March 2021 Financial Stress Index (FSI) report

on March 30, 2021 / by Financial Mindfulness

March 2021 Financial Stress Index (FSI) report

Number of Australians ‘thriving’ bounces back dramatically as Covid nears end, but worst affected still suffering.

Australians assessed as ‘thriving’ financially – a group that slid backwards eduring the first six months of the Covid pandemic – have bounced back and are doing even better than before the health crisis.

According to the Financial Mindfulness Financial Stress Index (FSI), over a quarter – 25.8 per cent of 645 respondents – were rated as ‘thriving’ between the six-to-12-months into the pandemic from their answers to the FSI questionnaire

The proportion thriving was 18.8 per cent pre-Covid, but that crashed to 2.4 per cent during the first six months of 2020 as a big proportion of people slid into the next category down.

“Many people became extremely uncertain and worried about their financial position during the pandemic,” said Financial Mindfulness, CEO and Founder, Andrew Fleming.

“But extended Government support very likely stopped financial stress from spiralling.”

“When people stopped going out, their personal savings increased and at the same time interest rates were adjusted to their lowest levels in history.”

“The combination of extra savings and cheap money fuelled a personal and Australia-wide economic bounce back. This is reflected in the FSI data collected at February 2021.”

“This ‘bounce-back’ is evidenced in falling unemployment, GDP levels increasing and another property boom.”

The FSI tracked financial stress in detail – and across a range of metrics – over the last 18 months, at six monthly intervals, and captured the ongoing impact from the COVID-19 pandemic.

Depending on their answers to a set of 35 questions, respondents fell into one of five bands: distressed, stressed, managing, succeeding or thriving.

Overall, FSI data found an estimated 2.09 million Australians are experiencing levels of financial stress that reduce their wellbeing and capacity to function.

Financial Mindfulness estimates the associated lost productivity costs Australian business an estimated $27.02 billion per annum – a $5 billion improvement over the last 6 months.

The proportion of respondents ‘managing’ fell from 41.5 per cent in the first six months of the pandemic to 26.1 per cent in the six months from September 2020 to the end of February 2021.

There was a similar but smaller drop in the proportion in the ‘succeeding’ category. The migration of so many respondents to now be ‘thriving’ was partly responsible.

At the other end of the spectrum, a smaller number of people in chronic financial stress – categorised as ‘distressed’ – has continued to increase throughout the pandemic, with financial and psychological factors the main drivers.

“While it is clear that some people have bounced back, there are many Australians who unfortunately continue to experience considerable financial stress,” said neuropsychologist Nicola Gates.

“Inequity is increasing in Australia, and increasing inequality is associated with increases in financial distress.”

Key findings from Financial Mindfulness FSI report (Sept 2020 to Feb 2021) include:

• 10.75x increase in people who are thriving and not experiencing financial stress.
• 9.75x increase in those experiencing financial distressed during COVID19 times from pre-COVID19.
• Decrease in ratings of always feeling isolated, however a small increase on pre-COVID19 levels.
• Of those who are financially stressed, a large proportion feel worried (86%), overwhelmed (72%), and downhearted (75%) about their financial situation.
• 64% of people experienced financial shame.
• Those who identify as excessively eating, drinking, smoking due to their financial situation returned to pre-COVID19 levels.
• On average 16% of people often have physical stress relating to their money worries.
• Agitation is the most common somatic symptom of financial stress (71%), followed by tension (69%) and inability to “wind down” (65%).
• 71% of people are distracted because of financial concerns.
• Many take an ‘ignorance is bliss’ approach, either ignoring the situation (57%) or recklessly spending (57%).
• 66% of people note financial stress has negatively impacted their relationships.
• 59% experienced conflict with loved ones.

About the Financial Stress Index (FSI)

The FSI is a leading measure of total financial stress burden, and levels of financial stress impact across five dimensions; Financial status, Psychological impact, Behavioural signs of stress, Physical/Physiological burden and Social engagement.

The levels of financial stress are expressed on a scale; Thriving, Succeeding, Managing, Stressed and Distressed.