How to Reduce Financial Stress in simple ways.
Every human being aspires to gain financial independence. In times such as these, facing financial pressure is a reality.
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Easy ways to know about Financial Stress and Mental Health are right here.
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Learn quick and easy ways of how to reduce debt.
Finance is a large part of a person’s life. Who doesn’t require substantial amount of money to lead a happy and fulfilling life.
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Managing financial stress and mindfulness.
In the second part of our financial stress webinar covering managing financial stress, we look at goals, mindfulness, and monitoring progress with expert help from Lea Clothier, a Master-certified behavioural money coach involved in the development of the Financial Mindfulness program. Part one looked in detail, decision making, literacy, and learning new skills.
Setting financial goals
By definition, moving forward – out of financial stress – means we have to do things differently.
“If we stay where we are, we’re going to get more of what we’ve got,” Ms. Clothier says.
The reason for setting financial goals is because they can help unlock genuine and transformative behaviour change.
The theory of behaviour change is that we need to be motivated to make changes. Setting goals is a way of taking early but clear steps towards change.
“These goals can be tiny, or they can be very significant. I’m a big fan of what they call small but significant goals,” says Ms. Clothier.
One type of goal is a milestone – reaching a certain target of savings or being able to afford something we’ve targeted, like the deposit to buy a property, or fund a small business.
On top of the achievement of reaching a goal, the very act of setting financial goals can actually help reduce financial stress because it makes us feel a little more positive about our money.
“We can start to see the progress that we’re taking away from what we don’t want, towards that which we do want,” Ms. Clothier says.
In setting financial goals it’s a good idea to nominate an ‘accountability partner’ and make them part of your process.
That is a person to check in with around your progress.
The more you think about how you got into financial stress – this point where major change is necessary – and reflect on your history of self-defeating or disorganised behaviours with money, the more you’ll see accountability is essential in changing your relationship with financial stress.
It’s important to note things may not happen quickly. Making a meaningful change that can be sustained for a lifetime will probably be slow.
It is also just a reality that we are likely to go through periods of not seeing any changes or slipping back into old patterns with money.
That might seem depressing, but depending on your perspective and openness to change, the re-emergence of old habits is an opportunity.
How?
We have a clear choice: we can slip backward and give up or re-evaluate our goal, our process and perhaps set a new smaller financial goal.
Small financial goals and milestones are also rewarding.
It’s well-known by experts in goal-setting that most goals consist of smaller tangible goals, like stepping stones on a path.
“I’m also a fan of doing something physical to acknowledge reaching goals,” says Ms. Clothier.
“Whether that be like marking off a calendar every time you complete payment towards debt or colouring in a picture that has 52 elements of savings that you’re doing weekly over a year.”
This is important and useful because our relationship with money has become even more abstract than it was: very often we don’t even see or touch money in our cashless society.
Because so many transactions have become contactless or online during the pandemic the likelihood of not carrying any cash at all has increased for millions of us.
“We have lost that connection to the reality of our physical relationship with money,” she says.
“That money ‘disconnect’ is very real and it helps our ability to reach financial goals if we can get back a sense of connection to money.”
We are more likely to think of concepts and issues every day if we feel connected to them.
Discovering the power of mindfulness
Lea Clothier trained as a meditation and yoga teacher when she saw clients to her money behavioural coaching business were suffering acute stress.
“When they started to talk about money, they talked about their hopes and dreams with cash or their actual reality with money I could see that it was stressful, and I could see that stress was directly linked to their wellbeing,” she says.
Financial stress is a type of stress, and as we discussed in a previous blog which means it responds to a range of stress reduction techniques, including mindfulness.
Mindfulness – which at its most basic is about bringing our awareness to the present moment – is an important stress reduction technique.
“It means we are paying attention; we’re fully invested in this very moment,” Ms. Clothier says.
“We do that through the application of our five senses. It means that we start to pay more attention to our touch, our sight, what we can smell, hear and taste.”
