Credit card giant Mastercard reported a major shift in consumer behaviour that has seen 44% of Aussies decrease their use of cash when making purchases in-person since the outbreak of the coronavirus pandemic, as shoppers fear germs on cash.
The research found that more than half (52%) of Aussies are more aware of the dirtiness of cash as a result of COVID-19, while one in five (21%) said the risk of germs has made them not use cash at all.
Eight in ten (79%) of Australians agree contactless payments are a cleaner way to pay.
Founder and CEO of Financial Mindfulness Andrew Fleming said the combination of reduced incomes and a move away from using cash is the “perfect storm” for credit card debt which could drive up financial stress.
Perfect storm of credit card debt brewing for Australians during COVID-19.
Rapidly falling incomes, a move to card-only payments and a complete avoidance of cash is creating a “perfect storm” for Australians to find themselves in deep financial ruin.
Andrew Fleming, CEO of financial stress busting app Financial Mindfullness, says many Australians are unaware of the debt they are getting into by relying solely on personal credit.
“There is almost one credit card for every adult Australian. In January 2020 just before the crisis, there was $42.6 billion owing on credit cards with $28.4 billion accruing interest,” explains Mr Fleming.
If you’re experiencing financial stress, you’re dealing with two distinct issues: the money problems, and then the stress itself.
While Headspace has rolled out meditations specifically to help tackle financial stress, a new app has gone one step further to try and tackle both issues at once.
Developed with neuropsychologists, mindfulness and financial experts, the Financial Mindfulness app comes off the back of two years of research and aims to help people reduce financial, credit card and mortgage stress by addressing the way the stress itself is handled.
“The way we deal with particular stressors impacts everything that comes after,” said Financial Mindfulness founder and CEO Andrew Fleming.
“When financial stress is reduced, we get some peace of mind, our relationships improve, and we are more engaged in our jobs.”
But can the Financial Mindfulness actually help me with my finances?
Just because the app is primarily aimed at tackling the ‘stress’ of financial stress doesn’t mean that app is light on financial guidance.
To improve users’ ease of mind and change habits, it uses a mix of financial literacy, goal-setting, and positive reinforcement to help develop new behaviours for better money management.
“There has never been a solution available like this to ease the heavy burden of consumers’ financial stress.”
The app is available in the App Store and Google Play in both Australia and the US and offers two free learning modules: ‘Paying Bills’ and ‘Stress Management’.
You can access the rest of the modules, such as ‘Managing Credit Cards’, Managing Mortgages’ and ‘Unexpected Expenses’ for a one-off payment of $1.49 per module.
More than 20 modules are in the pipeline – expect to see ‘Managing Money in Relationships’, ‘Loss of Employment’, ‘Divorce & Separation’ and ‘Under-Earning’ before long.
Though the app only went to app stores this month, Fleming said user testing found financial stress was lowered after just one use of the app.
Power of Mindfulness over bad financial decision making.
If you’ve ever persisted with a dead-end job or loveless relationship or a university degree you regret starting in the hope it will somehow improve, or ‘chased your losses’ by doubling down, you might want to pay attention.
Maybe you’ve endured reading a novel you hated from the first 3 chapters or stayed through a movie just because you bought tickets – despite the fact you would rather be anywhere else.
Have you ever done something similar with money? Plunged money into a stock, a small business or tried your hand at Foreign Currency trading, something you didn’t understand? Hung onto that car for too long when it’s cost you a fortune already?
All these actions, and anything else where we ‘throw good money after bad’, are examples of a famous economic principle called the ‘sunk-cost fallacy’ which can be applied to life in general.
It’s the tendency to continue with an irrational and often risky course of action not based on the likely outcome, but because we don’t want to ‘waste’ what are unrecoverable costs and time – aka the ‘sunk-costs’.
It’s a very human response to the loss to try even harder to win, sometimes to avoid feelings of guilt or inadequacy, or even just fear of ‘looking bad’.
