How Do They Afford That?If you're feeling the regret of a splurge you really can't afford, you might be suffering from a financial hangover. Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they look at the causes of a financial hangover, how to treat one, and most importantly, how to prevent it happening again.
The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
Welcome to How Do They Afford That, The podcast that peaks into the financial lives of everyday Australians. I'm Michael Thompson. I'm a writer and the co host of the podcast Fear and Greed Business news As always, I'm with Cannon Campbell, financial planner, founder of Sugar Mama TV, the financial literacy platform on YouTube, podcast books, Instagram, threads, TikTok and more.
Hello Canna, Hello, how are you?
I'm going well? Today's topics quite a serious one, actually are It's all about financial hangovers. We are going to come up with what you would say is the ultimate remedy for a financial hangover. Before we get into it, though, we just need to make it very clear that anything we talk about is always general in nature. We don't know anything about your circumstances, so this is never personal or investment or strategic or product advice. It is purely for financial purposes only. Right, Let's crack on what exactly is a financial hangover and why do people experience it?
So it is post celebration regret. We feel when we levletta spending habits just got a little bit wild and crazy over the holiday period or after like big events, and it's like an over indulgence financially, spending way more than we are planned. We may have dipped into some savings, or we've relied on credit cards and buy now, pay later, and we feel a little bit ill. And I'd say the symptoms would be depleted savings accounts, unexpected debt, or a compromised financial goal. Actually is one of them where we you know, maybe we plan to save it for a holiday or buy a home, and that's kind of gone out the window. And I will admit it's easily done. You know, we get carried away in the moment and the festive season and generosity and the pressure to impress and keep up, and you know, even those your yolo mindset that's kind of overried. There's financial discipline.
Yeah, there's no judgment here, is there, because this is something that is so easy to do because getting caught up in the moment. It is Christmas, or it's you're on holidays, and all of a sudden an opportunity presented something like, oh you know what, I'm only here once. Let's get this done. And before you know it, you've spent all your money and you are left with nothing and that is a financial hangover.
And that's that stark reality like stressful regret, and for some people it's a sense of feeling completely trapped.
What's the first step that someone should take when they kind of wake up to the realization that they have severely overspent or that they might have damaged their own kind of financial goals or futures because of some decisions that they've made.
Like that, I would say self compassion, you know, recognize what has happened without spiraling or letting yourself spiral into like that shame or guilt. You know, financial hangars are very common, and it's it's whilst it's important to take responsibility, beating yourself up doesn't actually help. It's like a rocking chair. You can sit and rock and worry, but it doesn't she gets you anywhere. So instead, what I would recommend is draw a line in the sand, make peace with yourself. You know, you can only control what you can only control to a certain degree, and learn this is going to be something you learn and grow from. So reflect on why it happened. You know, what was the emotional, social pressure or trigger that made this happen. Maybe you didn't plan properly, and I actually recommend sitting down and writing pen to paper about what you've learned from this and how you're going to commit to making it different in the future. So not about punishing yourself, but fostering a sense of self respect and self love towards the financial wellbeing that you deserve in your life and acknowledging, you know, the issues and reframing it. Now is an opportunity where you're going to learn and grow and focus on solutions rather than just wallowing in the problem and feeling like a victim.
Okay, So it is important to avoid that shame then, because it's happened. There's nothing you can do about it after the fact. In terms of preventing it, the more important thing is trying to be productive now and both prevent it happening again. But let's now deal with kind of how to deal with what has happened, Right, What are some of these the actual steps, the practical steps that people can take after they've kind of dealt with the reality of it. Okay, this has happened. What do they do now?
Well, we've got to face the noise, face the music, you know, as I said, the stark reality has set in, so let's get.
On with it.
So the worst thing you could possibly do is, you know, avoid the bills and you know, dodge the phone calls and not reply to the messages. So I would recommend sitting down and going all right, get some clarity as to how bad this situation really is. Look at the debts, look at the savings accounts. You know, how much did you really blow over Christmas and New Years? And how much more was that than you originally planned? Look at the damage because once we've got the damage, we can then work out what needs to be fixed as a priority. And you can see you know the priority, but you can also see the shortfall that's going to impact your immediate financial situation. So it's like an assessment and that then can empower you to then take direction. And remember, financial mistakes don't define you. There are everyone goes through these, regardless of your financial situation, and they're stepping stones to help you become smarter with money. We've got to open yourself up and have that mindset as you're going through. So assess the situation, Go and do a budget. If you haven't done one before, now's a great opportunity to enroll in the Sugar Mama Budget and cash Flow Academy, and you know, you can trim some of your expenses. You can do a little short fun financial challenges like we've got Frugal February coming out and manifesting March, so you can redirect those savings towards fixing the damage as quickly as possible and getting on the phone asking for help, calling your creditors asking you know what can be done to help pay these loans off as fast as possible, and then you know, look to get some exciting goals behind you so that you've got something to look forward to once you've fixed up all the damage. So I think, okay, well I've put to clear up the credit card, and once I finished the credit card, I'm going to work on a holiday savings goal or an investing goal, or you know, I'm going to something that excites you so that you know you've got something to look forward to once you get through fixing everything that happened.