“By doing that, we get out of that hectic, noisy head of thoughts that all of us have.”
The power of mindfulness with money is it’s two-fold.
It means we need to bring our full attention to our finances.
We need to pay attention to what’s going on in our bank accounts, with our spending, in how we earn money, and in the way that we interact with money every time we use it.
Mindfulness also has the power to help to reduce our stress levels. It is known and proven to be able to reduce cortisol, the stress hormone.
There is also research to show mindfulness can actually increase the density of the pre-frontal cortex, also known as ‘the thinking brain’.
This is important because our responses to money are so often based on how we feel and our emotions.
This means that we’re reacting when we’re interacting with money; we’re not responding. We’re not making logical, clear, calm, well-thought-out decisions.
“For me, mindfulness is like a superpower when it comes to our finances,” Ms. Clothier says.
“It’s a way to slow down and give provide enough space to practice better decisions and practice a better way to manage money.
“Think about when you’re in the shopping centre, and you’re about to buy something. You’re not thinking much about it, you just like it, you’ve seen it and you want it.”
“You go to the counter, you tap as you go, you walk out, and as you leave, you get in the car, you go home. You get home, and you go, “Argh, I probably shouldn’t have bought that. I don’t have the money, and I’ve got those bills coming up.”
The emotional part of the brain reacts seven seconds faster than the thinking part. It’s unlikely we would turn to the knowledge gained in improving our financial literacy in that time.
But we can just stop.
A mindful approach with money in that situation would involve, slowing down our actions, and stopping before tapping the card, taking a breath, and checking in about how important the item really is?
The same can apply to investing in the share market, or lending money to family or friends for them to invest.
But by approaching and adopting mindfulness, we just slow everything down, and we don’t react.
“We can stop and consider the repercussions of any decision or action before making it.”
How to measure and monitor our progress
Very few of us know how financially stressed we really are. We need to have some kind of idea of this before we really know what progress looks like.
To measure financial stress, we need to look at more than just our bank account balances.
The context for how we spend, why we spend, and what we spend it on matters a great deal.
“Think to the gym and doing a fitness assessment before you get there,” Ms. Clothier says.
“Where you’re sitting with your PT, and they’re saying okay, ‘tell me about your diet, tell me about your state of mind, your sleep patterns, tell me about your exercise routines.”
“It’s the same concept as that, except it applies to your relationship with money instead of food or exercise.”
Financial Mindfulness developed the Financial Stress Index (FSI) as a way to measure and monitor the financial stress of individuals and groups of people in detail.
It is contained within the Financial Mindfulness app and measures the levels of financial stress on five dimensions with suggested solutions for individuals.
These are the financial status, the physical and psychological burden, the social engagement, the psychological impact, and the behavioural signs of stress.
The score given to each user is a starting point, a baseline.
Returning to doing the FSI every 30 days or more allows users to clearly see their progress across the five dimensions.
Managing financial stress – Decision making, literacy, learning new skills.
In the first part of our financial stress webinar covering managing financial stress, we take a detailed look with expert help from Lea Clothier, a Master-certified behavioural money coach involved in the development of the Financial Mindfulness program.
There are so many triggers to create financial stress in our lives today that reducing and managing financial stress has become an ongoing, sometimes daily task.
Thankfully financial stress as a specific type of stress is finally being acknowledged and a number of different methods are available to deal with it.
There are a variety of well-practiced stress reduction techniques which we can use to help address financial stress.
These include exercise, maintaining positive routines, and getting curious about the things that do reduce your general stress – for instance, short walks and/or short meditation sessions.
The Financial Mindfulness app is a proven, evidence-based tool for reducing personal financial stress that packages together some simple but extremely relevant tools: mindfulness, goal-setting, and financial literacy.
Its development has enabled us to tread new ground in the measurement of financial stress.
