Practical Strategies for Managing Financial Stress During a Recession

It’s no secret that New Zealand is currently feeling the pinch of a recession. From rising interest rates to the increasing cost of living, many Kiwis are experiencing financial strain. As a counsellor, I see the impact this has on mental and emotional wellbeing every day. Financial stress doesn’t just affect your wallet—it can affect your relationships, your health, and even your ability to focus on the things you love.

In times of economic downturn, it’s easy to feel overwhelmed, but there are practical steps you can take to regain a sense of control and reduce stress. In this article, I’ll share some strategies that I’ve found helpful for clients in managing financial stress during tough times—strategies that are not only grounded in financial management but also in mental wellbeing.

Understanding Financial Stress and its Impact

Before diving into solutions, it’s essential to understand why financial stress can be so overwhelming. According to the New Zealand Psychological Society (NZPS), financial stress can manifest as anxiety, depression, and an overwhelming sense of helplessness. The Mental Health Foundation of New Zealand reports that financial worries are one of the most common contributors to mental health issues.

“Financial stress is often a symptom of feeling out of control,” says Dr. Diana Wichtel, a clinical psychologist who has worked with many New Zealanders struggling with financial anxiety. “When people are uncertain about their financial future, it can create a sense of instability that spills over into other areas of life. It affects sleep, decision-making, and even the ability to enjoy life.”

In a recession, these feelings are compounded by external pressures—job uncertainty, rising costs, and the constant worry that things may get worse before they get better. So, how can you manage the stress without letting it take over your life?

1. Set Realistic Financial Goals

The first step in managing financial stress is to take stock of your situation and set realistic goals. This can help you feel more in control of your finances, which in turn reduces anxiety.

When you’re juggling bills and trying to make ends meet, it’s easy to fall into the trap of “I’ll never get out of this”. But breaking down your finances into manageable goals can make a huge difference.

“Start with small, achievable targets,” suggests John McIver, a financial advisor based in Auckland. “For example, setting a goal to cut down $50 of unnecessary spending each month might seem small, but when you achieve it, it builds confidence. Then you can start looking at bigger goals, like paying off debt or saving for an emergency fund.”

Some specific goals you might want to set:

• Track your spending: Keep a detailed record of where your money goes. This might feel tedious, but it’s an excellent way to identify where you can cut back.
• Start saving, even if it’s small: Try putting away a small amount each week. Over time, this creates a financial cushion that can give you peace of mind during tough times.
• Tackle high-interest debt first: If you have multiple debts, focus on paying off high-interest ones like credit cards. Reducing this burden will free up more money in the long run.

2. Create a Realistic Budget

If you don’t have a budget, now is the time to make one. A budget gives you clarity on your income, essential expenses, and discretionary spending. It can help you prioritise what’s most important and put you back in the driver’s seat.

For many Kiwis, budgeting can feel overwhelming—especially when there’s so much uncertainty. However, a realistic budget isn’t about cutting out everything you enjoy; it’s about being strategic with your finances.

“A good budget will account for your basic needs—housing, food, utilities, and transport—but it should also leave room for self-care,” says Vanessa O’Connell, a financial therapist. “If you leave nothing for things like hobbies or socialising, you may end up feeling resentful of your budget, which leads to stress.”

Here are some tips for creating a budget during a recession:

• Categorise your spending: Divide your expenses into essential (e.g., rent, food, utilities) and non-essential (e.g., entertainment, subscriptions).
• Use the 50/30/20 rule: Allocate 50% of your income to needs, 30% to wants, and 20% to savings or debt repayment.
• Revisit your budget regularly: In uncertain times, it’s important to reassess your budget every few weeks to ensure it still reflects your current financial situation.

3. Seek Professional Help

When you’re feeling financially stressed, it can be difficult to make decisions with a clear mind. Sometimes, the best thing you can do is seek professional help. This could be from a financial advisor, a debt counsellor, or even a therapist to help manage the emotional aspect of financial stress.

“Speaking to a professional can make a huge difference,” says Catherine Goh, a senior debt advisor with MoneyTalks, a free financial advice service in New Zealand. “Debt can feel isolating, but you don’t have to face it alone. There are people who can help you create a plan and give you the tools to regain control.”