But at worst ego, politics and emotional decision-making can cause people to double or triple their financial losses, causing huge financial and emotional stress for individuals and their families.
In the cold light of day, it’s not rational, but who hasn’t done something like this? More importantly, how do we stop this apparent madness?
“Meditation reduced how much people focused on the past and future, and this psychological shift led to less negative emotion,” Kinias wrote in the journal. “The reduced negative emotion [then] facilitated their ability to let go of sunk costs.” Mindfulness does have some power over bad financial decision making!
In another study, from Elsevier’s journal Personality and Individual Differences in 2007, found “mindfulness is associated with less severe gambling outcomes”.
Chad Lakey, Keith Campbell, Adam Goodie (University of Georgia) and Kirk Warren Brown (Virginia Commonwealth University) concluded their findings.
They wrote, “are hopeful in suggesting that the greater attention to and awareness of ongoing internal and external stimuli that characterizes mindfulness may represent an effective means of mitigating the impulsive and addictive responses and intemperate risk-attitudes of individuals with problem gambling.”
They concluded: “In this light, mindfulness may help to lessen the grip of automatic thoughts, affective reactions, and behaviour patterns.”
Research into the specific benefits of mindfulness is ongoing but it seems clear that a regular mindfulness practice can have powerful positive effects on dysfunctional decision-making around money and reduce financial stress.
We are still on holidays, right? Well the majority of us are enjoying the holidays somewhere with our family and friends. The hangover from Christmas and New Year is all but over, but one hangover that hasn’t left us is our credit card bill from Christmas and the so-called holiday ‘sales’, financial stress looms.
Chances are we still can be engaged in the frenzy of ‘The Stocktake SALE’, ‘The CLEARANCE SALE’, ‘Super Daily Deals’, ‘50 months interest free, no deposit, no interest (read full terms)’, ‘It’s the Season to SAVE BIG’, ‘After Christmas SALE and CLEARANCE’, etc.
That clever marketing pressure can flick a switch in our brains where we go into a kind of ‘trance’, handing over our credit cards, tapping away now in a cashless society on auto-pilot to suppress those logical thoughts of ‘we really shouldn’t be spending so much’.
According to BetaBait.com (a website helping start-ups connect with early adopters), 88 percent of the total impulse purchases are created primarily because the items are on sale.
Rather than purchasing useful or necessary items, impulse shoppers buy primarily because it puts them in a better mood. In addition, many impulse purchases are made because people feel that they can’t pass up an extremely attractive offer. Retailers know this all too well and exploit it.
So, what do we do about it?
In a recent interview by Money and Life last month, I was asked to identify some helpful tips to break the cycle of spending and debt.
BetaBait.com also found that when people shop with the purpose of buying immediate needs or forgotten items, the rate of compulsive buying falls by 53 percent.
Exactly how much do we spend on our credit cards?
The Australian Retailers Association expected Australians to spend $50 billion between mid-November and Christmas Eve. Aussie shoppers were tipped to spend a further $18 billion nationwide between Boxing Day and 15 January 2018.
According to ARA executive director, Russell Zimmerman, the jump is being driven by online retail. “With Amazon’s recent Australia launch, we are certain that online retail will be a driving force for post-Christmas sales with the ARA and Roy Morgan forecasting the ‘Other Retailing’ category to increase by more than four percent this year.”
Gumtree survey, which has found that Aussies are expecting to spend a staggering $10 billion dollars on Christmas presents alone, equating to more than $700 on gift giving per person.
Perhaps not surprisingly, the Gumtree research also found that almost 9 out of 10 Australians (86 percent) find Christmas puts a strain on their finances, with buying Christmas gifts dubbed as the biggest cause (66%) of this pressure.
The annual consumer survey by US company Statista found shoppers expected to spend an average of US6 on Christmas gifts alone in 2017, not counting other holiday costs and sales spending. This is a massive jump from the 2016 average of US$752.