Why you need to get organised – on many levels
Reducing financial stress on day-by-day and week-to-week levels can be complex, with accounts, different income streams, expenses, taxation, investments, and other factors to manage.
So, developing personal systems that work for you is essential.
Being disorganised with finances will invariably lead to an increase in financial stress.
But getting organised with finances also means aligning what we think and how we feel with our actions.
“I constantly see with the clients I work with that someone might know that they need to start a budget,” says Ms. Clothier.
“They take action or the behaviour of implementing a budget. Yet on a thinking level, they have some challenging and limiting beliefs about budgeting. And then, on an emotional level, they feel disempowered, or they feel restricted, so whilst we’re taking positive action of budgeting, we’re not aligning that with positive thoughts and emotions.”
“And then we wonder why we don’t get the results that we’re seeking.”
The answer to this is to explore your relationship with money and your beliefs about it – including beliefs that might be holding you back.
Our relationships tend to be a good place where our money beliefs and values come to light.
For some people, it may be useful or necessary to do more personal work on these issues with a financial counsellor, a financial wellness consultant, and/or more specialised therapist.
Moving forward, there are many ways and means to manage financial stress, as we said.
This blog will cover a handful of tips, tools, and techniques that Ms. Clothier has found most useful in her work.
Accepting past decisions
Money is an emotional topic. Just look at the importance of it in almost everybody’s lives, that importance can create strong emotions.
“Like it or not, we are where we are today because of past experiences, decisions, and actions or past inactions or indecision,” Ms. Clothier says.
We have to accept the past and move forward.
Yes, there may be greed, shame, guilt to feel and let go of.
It can be painful to confront difficult emotions, but that’s normal too. Trying to not look at these emotions doesn’t work as a long-term strategy, even if it’s appealing.
At a practical level, our decisions are often made on habit.
When the habits are mindful and not reacting – especially to emotions – our trajectory with finances is usually positive.
But if our money habits tend to be reactive and we spend as a reaction to feelings and even urges and impulses, our money problems are usually chronic.
Accepting past financial decisions isn’t easy, but it’s important.
“We can make peace with the past; we can learn from the past, and then we can move forward and make better decisions,” Ms. Clothier says.
The importance of financial literacy
Don’t take this personally, but levels of financial literacy in Australia are “abysmal”, Ms. Clothier says.
A recent Melbourne University survey, the regular Household Income Labour Dynamics in Australia (HILDA) survey found that half of the respondents could not answer five simple questions about inflation, interest rates, compounding, and diversification correctly.
We are not saying you can’t answer those questions, but the point is financial literacy is fundamental, it underpins most of your money choices.
Again, remember how important money is to our lives, and our ability to make choices – it pays for our day-to-day lives and sets up or potentially undermines our futures.
Even worse there is a frightening gender gap relating to financial literacy. One in three female respondents couldn’t answer any of the HILDA questions.
Most fundamental lessons people learned about money were learned in the home, and partly by watching and learning.
Schools are getting better at teaching financial literacy today, thankfully. The media also contains a lot of information about finances in the form of clips, podcasts, articles, and blogs, such as this.
The good news is that there are many tools out there, free websites, free content, classes, books, and podcasts that you can listen to increase your financial literacy.
“I always say that learning finance is like learning a new language,” Ms. Clothier says.
“You speak the lingo, and once you know the speech, it makes it a lot easier.”
Learning new financial skills
Continuing on from the above point, learning new financial skills is an important way to help us manage financial stress.
Knowledge is only powerful when it’s applied, we actually need skills to get the most out of our knowledge.
Even if we know certain key facts and believe in a course of action, we can still slip up because money is so emotional.
For example, we know we should spend less than we earn. We know we shouldn’t big amounts of money on our credit cards.
We know we should be looking at our financial statements and bills and budgeting regularly.
But just because we know those things don’t mean that we do them.
“This happens because money is emotional and because it seems difficult,” Ms. Clothier says.