Some useful services available in New Zealand include:

• MoneyTalks: Offers free, confidential budgeting and debt advice.
• Sorted.org.nz: A government-backed financial education platform that provides budgeting tools, advice on saving, and managing debt.
• Financial Counselling New Zealand: Provides free financial counselling and support for individuals in financial distress.

4. Focus on Your Mental Health

Financial stress often leads to emotional and mental exhaustion. The good news is, you can take steps to manage your emotional health during a recession. The better you feel emotionally, the more likely you are to make clear-headed decisions about your finances.

“It’s easy to get caught up in the ‘hustle’ mentality, especially when times are tough,” says Dr. Anne-Marie Jackson, a psychologist in Wellington. “But it’s important to remember that your mental health is just as important as your financial health. Taking time for self-care, mindfulness, and physical exercise can help manage anxiety and keep you grounded.”

Here are a few ways to focus on your mental wellbeing:

• Practice mindfulness: Mindfulness meditation can help reduce anxiety and improve focus. Even just 10 minutes a day can make a difference.
• Stay connected: Reach out to friends, whanau, or a support group. Social support is critical for mental health, especially during stressful times.
• Exercise: Regular physical activity has been shown to reduce stress hormones and improve mood. Whether it’s walking, cycling, or yoga, find something you enjoy.
• Sleep well: Poor sleep can exacerbate financial stress, making it harder to think clearly. Aim for 7-9 hours of sleep each night.

5. Cutting Unnecessary Expenses

When money is tight, trimming unnecessary expenses can provide immediate relief. Think about where you might be able to cut back without sacrificing too much.

“You don’t have to give up everything, but reducing things like takeaways, subscriptions, or even your gym membership can free up more cash,” says McIver. “The goal is to identify where you can make temporary changes to ease the financial burden while keeping your lifestyle as close to normal as possible.”

Ideas for cutting costs include:

• Canceling unused subscriptions: Review things like streaming services, gym memberships, and magazine subscriptions. If you’re not using them, cancel them.
• Meal planning and cooking at home: Eating out can add up quickly. Consider meal prepping or cooking more at home to save money.
• Switching to cheaper alternatives: Look at things like insurance, mobile phone plans, and utilities. Often, there are cheaper options available that still meet your needs.

6. Build an Emergency Fund

One of the most powerful tools for managing financial stress is having an emergency fund. While this may seem difficult in the short term, having even a small amount set aside for unexpected expenses can provide significant peace of mind.

“I recommend starting small,” says O’Connell. “Even just $500 for emergencies can make a difference. If you can build that over time, it will give you confidence knowing that you have a cushion if something goes wrong.”

Here are a few ways to start:

• Automate savings: Set up an automatic transfer to a savings account each payday, even if it’s a small amount.
• Use windfalls: If you receive any bonuses, tax returns, or gifts, consider putting a portion into your emergency fund.

7. Know When to Seek Help

Finally, if you’re feeling overwhelmed by financial stress, don’t be afraid to ask for help. There are plenty of resources in New Zealand designed to support people who are struggling financially. From counselling services to financial advisors, reaching out for help is a positive step toward reclaiming your financial health.

Conclusion

Financial stress during a recession can feel daunting, but with the right tools and mindset, it’s possible to navigate these challenges without losing sight of your wellbeing. By setting realistic goals, creating a solid budget, seeking professional help, and taking care of your mental health, you can reduce the burden of financial stress and regain a sense of control.

Remember, you’re not alone in this—there are resources available, and there is no shame in asking for help. Focus on taking small steps towards financial stability and personal wellbeing, and take it one day at a time.

 

References:

1. New Zealand Psychological Society. (2023). Understanding the Mental Health Impact of Financial Stress.
2. Mental Health Foundation of New Zealand. (2023). Financial Stress and Mental Health.
3. org.nz. (2023). Budgeting and Financial Planning Tools.
4. (2023). Free Financial Advice and Support.

 

Hi, I’m Mikael, I’m a compassionate integrative therapist dedicated to helping children, youth, and families thrive. My approach is trauma-informed and neurodiversity-affirming, creating a safe, judgment-free space where clients can heal at their own pace and explore their emotional well-being. With a Bachelor of Science in Psychology from the Philippines (NZQA Recognized) and a Master’s in Developmental Psychology, I have a strong foundation in human development and the complexities of emotional and cognitive growth. My mission is to empower clients to feel truly seen, heard, and supported on their journey to healing and resilience.

Connect with me here.