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How to deal with financial anxiety

Prioritising your spending and staying disciplined is the key

How to deal with financial anxiety

How to deal with financial anxiety

As per a recent survey by Deloitte, the youth in our country are 'not just concerned about their day-to-day finances, but also their long-term financial future.' Managing personal finances doesn't need to be stressful; instead, it is a simple three part process: Awareness, planning, and disciplined execution.

The study further says that Gen Z and millennial are not concerned about their day-to-day finances and long-term financial future. When it comes to work, they prefer remote working and are not necessarily driven by loyalty towards their employers. In fact, a vast majority of them are eager to pursue a side job to augment their income and are willing to change jobs in just two years if it doesn't satisfy them. Around 29 per cent Gen Z and 36 per cent millennials selected cost of living (housing, transport and bills) as their greatest concern. Further they stated that they don't feel financially secure and at a broader societal level, they are deeply concerned about wealth inequality. Long-term financial futures and day-to-day finances continue to be top stress drivers for both generations.

Talking to Bizz Buzz, Gaurav Chopra, Founder & CEO, IndiaLends – an online marketplace for credit products (loans, credit cards) suggested certain tips for GenZ.

Awareness of your finances: Financial understanding is crucial to making well-thought financial decisions. Understanding key concepts such as assets, liabilities, and cash flow is vital. An asset is what you own outright, like stocks or mutual funds, whereas a liability is what you owe to someone, like a loan or credit card balance. Cashflows are what you earn and spend each month. You are in sound financial health when your assets are higher than your liabilities, and your income is higher than your spending. Easier said than done, right? Let's look at how we can achieve this.

Set your financial goals: Start with setting simple financial goals. It could just be to save or invest Rs 5,000 every month. It can also be to create an emergency fund with at least 6-9 months' worth of fixed expenses for peace of mind. You set your own goals and revisit them once a year to see if the goals are still relevant. Remember, the objective is to have your assets greater than your liabilities and income greater than your expenses.

Put together a plan: It's essential to start with your expenses. Break them down into fixed expenses like rent, EMI, bills, and discretionary expenses like entertainment or eating out. Set aside the amount you need for your fixed expenditure. Next, specify your savings goal. It is recommended that you save a minimum of 20 per cent of your post-tax income each month, as long as your fixed expenses are not higher than 80 per cent of your income. But if you can afford to save more, your future self will thank you for it. And, don't forget to take full benefit of savings-related tax exemptions. Third, set aside 5-10 per cent of your monthly income in a high-interest paying savings account as emergency cash. Finally, spend the remaining amount to your heart's desire on experiences that give you the most joy.

Be mindful of your spending: We live in the age of convenience, with 10-minute deliveries and non-stop flights across the world. Technology has made everything more accessible but also made us more prone to impulsive decision-making. Mindful spending does not mean you deny yourself the experiences you enjoy. It's about prioritising what's most important to you. If you follow your plan and only spend what you've earmarked for discretionary spending, you can rest assured money will not be a source of anxiety.

Build a good credit profile: Your credit profile contains information about your credit behaviour. It empowers you to avail of credit whenever you need it most. Availing of credit is not a sign of poor financial management. Instead, it's a powerful tool for growth if used correctly, and a strong credit profile presents you with advantages such as better terms and a lower interest rate, amongst others.

In a nutshell, financial anxiety arises when you are unsure of your financial future. You can avoid such stress by prioritising your spending and staying disciplined. It does not mean you deprive yourself of simple joys but ensures you can enjoy each moment without the anxiety of no financial security.

Kumud Das
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