The problem is many of us don’t have the skill levels needed to practice good day-to-day management of money and financial stress.
“Learning new financial skills can be a straightforward way to reduce our stress levels,” she says.
It’s building a habit; it’s making a unique knowledge and skill base.
It can involve something as simple as learning how to manage a credit card better.
Or even how to manage and read a credit card statement.
“I’m often surprised how many of my clients cannot read a credit card statement and understand the impact of only paying the minimum balance on an ongoing basis and what that means to them,” Ms. Clothier says.
Starting to build those skills from a basic level up to a more advanced level can help create a better and healthier relationship with money.
Next week: How to manage financial stress part 2 (using goals, mindfulness, and progress).
What to do if lockdown has caused me financial stress.
Right now, millions of Australians are under public health orders to stay at home in an attempt to reduce the spread of the Delta variant of the Covid-19 virus all around the country.
More than half of all Australians face this uncomfortable but necessary reality, and it is producing feelings including loneliness, fear, worry, depression, and stress.
The unprecedented – and extended – interruption to normal life has worn so thin that for many, it’s starting to feel like a depressing new norm.
Uncertainty and fear were defining characteristics of the pandemic from the outset.
The uncertainty isn’t something we can do much about: nobody has a crystal ball.
Fears are a little more tangible. We fear for the health and safety of our families and ourselves.
Thankfully, there are plenty of official and expert resources to help people deal with their mental health during the pandemic.
Here’s a great government link with plenty of advice and links to specific types of support.
The respected Black Dog Institute has produced 10 tips for managing anxiety during Covid-19.
We suggest you use these links if you need them.
People also fear for their finances, and this isn’t just a ‘first world problem’; it’s real and much deeper.
While some of us are saving because we are not going out, the lockdown means many people cannot get to work and have lost hours, and therefore, their wages are reduced. In mid-August, it was revealed 150 child care centres closed – all have staff, and all those staffs lost wages.
In 2020 Australia experienced negative wage growth due to the pandemic-led economic downturn.
Or even worse, some have lost their jobs. This is acknowledged by the government’s latest round of Covid disaster payments.
Everyone losing wages or their job will experience financial stress, sometimes at an acute level, and if these changed circumstances persist or worsen, the financial stress will likely become chronic.
Fearing for our financial security shakes us to our core; for many of us, it feels like it’s about our very survival, even a matter of life and death.
Financial stress has moved from a fringe issue to a serious, even core problem. It is acknowledged by the likes of the Black Dog Institute’ managing financial stress during lockdown.’
‘Mental and financial health can be a vicious cycle,’ says Black Dog. ‘Financial instability can lead to poor mental health, which can make taking action to protect your financial situation harder.’
‘When people are under pressure, they may start drinking more or avoid talking to family and friends, which can make it even harder to cope.’
This blog looks at financial stress during Covid lockdowns – why we feel stressed, what we can do with financial fears, and what practical steps we can take.
Why do we feel financial stress during lockdowns
Hamish Ferguson, a Director at Vision Property and Finance, says it’s important to acknowledge that feeling financial stress during a lockdown is to be expected.
“Lockdowns introduce unpredictability into our lives. One of the requirements of effective cashflow management is being able to predict both your future income and expenses.”
There is a saying that in the absence of good information, people will make poor decisions.
There is a lot of emotion in the community, and at times misinformation spreads. This poor-quality information can affect people who give it too much attention, and some will either not look after themselves or spend too much money thinking that this is an excellent way to reduce stress.
‘Many of us will spend more money when we have higher levels of emotion,’ Mr. Ferguson says.
‘It is quite clear that emotion levels in society are higher, so this will produce binge spending or emotional spending at a higher level.’
What can we do about our financial fear during a lockdown?
Practicing mindfulness is not just about sitting down to meditate, though that is recommended.
Mindfulness is actually about paying attention to thoughts and feelings and is said by experts to resemble curiosity as a state of mind.
