Don’t let debt ruin your festive season

Financial management, the act of organising day-to-day finances, managing debt and building a savings buffer, is one of the most under-emphasised components of comprehensive financial planning, despite having a disproportionate impact on mental health.

JJ van Wyk, a financial adviser at Momentum Financial Planning, says this narrative needs to shift. According to him, there is a significant link between one’s financial situation and their mental well-being.

“Individuals with problem debt are more likely to report mental health difficulties. Financial difficulty can trigger stress and anxiety, which may lead to or worsen mental health issues.

“These difficulties can then make it harder to manage money, maintain income and seek assistance, potentially creating a cycle that intensifies the financial strain.”

Van Wyk believes that when financial behaviours are positive, the benefits extend far beyond a bank account. For instance, regularly saving and paying credit card balances on time are significantly linked to improved mental health.

“Having a financial cushion reduces the constant background hum of worry, leading to less stress and greater peace of mind.

“Conversely, the presence of persistent unsecured debt creates a crushing psychological burden. It is strongly associated with a higher incidence of depression, anxiety and even suicide. Individuals struggling with debt are up to three times more likely to experience a mental health condition.

“The stress of debt can affect sleep, concentration and relationships, creating a vicious cycle where poor mental health makes sound financial decisions even more challenging.

“The reality is that you can’t build a secure future on a shaky foundation. Recognising that financial well-being is a prerequisite for mental well-being is crucial,” explains Van Wyk.

He states that taking control of your finances is a powerful way to reclaim your mental peace.

Tips to reduce money-related stress and anxiety:
• Create a simple budget: Start with a basic understanding of where your money goes. Use the 50/30/20 rule as a guideline: 50% for needs (rent, utilities, groceries), 30% for wants and 20% for savings and debt repayment. Engaging the services of a financial adviser can help you understand where you stand financially and instantly reduce ambiguity and anxiety;

• Build a small emergency fund: Start with a modest goal, such as one month’s expenses. This buffer is primarily a mental health tool. It ensures that a small, unexpected expense (like a car repair or medical payment) doesn’t derail your stability and trigger a panic spiral;

• Tackle high-interest debt: Focus on paying unsecured debt (like credit cards or short-term loans). Use the “snowball’ (pay off the smallest debt first for a quick win) or “avalanche” (pay off the highest interest rate first to save money) methods. Eliminating high-cost debt frees up cash flow and reduces the mental burden;

• Automate good habits: Set up automatic transfers for your savings and debt payments. Removing the need for constant decision-making makes good behaviour habitual and reduces the mental energy spent on finances;

• Schedule a money date: Dedicate 15-30 minutes weekly to review your bank accounts, pay a bill, or check your savings goal. Approach this with curiosity, not judgement. This practice prevents financial anxiety from festering in the dark and keeps you proactively in control;

• Use the services of a financial adviser to avoid financial burnout: A financial adviser provides objective expertise, acting as a vital support system and partner to help you navigate sometimes complex financial decision-making and tracking. This reduces the mental fatigue associated with financial planning.