Achieving Financial Peace of Mind

By Nest Wealth on 26/08/2016Article 9 Minute Read

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Picture how much more fulfilling life would be without financial worries. Try some of our tips to help reduce stress and achieve financial peace of mind. Soon enough, you may find your stress is replaced by confidence, and you’ll be sleeping better too. 

If your finances are keeping you up at night don’t worry, you’re not alone. A survey conducted by Leger of over 1000 Canadians (excluding Quebec) between September 26 and October 1, 2014 discovered 42 percent of Canadians rank money as their greatest source of stress. In fact, Canadians stress and worry more about their finances than they do work, health, or personal relationships.

We’re going to look at some of the harmful effects of worrying, identify the stressors, and go over strategies to alleviate financial stress.

Harmful Effects of Worrying 

Worrying about finances has become so ingrained in today’s society that it’s accepted as a “normal” worry. Stressing over finances not only affects our quality of life, mentally and physically, but also the lives of those around you. Stressing about finances can lead to:

A lack of sleep. 

Laying awake at night, tossing and turning because of financial issues is no way to live. Significant numbers of men and women have reported losing sleep over financial worries (in the same study by Leger, 51 percent of women, and 40 percent of men of those surveyed). Ruminating about your finances (when you should be asleep) won’t help you solve anything quicker, will most likely make it harder for you to focus at work, and could even cause some more serious health issues. Sleep is crucial to our health, bodies, and peace of mind – it repairs and refuels us and we need it the same way a machine needs oil.

Pessimistic thoughts. 

Thinking about all the negative outcomes means you have less time to focus on being productive, and less time to enjoy life. In other words, worrying is a down payment of emotion on something that hasn’t even happened yet, and it keeps you from being present.

Strained relationships. 

If you’re constantly stressed out you’re probably not that fun to be around. Being consumed with money worries can even cause couples to lie to each other about finances, which can damage relationships, beyond repair in some cases. Canadian Couples that are open about personal finances argue much less about money than those who hide things from their partner (58 percent of those surveyed by Leger reported that they never or rarely argue with their partners about money). Of those that said they were less transparent about personal finances, only 30 percent said they rarely (or never) argue with their partner about money.

Behavioural issues. 

People react to stress in different ways. In order to calm nerves, it’s not uncommon for those with financial stress to overeat, smoke, drink, or become withdrawn from their usual social situations (especially if they feel like no one understands, or can relate, to the situation they’re in).

General unhealthiness. 

Heart disease, gastrointestinal problems, weight gain or loss, eating disorders, diabetes, insomnia, psoriasis, cancer, high blood pressure, substance abuse, anxiety, and depression can all result from stressing over finances. Such health problems could end up costing you more money to treat, create bigger health issues, and take away from the enjoyment of life.

Achieving Financial Peace of Mind

To survive uncertain economic times and have financial peace of mind, it’s essential to address your finances, identify the issues, and have a plan to help you navigate through the stressful times. Financial stressors can include things like debt, losing a job, balancing a budget, paying bills, not having an emergency fund, not having enough saved for retirement, arguing about money with a spouse or family, outliving retirement savings, impulse spending, taking a loss on investments, and market volatility in general.

Here are 8 things you can do to achieve financial peace of mind, even when times are tough:

1. Manage your personal finances now, so you don’t have to worry later.

Money makes the world go ‘round! These days money can free us, or control us; it’s what drives our economies, it’s taken the blame for divorce, and corruption, and in a way, it is the product of all products. Yet, as much as we all make, most of us know very little about how money and personal finances work. And while we could blame our parents or teachers, saying “they should have known, and prepared us better”, it’s pretty clear that placing blame (on them, or yourself) won’t help you learn how to file your taxes, create a proper budget, or help you invest to grow your wealth. Get a crash course on managing personal finances and investing here

2. Create financial goals.

Do you have debt you’d like to pay off or want to retire one day? Maybe you want to start an emergency fund, or have the dream of buying a cottage. Whatever your financial wishes are, setting financial goals can help you achieve them.

3. Cut costs to increase cash flow.

Track your spending (one off purchases, and recurring expenses) to see where you can cut down costs. For example, you may have signed up for a gym back in January, but if you haven’t used your membership enough to make the monthly payments worth it, it’s time to end your membership. Another great way to cut costs is by cutting cable TV. Do you really need to spend money on cable every month when Netflix and other streaming services can provide the same shows and movies at a fraction of the cost? Perhaps the best way to cut costs is to cut down on investing fees. The average Canadian equity fund charges Canadians some of the highest fees in the developed world, taking 2.35% of returns each and every year. With investing options, like flat fee Digital Wealth Managers, why would you continue to pay a
percentage of your assets to fees when you don’t have to anymore? Find out how much you’re paying in investment fees here.

4. Stick to your plan.

Your budget, financial plan, savings, and investments are a few of the keys to financial success. If you don’t already have a budget and financial plan, create one as soon as possible – both will help keep you on track and prevent you from making financial mistakes down the line. Sticking to your plan can also ease that fear-of-the-unknown feeling, because you’ll have a clear picture of your financial situation (rather than having your finances be a black hole of worry).

5. Automate finances.

This is really important if you are someone who forgets to pay the bills on time. Aside from freeing up some of your time (so you can spend more time with family), setting up automatic payments for bills, savings, and investments, can ease some of the financial stress you take on. Digital Wealth Managers, can help automate finances in strategic ways. So instead of setting up automatic payments to a savings account (where your money would sit, and you would see minimal growth), a Digital Wealth Manager, like Nest Wealth, could help you prioritize your financial goals and funnel your hard earned dollars towards them (like for example, setting up automatic contributions to your RRSP). Less stress, more free time, and fewer emotional decisions are just a few of the benefits to automating your finances

6. Save and Invest.

Think about it this way: savings are for today, and investments are for tomorrow. Growing your savings and investments over time (and putting your investments to work for you) will help you live the life you ultimately want to. If you’re thinking, “this won’t apply to me because I have no investments or savings really, and it’s too late to start now,” stop! It’s never too late to start investing (or saving), here’s why. Also, when it comes to investing, Digital Wealth Managers like Nest Wealth know a passive approach to investing is the most effective way to reach your financial goals. Because your portfolio is built to “be the market”, not “beat the market”, you’re more likely to help you come out ahead financially.

7. Stay calm.

The most important rule when you’re in the teeth of a tough market could very well be to stop and do nothing. Historically, passive investors (investors that keep their money invested for the long haul), with a diversified and well-allocated portfolio, often come out ahead financially. Remember late 2008 and early 2009, when (according to the Investment Company Institute) more investors pulled money out of mutual funds than any other time in history. What happened? The market tanked as investors were fearful of losing even more on their investments, and we’ve been in a bull market ever since. Seeing losses can cause investors to panic and make irrational decisions based off emotion (like selling a stock when the market is at a low point). If you have trouble keeping calm during market fluctuations, Digital Wealth Managers like Nest Wealth can help keep emotions out of the equation and prevent impulsive financial decisions and mistakes.

8. Ask for help.

Stressing about finances is a bad habit (for our bodies, and our minds) that can be really difficult to break. Hiring a professional can help you achieve financial peace of mind by giving you back more free time, and reduce your financial stress. With technology constantly evolving some Digital Wealth Managers are able to offer the same services as traditional advisers at a fraction of the cost.

Picture how much more fulfilling life would be without financial worries. Try the tips above to help reduce stress and achieve financial peace of mind. Soon enough, you may find your stress is replaced by confidence, and you’ll be sleeping better too.