In 2017, Christmas retail sales are forecast to grow to about 680.4 billion U.S. dollars; a 3.8 percent increase from 2016. Net result, Americans seem to be in a generous mood of giving more this year. Does the Trump effect have anything to do with this?
In the US, Americans have now hit a scary milestone, the highest credit card debt in U.S history. According to the Federal Reserve, Americans had US$1.02 trillion in outstanding revolving credit in Oct 2017. When it comes to individual households, the average American family owes US$8,377.
For the first time since the Great Recession, lenders have given more consumers with sub-prime, or below average, credit scores, access to credit cards, but they are giving them lower spending limits, according to the credit reporting agency TransUnion.
So, what does this impulse spending all mean to our Financial Wellbeing
New research is constantly being released on the impact financial stress is having on our financial wellbeing and general health worldwide.
According to the European Society of Cardiology, research recently presented at the 18th Annual Congress of the South African Heart Association, significant financial stress is associated with a 13-fold higher odds of having a heart attack.
So how can we get through the holidays not regretting our spending, not dreading the bloated repayments to come, then show up to work without that nagging sense of fear that comes from surviving with financial stress?
An Australian start-up – Financial Mindfulness – is developing a financial stress reduction program designed to revolutionise the way we think and behave with our money. In the process, we can stay within our means and feel better about ourselves by saying goodbye to the worry of money.
Financial stress behind mental health insurance claim spikes.
New research reveals that financial stress is a hidden mental health trigger for Australians to submit insurance claims, part of a trend alarming the life insurance industry.
The financial stress burden faced by Australians is, according to analysis by Rice Warner, a major factor in the escalating numbers of mental health-related claims that insurers are wrestling with.
In a report commissioned by an Australian start-up, Financial Mindfulness, to examine the viability of a program to reduce personal financial stress, it was estimated that well over half of mental health-related insurance claims are due to financial stress.
“It is not unreasonable to assume that 60 % of mental health claims have financial stress as a primary or secondary contributor,” Rice Warner consultant Heather Brown wrote.
Other research also commissioned by Financial Mindfulness in July 2017 found that Australians under financial stress suffered severe impacts on their mental and physical health and relationships.
While musculoskeletal conditions are the biggest category of claims for both IP and TPD claims, it is widely acknowledged that mental health is the fastest growing cause of insurance claims. Many agree because decades of stigma is lifting.
Rice Warner’s Group Insurance Claims Experience Study, a huge research project into 140,000 claims across 16 superannuation funds from 2011 to 2014, revealed another stunning finding, about the leading causes of IP claims in particular.
Mental health issues were the leading cause of IP claims during most Australian prime child rearing and career-building years (25 to 45 years). IP insurance premiums are worth an estimated $4.1 billion in annual premiums.
The types of insurance most affected by mental health claims are Total and Permanent Disability and Income Protection. 20% of all IP claims are due to mental health issues or suicide, while the figure was 15% for TPD.
According to Financial Mindfulness Founder and CEO, Andrew Fleming: “The trend of mental health insurance claims lead us to believe that this is the number one issue facing the life insurance industry.
What is the major reason behind mental health claims? Financial stress.
“Financial stress is having a major impact on Australians mental health.
More than one in three Australian’s surveyed (38%) worried about money “all the time”.
Those who identified as being financially stressed, said anxiety (66%), depression (64%) and social isolation (55%) were the consequences of financial stress.
Financial stress devastating Australians, close to 1 in 3 Australians suffer from significant financial stress, which has for the first time been comprehensively examined in new research by CoreData.
The results show financial stress leads to anti-social behaviour, relationship conflict and breakdown, isolation, sleep loss and symptoms of depression.
Australian start-up Financial Mindfulness commissioned global research firm CoreData in July 2017 to question 1000 Australians about what financial stress does to their relationships and their physical and physical and mental health.
