Sound mental health is critical for a person to live their best life and be their most productive. Unfortunately, mental illness is prevalent in Australia, with one in five Aussies aged 16-85 experiencing a form of mental illness each year. There are many factors at play; however, one of the most common contributors is our finances. Financial stress impacts our mood and thought processes making it even harder to make smart financial decisions in the future.
Financial stress can impact people of any income level; it is essentially relative. However, lower-paid, casual or hourly employees are affected disproportionately. The accepted fortnightly or monthly payday breeds a vicious financial cycle and mindset that is often difficult to break out of. Being freed from the payday cycle is one way to liberate someone financially and provide a catalyst for improved mental health.
The mental impact of the fortnightly and monthly payday cycle
Almost six million Australians are living paycheck to paycheck – that’s close to 50% of the workforce. When we’re worried about paying our subsequent bills and simply ‘making it’ to the next payday, it’s obviously going to be challenging to keep a clear mind. Adding fuel to the fire is the risk of an unexpected expense or emergency. Without the excess funds on hand, employees in this position regularly turn to debt to plug the cash flow deficiency until the next payday. This, in turn, reduces their cash flow in the next month (due to the fees and interest charges incurred), breeding a cycle often referred to as a ‘debt trap,’ where it becomes tough to pay down existing debts. Being a slave to debt is certainly not a recipe for good mental health!
Poor mental health impacts our ability to manage money
Poor mental health influences our ability to manage finances in many ways. We might find it difficult to concentrate on essential decisions or understand all the necessary information regarding managing your money. Even if someone has enough money to pay their obligations, just being in debt may weigh heavily on their mind, often leading to anxiety, depression and further distractions. It also impacts our ability to perform at work and increases the risk of dropping out altogether.
How to free yourself from the payday cycle
We can do many things to escape from the payday cycle, and employers play a significant role in enabling their staff to do so. Here are three tools we can use:
- Budget. Create a budget for household spending that you can stick to. A basic plan can help you see where money is going. Even if you go over, it can help give a sense of control over expenses. One should however keep in mind that by budgeting, this will not avoid an unexpected expense cropping up, it’s a fact of life.
- Eliminate debt. Eliminate any consumer debt as a first priority. That might mean sacrificing discretionary purchases for a while, but it will be worth it. Debt often breeds more debt!
- Earned Wage Access (EWA). EWA allows workers to access their earned pay at any point in the pay cycle without waiting until their next payday. When an unexpected bill or expense arrives, you can simply access a portion of their earned wages to cover any shortfall instead of turning to credit or a payday loan. Using EWA can cost you nothing, if your employer provides this solution as an employee benefit, but if not accessing your earned wages using the Paytime solution will cost less than a cup of coffee (with no other fees and charges) – regardless of how much money you need to access during the month.
Your company can empower you and your colleagues to take control of their mental health by breaking the payday cycle. Put them in touch with Paytime today to arrange a free consultation.