By Catherine Robson
I recently discovered a great blog by Elesha Piper called Minimise to Maximise. She is a young woman who, despite earning a good professional wage, found herself drowning in consumer debt and credit cards. She did not have extravagant tastes or a shopping addiction. She just wanted to keep up with her friends and have things that made her feel that she belonged. However, by the end of 2012 she felt completely overwhelmed and ashamed about her finances. So she made the commitment to change her life and become debt free. It took her 14 months to clear her $15,000 of debt and at the end of the process felt happier, calmer and more energised.
Piper's story has particular relevance given the recent findings of the NAB Quarterly Wellbeing Index, which has fallen for three straight quarters. It shows that one in three Australians report very high levels of anxiety. This mirrors a similar report by ME Bank, which shows a significant deterioration in Australians' overall financial comfort, and the lowest reading since the survey began.
Decluttering and consuming less can make you happier and wealthier.Credit: Dejan Ristovski
A major pain point was the ability to service debt, with 10 per cent of those households with outstanding debts admitting they did not expect to be able to meet the minimum debt repayment in the next six-12 months, a twofold increase from the previous survey and the highest level since the survey began. Consistent with debt stress, there has also been a marked increase in families feeling the need to draw on home equity to pay off other debts or make ends meet.
This is at the very same time that interest rates have reached all-time lows resulting in baby boomers self reporting the highest deterioration in their financial comfort levels, as a result of lower returns on their retirement savings.
In fact, the survey found about 90 per cent of Australian households reported low-to-mid financial comfort, with only 10 per cent reporting high comfort. This was largely as a result of accumulated debt levels, concerns about adequacy of income, the cost of necessities, lack of job availability and security as well as deterioration in expectations about maintaining an adequate standard of living in retirement.
These household comfort levels belie the relative financial strength of Australia – depending on which measurement you use, we are consistently in the top 10 wealthiest nations as measured by income (GDP) per person. We also have a relatively low unemployment rate at 5.8 per cent, with economists generally accepting that "full employment" is about 5 per cent. In addition, house prices in Sydney and Melbourne going gang busters, benefiting millions of incumbent home owners.
Why the disconnect? It's less about our actual financial circumstances and more about how we feel about them. When we feel out of control or uncertain about the future we feel anxious. This was the case for Elesha. Rather than feeling deprived during the hard slog to repay her debt, the opposite was the case. A self-confessed travel addict, by reducing the "things" she spends her money on, avoiding crippling interest costs and decluttering her life, Piper has been able to save more for travelling and create a whole new business for herself as a blogger and freelance writer.
She achieved all this with some simple steps:
Declutter - start small and focus on the easily solvable. One drawer, one cupboard or one shelf. A small decluttering win is motivating and momentum building. Once cleared, declare the space a clutter free zone.
Adopt a purchase with purpose mindset to prevent buying stuff on autopilot or "just because". Unsubscribe from email newsletters or sale alerts from stores to put an end to the daily prompts to buy, buy, buy.
Create "no stuff" routines - get out of the habit of spending leisure time shopping. Focus on spending your weekends catching up with friends for a walk, run or bike ride outdoors instead.
Appreciate what you have….and give – donating some of your unwanted stuff to people who really need it, not only helps you transition from owning less, but also to wanting less. Helping others simulates feelings of gratitude for what we already have.
What could you minimise to get more comfort in your financial life?
Catherine Robson is a financial planner with Affinity Private. Twitter: @CatherineAtAff.