CoreData dug deeper into the issue than anyone ever has in Australia, creating the first ever personal Financial Stress Index, based on responses to 17 questions.
The results show nearly one in three people (30.4%) are suffering from significant financial stress and they are struggling compared to those who are not financially-stressed. Women were more likely to be more financially-stressed than men (33.4% v 27.6%).
Dr Nicola Gates, chief scientific advisor for Financial Mindfulness, said significant financial stress was “a lot more common than I had believed”.
“Worse 80% of them report severe discomfort – psychological and physical discomfort as a result,” Dr Gates said. “Financial stress is an issue that needs to be talked about in order to reduce stigma and shame, and to bring about intervention.”
35 cent of respondents suffering financial stress admitted using drugs or alcohol to manage negative feelings associated with personal finances during the past month. That level of abuse was a remarkable 18 times higher than people not under financial stress.
More than 66 per cent of those suffering financial stress said money worries directly led to feelings of fear, anxiety and/or depression – three times higher than people unaffected by financial stress. “Financial stress, like other stress, is a significant threat to our mental health and can lead to mental illness,” Dr Gates said. “For example, financial stress can cause a person to feel shame and develop a sense of failure which may lead them to become depressed.”
One of the most surprising findings was that financial stress is felt broadly, and not only experienced in low-income households. Respondents on salaries of up to $150,000 a year with investments of up to $750,000 were only marginally less financially-stressed than those who earned up to $90,000 with investments of up to $350,000.The findings also showed that financially-stressed Australians reported:
Their physical health was affected nearly six times as much as those not financially stressed (60.8% v 10.5%).
Arguing about money with family/partner nearly four times as much (75.8% v 21.4%).
Feeling at least considerably irritable / having angry outbursts over their money twenty times more (52.2% v 2.6%).
Having problems sleeping at eight times the rate of those not financially stressed (71.3% v 8.7%).
More than a third (35.2%) used alcohol or drugs to deal with financial stress.
52.4% have trouble concentrating (vs. 3.3%), 16 times higher.
37.8% have been hurtful towards themselves or others, 17 times higher.
Nearly nine out of 10 (88.0%) avoid social functions reasonably often, four times higher.
Worrying about money “most of the time”, at six times the rate of those not stressed (71.0% v 11.7%)
Financial Mindfulness released its latest Financial Stress Survey and the results showed just how much damage financial stress is causing. The Sydney Morning Herald covered the story.
Nearly one in three Australians is feeling financially stressed, with damaging effects on mental and physical health and social relationships.
The CoreData/Financial Mindfulness Financial Stress Survey of 1000 people found 30 per cent of people reported financial stress, and the problem affects all socio-economic groups.
Marian Russell, from North Narrabeen on Sydney’s northern beaches, knows the feeling well.
Her husband, Zac, 28, works long hours as a carpenter while Ms Russell, 24, looks after the couple’s two children, Allegra, 2, and Bodie, 1.
Marian Russell with her two children, Allegra, 2, and Bodie, 1, at Warriewood beach. Credit: Daniel Munoz
The family lives pay cheque to pay cheque and struggles to pay off a debt they acquired when they bought a vehicle for Zac’s work.
“This week we literally had $30 after all the bills were paid. It’s sad but we’ve got to be thankful we’ve got food in the cupboard,” Ms Russell said.
“It’s taking its toll, not just on our relationship but emotionally, on myself. I have anxiety and depression and it doesn’t help not having my husband around because he has to work six days a week to keep food on the table. It’s a lot of pressure for a young mum.”
Ms Russell said her husband found it hard to switch off from work and the couple rarely get to go out together. Her husband’s family live nearby but are away until the end of the year, so free babysitting is off the cards for now. They got married in the registry office because money was too tight for a wedding and Ms Russell has shelved her plans for study.
