In Victoria, we find ourselves back in lockdown for at least the next five weeks. While it involves working and schooling from home, lots of walking-for-exercise and, no doubt, the odd glass of stress-releasing wine, the obvious winners are the ‘Buy Now, Pay Later’ companies who have enjoyed a phenomenal run this year.

Afterpay, one of the more well-known providers, has increased 856% since March and is up 38% in the first 10 trading days of July. As online shopping becomes our safest, if not only, option, people are jumping on the band wagon. For many consumers, the opportunity to split payments over a four week period is just too good to miss!

But what happens when things go wrong?

Online Shopping Regrets

We all know the feeling of regret that can accompany an online shopping splurge. The initial purchase excitement wears off and worry kicks in. Should you have spent the money? What if the dress doesn’t fit, the handbag doesn’t look right or the jewellery is not worth the money it cost?’ When your package finally arrives, you feel a mixture of anticipation and dread which can easily morph into guilt and remorse. 

Maria Sharapova kept a diary when she was 16 and dealing with a lot of stress as she progressed in her tennis career. In her book ‘Unstoppable’ she writes:

‘Over time, I’ve developed my own treatment. It’s something I call retail therapy. When you feel you need to see a psychologist, go out and buy a pair of shoes instead. If they are really great shoes, all your worries will evaporate. Why pay $300 for some BS talk with a psychiatrist when you can pay the same and end up with a great pair of shoes that will be with you every day. People! It’s common sense!’ 

It’s very easy to develop an unhealthy relationship with money when we are faced with life challenges. Like Maria, many of us fall into the trap of passive-and-quick problem fixing, where we look for the short-term ‘high’ of retail therapy. The option of BNPL can easily result in spending beyond our budget, which then adds to our guilt and financial stress.

The impact of Covid-19 financial stress

Last week I spoke to Rachel. A single mum with a dependent child, she has recently lost her job. In tears, she asked me what she should do. Luckily, she has some savings which will last for a while, but she is incredibly worried and stressed about her long-term financial situation.

Here are five tips to help you, or your friends and family, deal with financial stress.

1.      Identify your financial problems

o   Be specific. E.g. ‘My credit card debt is out of control.’ ‘I am always in the red.’ ‘I can’t get ahead in life.’ ‘I am worried about having too much debt.’

o   Write them all down

o   Be honest – it is between you and your journal

o   Consider the worst case scenario. What will happen if you continue to have these financial problems? Where will they lead you?

2.      Write down all possible solutions

o   List every solution that comes to mind, even if it sounds impossible. E.g. cut the credit card in half. Delete all shopping apps from your mobile. Shop only once a week / fortnight / month. If  you’re super worried about your investments falling, do not look at your account. Get a professional adviser to help you sort out your money problems.

o   Write down the pros and cons of each solution.

3.      Choose one solution that is the most ideal

o   It has to be easy to implement

o   You can action it immediately

o   Start small. Where possible, pay off the smallest debt first.

4.      Create a detailed plan of how you are going to achieve your chosen solution

o   Be specific

o   Write down what needs to be done, and when

o   Use SMART technique (Specific, Measurable, Achievable, Relevant, Time)

o   Decide, realistically, when you will achieve your goal

o   Identify which skills, information and resources you need to achieve it

o   Determine who will help you – your partner, friend, someone who will keep you accountable, financial adviser etc.

For example:

o   I will keep a diary of my expenses

o   I will download a cash flow management app that will help me track my expenses and understand what I spend, how much and how often

o   I will review my bank account every two weeks to allocate a percentage of my salary to different ‘bucket’ accounts for expenses such as food, bills, splurge money etc.

o   I will stick to my budget and reward myself if I achieve my goal

5.      Review your progress and start again

o   Have you improve your situation / achieved your goal?

Þ    No - change your strategy and try again

Þ    Yes - move on to the next issue on your list from Step 1

Following these steps requires discipline which, for some of us, does not come naturally. But, remember that you are in charge of your life – and your finances.

If you are currently experiencing an increase in financial stress as a result of Covid-19 and lockdown, please contact TruWealth on 03 8648 6534 or email contact@truwealthadvice.com.au