The Stress Test

If you’re stressed about your money right now, you’re not alone.

Australians’ mental health is actually in worse shape now than during the Covid lockdowns, according to a new study by KPMG and Smiling Mind.

Our biggest source of stress?

The rising costs of practically everything … especially interest rates.

Here’s the thing: when it comes to our mental health, Australians are good at asking for help. We are, after all, the second largest users of antidepressants in the world.

Yet when it comes to dealing with money stress?

Not so much.

But ignoring things won’t make it any better … nor will doom-scrolling. The only thing that’s guaranteed to get you back in control is for you to take action.

So let me give you three action items you can do right now.

The first action item is to pick up your phone, google MoneySmart’s ‘Mortgage Calculator’ and see what your repayments would be if interest rates went up another 2%.

(Hang on, why 2%? Because the bulk of the senior bank economists predict rates will rise 1.5% over the next 12 months. Having said that, these are the same guys who all once famously lost a financial forecasting contest with my golden retriever … so let’s be conservative.)

Write down what your monthly repayment would be, and then …

… act as if it’s this figure already.

Get into a bit of role-play for the evening:

What would you have to do to meet your repayments?

Then check your home loan. Here are some numbers: the average variable rate is 4.55% … or 5.10% if you’re with one of the big banks (but why would you be?). If you have more than 20% equity in your home, you should call up your bank and bitch (rather than go through the hassle of switching). A good variable rate to demand is 3.5%. Do that and you’re three-quarters of the way there.

The second action item is to review your spending.

Disclaimer: I’ve never stuck to a budget in my life, so I’m afraid I can’t help you with a rigid spreadsheet. Instead, I’d suggest that you review your Barefoot Buckets and spend consciously … which means be lavish on things you love and use a lot (hello Dunlopillo) and vicious with anything you don’t (goodbye Netflix).

The third and final action item – regardless of whether or not you have a home loan – is to get a payrise. Yes, I know the thought of asking for more money probably makes you feel a little queasy, but this is a total non-negotiable. Besides, everyone else is doing it. With inflation burning through 7% of your wallet this year, you need to get at least that much of a payrise, or you’ll be going backwards.

So there you have it: three practical, positive and empowering action items that you can do right now to take back control of your money. Let me know how you go!

Tread Your Own Path!