Can I take a step back slightly and just kind of rewind just a little bit to kind of what leads to these kind of financial hangovers? Are they They're common kind of spending traps. So there's kind of patterns of behavior that can lead to financial hangovers. And I suppose then the follow up question to that is, how can you avoid them happening in the first place? Is it kind of I don't know, I want to say things like lack of impulse control and that kind of thing. Is it, Well, it is.
I mean, it's definitely one of them, you know, as sort of said, it's you get caught up in the excitement, you know, the keeping up with the joneses. You know, people love being generous people. I love giving people gifts. Even I can get carried away going I just want, you know, so many presents under the Christmas tree for my kids, and you know, to open up a thousand presents and just go nuts and have wrapping paper everywhere, Like everyone can get caught in the in the moment. And also that you know, you only live once mindset, you know, these things can go just that short term spontaneous decision just completely overrides any sense of you know, discipline or you know, practical application with money in our lives. So there are lots of things, and also you know a sense of loneliness. You know, Christmas time is such a trigger for so many people. You know, we then maybe overcompensate or try and mask it with buying ourselves things that we don't actually need, just to try and feel better about ourselves. So there's so many different things going on.
All right, let's take a quick break. When we come back, I want to talk to you about some of the other strategies that you can help to get yourself out of the whole that you might have created by perhaps overspending, but also kind of looking ahead a long way to the future, to the preventative strategies that you can take to make sure that this doesn't happen again. Canna, we are talking today about financial hangovers and how to deal with them. Can I talk to you about budgeting? If you have a strict budget, and you mentioned in passing before sit down and make a budget, it's one of the first things to do to recover from a financial hangover. What role does budgeting player I suppose in preventing one as well, because if you know, I'm making an assumption here. I know assumptions are dangerous on this show because nine times out of ten they are wrong. But I'm assuming that if you have a very clear idea of where your money is, what your money is supposed to be going towards. Then you are perhaps less likely to just go out and overspend and splurge in the wrong area because you've got almost a sense of accountability to yourself already. Yeah, that is that correct.
Absolutely, you know, and I think in this particular situation talking about a financial hangover, budgeting is prevention as well as a cure correct. And you know, as I always say, it's not about restriction or control or punishing yourself. You know, a budget gives you clarity and intention. It allows you to take back control and reduce the stress and avoid repeating those same mistakes again. So before you do a budget, it's about creating those boundaries and ensuring that you're spending alignes with your income and your priorities and your value system. But then afterwards, as you're healing, let's say, from the financial hangover, it actually allows you to allocate your funds and actually tackle the debt and rebuild those savings, but also create that really important awareness in your life as to where is your vice, where is your trigger, where is your you know, danger zone, so that you can actually be far more mindful when it comes to your money and you know that you know what are the triggers where do you tend to get caught up an emotional spending or relying on credit or making those impulse of purchases. And the budget can allow you to plan ahead for those things, and you know, it gives you those lists to stick to, and the moment, you know, as you're reviewing a budget, you actually do pause and reflect.
So that's probably then key to prevention because or breaking a cycle moment. Listening to all of this, it sounds as though some of the factors that can lead to a financial hangover might be part of a recurring kind of pattern, like because Christmas comes around every year, kind of a holiday might come around every year kind of some of these environments in which you are likely to overspend. This might be even just something as simple as a budget, because it gives you that accountability and it gives you those goals, those things that you're working towards that might help to break that cycle.
Definitely.
Okay, what about credit card debt again something that we have mentioned in passing, But I think this is where a financial hangover can get quite dangerous, can't it? Because if part of what you have done is overspent and over committed yourself in terms of the debt that you have. Then that can have a really serious flow on effect into your future in terms of affecting your credit rating, in terms of despiraling and compounding the amount of interest that you have to keep on paying. How do you break that side of things?
