The news is packed with doom and gloom about the cost of living crisis. But whilst these external factors can seem overwhelming, most of us have the power to take control of our finances. With the help of the brilliant money-management expert Clare Seal, this article empowers you with information to make the best choices for your financial future.
Big picture thinking
Money management can seem overwhelming when we’re in the weeds and when all we can hope for is next month’s paycheck. The next debt payment. The next house or car we’re vying for. We’re often surrounded by negative news about the cost of living.
Our expert, Clare, is a financial well-being speaker, Author, and Founder of The Financial Wellbeing Forum. To begin, she encourages all her clients to step back and think about two aspects: internal and external factors.
External money factors
The external factors would be the cost of living, inflation or a recession. They’re things we unfortunately cannot control. So, if these are the only things holding you back from making moves with your money, consider workarounds (more on that later) or being patient. It might sound defeatist, but Clare makes a great point; “Things will get better again - we see this after every crash or financial crisis...I often tell my clients that sometimes the best thing to do is to press pause”.
When we hit the same brick wall of a situation we cannot change, it affects our well-being and perspective on money. And often, the best thing is patience and putting those grand plans on hold - just for now.
“Things will get better again - we see this after every crash or financial crisis...I often tell my clients that sometimes the best thing to do is to press pause”.
Internal money factors
Instead, focus on what you can control: the internal factors or how you feel about finances. Often, not feeling like we have enough money can be linked to lifestyle creep. Increased spending when we have a new job, investing in a bigger house or better car because we feel we need it. But Clare encourages us to think about what a lifestyle that makes us content and happy looks like. And if you’ve got most of those things in place, you might not need anything else. We’re always encouraged to step forward - get a bigger house, a better car, go on a better holiday. This list goes on. But by focusing on what we have rather than what we don’t, we can re-establish our spending habits. Get out of the race of what everyone else is doing and refocus on the here and now - what makes you happy?
Diving into debt management
Another aspect that causes more stress about the cost of living is debt. Clare had her issues with debt in the past and overcame them by starting with being 100% honest with herself. “Once you know all of the information, nothing can surprise you… Start from there and work out what the minimum repayments are.”
Clare continues, “Debt isn’t something that defines you as a person or anything to be ashamed of.”
“Once you know all of the information, nothing can surprise you… Start from there and work out what the minimum repayments are.”
Once you remove that stigma, you can look ahead and make a plan. Clare recommends using the avalanche or snowball approach to debt management - both use accumulation and reward to help you hit your debt management goals.
The snowball approach involves paying off the smallest debt first and then moving on to the next smallest one. With each debt you pay off, the amount you can put towards the next one increases, "snowballing" until you've paid them all off. This method can help you gain momentum and motivation as you see your debts disappear one by one and give you a sense of achievement.
On the other hand, the avalanche method involves prioritising the debts with the highest interest rates, as they are costing you the most money in the long run. By paying off these debts first, you can save more money over time and reduce the overall amount of interest you pay.
Finally, we have savings. It seems simple, but where do you start and make it less stressful in times of financial instability? Here are some of Clare’s best ideas on the subject:
Instead of surveys, user testing and other sites that claim to give you cash fast, try sustainable side hustles.
"Money is only one of the currencies and resources that we have in our lives. Time is massively valuable as well, and so is your health. So if you’re staying up until 2 am doing surveys every night to try and get to the next payout, it can impact your health at your day job," Clare says.
Instead, she suggests looking at your skills and freelancing within this area, ensuring it doesn't harm the rest of your lifestyle. Another route is exploring cashback opportunities. Cashback is a low-effort way of banking money that you can utilise at high-expenditure times like Christmas. Search on sites like Martin Lewis’ MoneySavingExpert in the UK to find the latest deals.
Make savings automatic
“Pay yourself first,” Clare says. She recommends having a standing order or automatic transfer scheduled for payday (or shortly after) into a savings account. Make a plan within your means, but start small.
Once you’ve started the savings habit, you can add more money to the pot. Remember to look into different savings accounts and pick based on what you’re saving for. For example, shopping around for high-interest rate or cashback accounts can be a great way to maximise your savings if you're not planning on touching the account funds for a while.
The final word
We hope this article has quieted some of your anxieties about the current cost of living crisis. Ultimately, there are aspects we can control despite the ongoing uncertainty. Once we focus on what we CAN control, the whole situation seems less intimidating and much less stressful, too.
Clare Seal’s latest PepTalk is OnDemand for subscribers. Interested in PepTalk’s on-demand micro-learning? We have a wealth of expertise and diverse thinkers in our network, here to help ensure you and your team can win at the business of life — simply drop us an email, and we'll give you a free demo.