Strategies to help you deal with financial stress

There’s been a lot of commentary recently about people doing it tough due to the cost of living. Even high earners aren’t immune to the pressure.

According to a report by Finder cited in the Guardian, more than a third of Australians who earn six figures are living paycheque to paycheque, with less than a month’s worth of their salary saved.

Businesses are also feeling the pinch, with the Financial Review reporting that small businesses are ‘under the most financial pressure in decades’. 

This financial strain is taking its toll, leading to a huge amount of stress, anxiety and feelings of uncertainty about the future that only exacerbate these worries and emotions. 

If any of this resonates—whether personally, professionally, or both—here’s some advice to help ease the pressure. 

Own it and share the burden 

The first step to take in the face of fiscal stress is to own it—and talk about it.

Keeping those difficult emotions to yourself can take a serious toll on your physical and mental health—and it won’t improve your situation. In fact, it’s likely to make things worse. Instead, try sharing what you’re going through with a family member, friend or trusted confidante.

If it’s your business that’s experiencing financial difficulty, raise your concerns with others, including colleagues and your accountant and business advisor. 

Lots of people are facing the same stress right now, so don’t be embarrassed. Offloading will give you an immediate sense of relief and may lead to some great solutions. 

Assess your position and explore options 

The next step is to assess your financial position. You already know there’s an issue, but to turn things around, you need to get down to the specifics and then look at your options.

My personal finances are the problem

If you’re struggling financially personally, look at your assets and liabilities position and your personal income and expenses. 

Do you have options to increase your income or reduce your outlays? For example, can you boost your income by seeking a pay rise if you’ve not had one recently or by picking up more hours or a second job? 

Additionally, assess your discretionary spending habits—are there luxuries or subscriptions you can reconsider? Also, look at renegotiating terms on any debt you have and ask utility providers if they can give you a better deal. 

My business finances are the problem

If your business is the financial elephant on your shoulders, you need to review the balance sheet, look at assets and liabilities, and determine your position. Again, you also need to look at your expenses and outlays. 

Assess your financial commitments and, as with your personal finances, look at ways to reduce spending and increase profit. Could you move to a cheaper location, increase profit margins by re-evaluating your pricing strategy, or find new suppliers?

Also, look at renegotiating existing debts to make them more manageable and aligned with your current cash flow. 

Additional advice for business owners 

As well as doing the above, here are some additional actions you can take for your business—whether you’re feeling financial pressure or want to avoid facing it.

Prepare financial projections 

Creating financial projections is so important in business, especially if you’re facing financial stress. 

By estimating your future revenue, expenses and cash flow, you can get a clearer picture of your financial trajectory and pinpoint any projected deficiencies that need fast attention. 

A projected deficiency is a forecasted shortfall in your income relative to your expenses. If you know what’s coming, you can take action to prevent it, for example, by running a marketing campaign or exploring loan options.

Look out for warning signs 

Being aware of the red flags that may suggest financial distress can help you make decisions and take action to protect your business before the situation gets worse.  

Here are some key signs to look out for:

• Deteriorating bank balance – A steady decline may indicate cash flow issues and a lack of sufficient revenue to cover expenses.
• Declining sales – A drop in sales figures may signal that your product or service is losing its appeal or that market conditions are shifting.
• Increasing costs – Rising operational costs without a corresponding increase in revenue can quickly erode profit margins and lead to financial strain.
• Difficulty collecting debtors – Struggling to collect payments can impact your cash flow and indicate potential customer financial instability.
• Clients asking for extended terms – If this happens often it may indicate they’re facing financial difficulties, which could affect your income.
• Not paying tax debts – Falling behind on tax obligations can lead to penalties and legal issues, making your financial problems worse.
• Gut feel – Trust your instincts. If something feels off about your business's financial health, take the time to investigate further.

Protect your business against risk

As well as dealing with any current financial stress, and looking out for warning signs, it pays to be proactive. By implementing some straightforward practices, you can create a buffer against unexpected challenges. 

Here are some things to do:

• Ensure you have paperwork—contracts where necessary – Solid agreements can protect your interests and clarify expectations, reducing misunderstandings.
• Invoice regularly – Keep your cash flow healthy by sending out invoices promptly and consistently.
• Adhere to your debt collection systems – if you don’t have one, implement one. A reliable debt collection system can help you stay on top of outstanding payments and keep your finances in check.
• Enforce payment terms – Don’t shy away from reminding clients of payment deadlines. This helps maintain a professional standard and encourages timely payments.
• Seek personal guarantees where possible – When working with new clients, a personal guarantee can provide an extra layer of security for your business.
• Credit check new customers – A quick credit check can give insight into a potential client's payment history, helping you assess their reliability.
• Request money up front where appropriate – For new or high-risk clients, asking for a portion of the payment upfront can lessen financial risk and ensure commitment.

Take action to turn things around

Being under monetary pressure, at home or in business, isn’t a nice place to be. But if you’re facing it, don’t bury your head in the sand. This can make your financial stress worse. Instead, own it, talk about it and take action. The quicker you act, the better your chances of turning things around. 

Concerned you may be under financial stress? Reach out to your Maxim advisor or contact our team today. We can help you assess your situation and put you in touch with one of our turnaround partners if necessary.