Look, technically, you should obviously always prioritize the debt with the highest interest rate first, and then obviously from your budget, use any spare money that you're able to free up to put towards that debt, you know, and that also includes money that you're able to earn, so any bonuses or refunds or you know, if you do have a side hustle, you can put that money towards the debt. And then also there's things like balance transfers, which I'm very cautious of because it doesn't necessarily change the habit. It just kind of parks the problem a certain period of time, but it is definitely a viable option that should be considered. And then obviously having automatic payments in place so that you don't forget to make those repayments and you can stay on top of it. And if you can afford to round up those repayments so that they're more than what the minimum requirement is, and then go through like press pause and just go through times where you can where you have like a no spending challenge, or you have, you know, a frugal weekend where you can just kind of just cut all the spending and just learn to just breathe and learn to use that time to reflect and reassess, and any money you didn't spend that you would have normally you can put towards that debt or put towards building up some savings again to help create that sense of stability and see the light at the end of the tunnel.
I like to wrap things up on a positive and we've kind of done that a bit there with that answer. But how do you kind of make a financial hangover into an experience that you learn from and that that can lead to better things in the future. Is it by what you said earlier in the episode. Is it about making some exciting goals, things that kind of motivate you to do a better job of resisting the urge to spend because you are excited about what is going to come, So that in the end, you are more focused on your money goals and more focused on a more exciting kind of financial future. It does it come down to goal setting.
Absolutely. You know, if I don't have a goal in my life, something is wrong. I'm something off with me. So a financial hangover can actually be your turning point, you know, that can be your rock bottom, and you learning to reframe it so that you're actually giving yourself feedback, you know, treating your overspending as valuable data and insight into yourself. You know, what did you learn about your habits? What did you learn about your emotions and your emotional regulation and those triggers? And can I say on the subject of triggers and emotions, we are just surrounded by so much marketing everywhere you look like, and retailers know that we go to spend money and they, you know, playoffs and perhaps one of the things is to jump off social media if that's a trigger. So so many blessings can come from this and celebrate those wins. You pay ten dollars off your credit card, you paid one hundred dollars or one thousand dollars. Every little win needs to be celebrated. That does not mean you go out and spend, but you're just like nice for yourself. You know, you give yourself a pat on the back. You've got to become your own inner cheerleader, and you know, stick to your plan. Head down, bum up. You can do this, and everything you learn along the way is actually going to help you then redirect this and to maybe building savings or building an investment portfolio. You are strengthening your financial skills as you are paying off those debts, and you know, so it's experienced, you're gaining you're building up financial resilience because you're learning. Yep, this is hurts, this is painful, this is frustrating, this is slow, But I'm learning. I'm never going to disrespect money like this and compromise my financial wellbeing, and I'm learning how to do a budget. Getting into a mess like this is often the catalyst for people doing a budget and learning to a budget and manage their cash flow, learning how to save, learning that obviously taking to the next level of investing. So your financial hangover as an opportunity to gain a lesson rather than see it as a failure, and to actually start to set yourself up for long term financial success and it's not the end of the day. It's an opportunity to grow.
Yeah. One other point occurred to me while you were talking just then is that you don't need to do it alone as well, is that you can talk and you should if you need to. If you find yourself getting into this hole, then you should talk to somebody else about it as well, because it is about not being ashamed of it. You need to be kind of practical and clear minded in terms of what you're and what you're doing. Financial counselors for one thing. We've talked about that in the past three Yeah, if you have really got yourself into trouble, that there is support out there as well. And it's also good accountability. Talking to other people and a financial planner and even just others who are in a similar situation to yourself. You can help each other remain accountable exactly.
Compassion is key.
Absolutely all right, Canna, We have covered that fairly comprehensively. Financial hangovers. It is a big time of year for financial hangovers, so this is probably something that a few people will be listening to this identifying with those feelings of having overspent and why it is important to avoid the shame, and you've got to treat yourself with kind of self respect throughout that period. But use this as the turning point, use it as the moment at which you change your relationship with money, things like kind of doing a budget, taking the time to understand the damage and understand kind of where you can go to next. Focus on your goal setting and avoid credit card debt if you can with this, get out of that debt as quickly as you can and look to the future because that is where you're going to be able to set these exciting goals and help to break that cycle. Canna, I feel exhausted after this. It's quite a serious topic, it.
Is, and it just needs to be taken with just kindness.
Yeah. Now, if anybody wants more information from you, where do they find you?
Sugar Ma? My TV on Instagram is the best place you can contact with me.
And you can hear me every day with Sean Aylmer on Fear and Greed daily business news for people who make their own decisions. Thank you for listening to how do they afford that? Remember please to hit follow on the podcast. That is vital and the best thing that you can do to help us spread the word is actually to send this episode on to someone who think might benefit from listening to it. Thank you very much for your company. Join us again next week.