Marian Russell had to take her children, Allegra, 2, and Bodie, 1, out of swimming lessons because of money worries. Credit: Daniel Munoz
Her biggest fear is not providing for her children. She cancelled their swimming lessons because it cost too much, a decision that weighs heavily given the family live so close to the beach.
Ms Russell said she would like to contribute financially but if she went back to her former work in retail, the cost of childcare would leave the family only $10 a day better off. “I would love to work but it’s not worth it,” she said.
Instead she sells her art online, under the name LunaTribeDesign on Instagram and Facebook, providing some “pocket money” and a much-needed emotional boost.
Ms Russell said they were lucky to live in a good rental property but she doubts they will be able to get ahead while living in Sydney.
The financial stress survey found money worries were widespread across all socio-economic groups. Clinical psychologist Dr Nicola Gates, who was involved in the study, said people on high incomes reported financial stress as well.
“It can be over-commitment but also things can change profoundly for people,” Dr Gates said.
“A client in my practice had a recreational sport accident … he came off his jet ski and hadn’t set himself up well with insurance, so the family lost the major breadwinner just like that. So where do the school fees come from? How does the mortgage get paid? People’s financial position can be more precarious than they realise.”
Dr Gates was aware financial stress was a problem for her clients but was surprised the survey suggested it was so high in the general population.
Potential reasons include the high cost of housing, lack of wages growth, perceptions of job insecurity and the fact financial literacy has not kept up with the complexity of the financial system.
“Financial stress is very prevalent and there’s a lot of shame and embarrassment around financial stress and as a result people don’t really talk about it,” Dr Gates said. “Shame is a particularly acute risk for mental illness.”
The psychological burden of stress has a physical effect on the body, with lack of sleep and lowered immunity. And people often cope with financial stress in ways that can damage their health and relationships.
Thirty-five per cent of financially stressed respondents have used drugs or alcohol to manage negative feelings stemming from their money worries, while 38 per cent have been hurtful towards themselves or others.
Almost nine in 10 financially stressed respondents regularly miss social events because of money worries, compared with only one in five of those not financially stressed.
More than seven out of 10 people who are financially stressed regularly lose sleep because of money issues, compared with less than one in 10 of those who are not financially stressed.
And more than half of financially stressed respondents report considerable difficulty concentrating due to money worries, compared with only 3 per cent of those who are not financially stressed.
By Caitlin Fitzsimmons
Updated September 4, 2017 — 11.29am first published at 12.15am in the Sydney Morning Hearld
We asked you, our Financial Mindfulness Facebook family – across Australia, the United States and the United Kingdom – to take part in a survey about financial stress in your life. The results are in.
Financial stress, which comes with a strong set of beliefs, is a huge factor in your lives. Monthly bills – such as credit cards and other regular payments – disorganisation, income and unexpected expenses are the major causes of your financial stress.
Constantly stressed about money
One of the most striking findings of our July 2017 survey was that an extraordinary 94 per cent of respondents experienced financial stress – defined as “feeling discomfort and/or worry about making financial decisions” – at least “fairly often”.
A surprising 35 per cent experienced this kind of financial stress “all the time”, while just over a quarter were affected “very often”.
We also asked you a series of questions that haven’t been widely posed to the public before about financial stress. Your answers showed the seriousness of people’s struggles around money.
Why does financial stress hurt our concentration?
Because other studies have showed that financial stress can cause issues with concentration in our daily lives, we asked exactly what about your financial worries affects your concentration.
“I can’t stop thinking about debt and [my] financial struggle,” was a typical response we received to one of the questions we posed. “Thinking several things at once and always having the uncertainties and insecurities present in [my] mind. Focus is clouded with fear,” said another woman.
Similarly, this: “I cannot concentrate since money is always on my mind. Worrying about how to pay all the bills and keep the kids fed make it difficult to focus.”
