till I find another job.
Lawsie: But also what I would, I'd challenge that and go, but still try and keep the habit going. So rather than totally stopping, if you're in a position, even if it is that 10 bucks a month, like if you routinely have always put money in monthly into investing, just change the amount that you're doing. You might just go, I'm gonna do, yeah, yeah,
Mel: It might be 50 bucks a month or a hundred bucks
Lawsie: So that way you've still got that habit going. It just is the amount that's changed because you know, circumstances beyond your control or whatever have changed, but you've still got that habit going. It doesn't end up being that thing like you're saying where people suddenly go, oh, pull the handbrake up, I'm not gonna do anything. It's like, well no, you can pull it up slightly and still keep doing. So you've got that habit going, it's just that you redirect where that money is going for a period of time and then when things you know sort themselves out, then you increase the amount you're doing. Same with all of this, like you still wanna have a buffer, you still wanna get rid of your bad debt before you're looking at investing. So just to make sure that that's really clear for everyone.
Lawsie: But same deal, once you've got rid of your bad debt, you're suddenly gonna be freeing up money that you weren't used to having. 'cause It's been going to your bad debt. So that could be going, don't spend it, don't investing. And same with your buffer. It might be that you go, great, yeah, I've now achieved that goal. Now I can, you know, redirect that to investing, which is where the amount that you're investing can absolutely change. And it can start small and then be higher at other times and drop down. But just don't lose that habit of it. Just make sure you do it. Even if it's, you know, if it's $10 for the month like you still are then actually investing end rant.
Mel: No, that's a beautiful point. No good rant.
Lawsie: Our final one, final one is do a 30 day financial detox. Anyone that's been through my financial adulting plan knows that this is their first challenge that they need to do.
Lawsie: And the reason that we have that is, you know, we all know that we are living in a world that tells us that we deserve more and it's so easy to be able to just get whatever we want thanks to the credit cards and all of the other things that we've spoken about already that we don't want you to use. And so people are doing this and spending beyond their means, even if they know they can't afford it. 'cause Some people aren't just even aware, it's just like, oh, I've got the magic card and I can just use it. So the whole point of the 30 day financial detox is 30 days of not spending on any wants. And this is all about helping you to reset to be a conscious consumer. So if you're someone that poor Uber Eats, let's throw them in under the bus again.
Lawsie: But if you're someone that just uses Uber Eats or your lunch break, you just go, oh, you naturally just go to the shops and oh, I like that top. Or I'll get those jeans. And you just sort of, it's really easy to start unconsciously spending or Friday night with a glass of wine, you're sitting there with your laptop while you're scrolling on your phone, watching the TV and whatever and it's just like, oh yeah, add to cart and do all of those things. So this detox is just about making you become more aware and not being able to do it. And anytime you do have that urge to go and spend on things that are wants, like your groceries are still a need, it's okay, we're still allowing you to eat. You know, if you've got that, then it's looking and going, why am I actually doing that?
Lawsie: And questioning that behavior. Because again, if we can become more conscious around it, it's like when we said plug the leaky bucket, like there's so many things that you're probably spending on that you don't necessarily want or need anymore. You just haven't done anything about it. And this is also part of that. It's just making sure that where you are spending money, you're really conscious about it, you're going, yep, it is what it is. I know I've got the greatest deal or whatever it is. And then again, just being, yeah, being more conscious of where every dollar goes. So then you're not a stress and you know that you've got a buffer and no debt and all of those good things and investing.
Mel: I posted something on the weekend and I had one of our alumni DM me and go, oh my gosh, you reminded me I need to do this again. And I said to her, yeah, I usually do it every July and I'm just about to head overseas to New York. So I'm so not doing it, but I would be doing it in August. Like this is still something that twice a year I do everything we talk about today, Lawsie and I, I don't know that you do a detox because you probably, you're far more disciplined than me. But again, that's knowing who you are and what you need. For me, doing a detox twice a year just is that beautiful reset allows you to start again, question your behavior makes you then put money in that mi. It puts you in that financial mindset to go, Hmm, alright, well what else do I wanna be doing and why do I do that?
Mel: Okay, maybe I need to unsubscribe to that or I need to break up with that for a while. So it is that beautiful financial reset because we live in a world that is absolutely marketing to us 24/7. We are carrying around a mobile shopping device where we've set up massive malls inside our social media to sell to us. So this is us taking back control. So yeah, 30 day financial detox, you set the parameters so you decide what you detoxing from and then go for it. So what we wanted to do today is to give you some practical things. 'cause I think it's really easy when you're feeling stressed and uncertain to stop and freeze and pause. So these things are just designed to keep you moving and to move you positively to a point where you feel confident. If you've got questions or comments, then obviously come onto Insta @melbrowne.money and let me know.
Mel: Otherwise, we've got a couple of free webinars coming up. We'll link those in the show notes as well. So if you are looking for more tips, if you are wanting more help, especially at the moment, make sure you come and check those out.
Mel: If you enjoyed this episode, we would love it if you subscribed and give us a review, then make sure you come and play with me on Insta. I'm at @melbrowne.money Remember there's an E on the end of Browne. I'm one of those fancy Browne's, and don't forget to check out the show notes for even more ways you can work with me to transform your finances.
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