Another wrote of the damage that a lack of knowledge was having for her and her partner: “Just being disorganized, my boyfriend and I have no control over our finances and we do not know where to start. We are trying to [get help] but we’re still not dedicated to [the] advice.”
Why do we deliberately avoid thinking about the problem?
We know financial stress comes with self-defeating beliefs. Our survey showed the fears behind these beliefs.
“If I think about it too much I panic,” was a typical response, while another admitted suffering from “head in the sand syndrome”.
Responses to this question revealed some real emotional distress when dealing with money: actually facing their financial problems was “too overwhelming”, “exhausting”, “too embarrassing”, “too stressful”, “I want it to go away”, “seems impossible, “it scares me and hurts”.
That makes a response like the following totally understandable: “I run away from things I don’t know how to handle.” This response seemed a bit more worrying: “It’s good to avoid thinking about it because the more you think about it, you give the problem more energy.”
From so much worry, it’s a short step to this: “It makes me depressed and not want to do anything or see any people.”
We asked about mindfulness too: what do people think it is? Interesting the least popular choice was “meditation”. The most popular was “being more aware”, followed by “making conscious decisions more often.”
How would a life without financial stress look?
We also asked exactly how people would even know if their financial had reduced, a reasonable question given the pervasiveness and complexity of the problem.
Easily the most popular option was “I would not worry about money as often”, which got more than twice the votes that “I would feel calmer making financial decisions” then “I would pay bills and meet my repayments without a problem”.
Way down the list was “I would have more money”, suggesting absence of financial stress is not about wealth.
You want to try to solve financial stress with mindfulness
Happily for us, a huge majority of respondents would try our program – which is a personalised financial stress reduction program, delivered by an app.
Mindfulness practice reduces time off work for anxiety sufferers.
Working with someone who is extremely anxious isn’t always fun, but it’s worth remembering stress hits everyone, including us. Anxiety disorders are by some measures the most common mental health issues in the western world, even more common than depression.
Previously research has shown sufferers of anxiety – which could be defined as continuous feelings of stress or worry – typically take more sick days at work and use more mental health services than average workers.
But mental health problems are so common they are basically unavoidable in the workplace, affecting at least 45 percent of all Australians in their lifetimes and possibly more, according to charity Sane Australia. Undetected mental health issues can also be triggered by major life events and financial stress events.
Hence the move to expand corporate wellness programs beyond physical health, and embed mental health programs and tools in them. Mindfulness is one such promising tool.
Mindfulness has been shown in many studies to positively affect symptoms of depression, insomnia and anxiety but now there is proof of improvements that could directly benefit employers: rates of absenteeism in anxiety sufferers fell after establishing a meditation practice.
A team of seven researchers, led by Dr. Elizabeth Hoge, associate professor of psychiatry at Georgetown University Medical Center, split a 57 subjects diagnosed with Generalised Anxiety Disorder into two groups, with half doing eight weeks of “attention control” training while the others did MBSR (mindfulness-based stress reduction) training.
Those that did the mindfulness cut their time absent from work by nearly two-thirds, while the control group actually increased the amount of time they took off work.
The measurement scrutinised in Hoges’ latest research paper – called Effects of mindfulness meditation on occupational functioning and health care utilization in individuals with anxiety – was “partial days missed” and not full days. Why?
“This may be the most sensitive measure of how anxiety disorders impact work performance, as employees … may come late to work, or leave early depending on their mental state,” her report said.
For those who continued practicing mindfulness in their own time, the reduction in absenteeism continued and there was a similar decrease in visits to mental health professionals.
The report concluded: “Mindfulness meditation training may improve occupational functioning and decrease healthcare utilization in adults with GAD.”
Hoge recently published research from a similar experiment which found a group which had undergone mindfulness training “felt” less stressed and had lower levels of the stress hormone ACTH in their blood than people who did stress management training.
If you need to speak to someone about your anxiety call Beyond Blue 1300 22 4636 or Sane 1800 18 7263.
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