So be curious about how your spending patterns are changing and where your money is going.
That helps us achieve financial mindfulness, which is simply described as having awareness and paying attention to your finances and financial behaviours.
It means more than being money smart or financially savvy, as it includes the capacity to regulate emotional responses that can lead to unhelpful financial behaviour and financial stress.
‘One of the strategies that many professionals will suggest is to break down the information we receive into what we know to be true and separate it from what may or may not be true,’ says Mr. Ferguson.
This can help us to focus on more reliable information.
Another strategy is to focus on verbalising things we can be thankful for when stressed or anxious. For example, are you safe at home, and do you have good home-cooked meals and a relatively comfortable environment where you live?
Being thankful can help to balance the information we are receiving and not just focus on the negative.
An example of the power of positive thinking is that rather than just thinking “I might lose my job”, to say to yourself, “Last time this happened, my employer and the govt worked well together to enable me to keep my job. I don’t have any reason to think that this won’t happen again.”
We’d also suggest turning off the television, or the online and social media news updates, as often as possible.
Constant updates on Covid are not helpful to most people. Information from sources of dubious origin is even less helpful.
‘Sometimes we just need to switch the world off and enjoy the silence,’ Mr. Ferguson says.
He suggests reaching out to people in your community going through similar experiences, for example, work colleagues, family friends.
‘Especially reach out to those people that you see as positive or “glass half full”. They are more likely to help you balance your thoughts,’ Mr. Ferguson says.
What are some practical steps we can take
In a period where our emotions are potentially impacting our financial behaviour, especially in a negative way, it’s time to take a step back and look at the basics.
“Review all spending to ensure you are focusing on needs and not wants. Strip your budget back to bare basics,” says Mr. Ferguson.
He suggests focusing on identifying the real fears or stress points and finding someone to help you work through those.
“Community and communication are very important.”
If you are not budgeting or haven’t reviewed your budget for a while, then it’s an excellent opportunity to do so.
Why revisit my budget?
Instinctively, we know that budgeting allows us to manage money wisely, avoid financial stress, and be in control.
During a lockdown enforced by the government, one thing we don’t feel is in control. That’s not comfortable for many people. Budgeting helps us to get back some sense of control in our lives.
Also, it’s a habit that is always helpful to our financial situation.
Even if you have a budget, here’s a reminder of the main steps to building a budget:
Remember, most people who try to budget fail to get the benefits of a budget because they cannot maintain the practice.
Maintaining a budget involves several steps too:
You can read our complete blog series on budgeting at these links: why budgeting helps your personal finances, how to budget and maintaining a budget.
If you are still struggling with balancing your budget, you can seek support. You could consider contacting a financial counsellor or a budgeting coach for help.
Remember, budgeting is learning a new life skill; it takes practice. And at a time when you may feel worried, uncertain, or even out of control, it will help with financial fear and financial stress.
If you are struggling with your mental health, please seek help:
Mythbusting our beliefs about financial stress.
Financial Mindfulness interviewed a dozen people in Hyde Park Sydney while gathering footage for a marketing video, every person we spoke to believed financial stress was all around them.
The problem is “huge, huge”, said one respondent, while others suggested 70 per cent of the population might be under financial stress. A couple said “everyone” was under financial stress; another commented that they “didn’t know anyone” not under financial stress.
Most understood that financial stress could cause, or at least be associated with, other problems in our lives, from depression to anger, insomnia, affecting our concentration and lower productivity at work, and things like social isolation.
Marc Richardson, a Sydney based clinical psychologist, says you can add “hits to your self-esteem”, relationship difficulties and a tendency to alleviate stress with drugs and alcohol to that list.
But there was little consensus among the people we spoke to – and a sense of helplessness – about how to help someone suffering from financial stress: answers ranged from providing financial advice to lending money through to just listening.
When it comes to how we interact with money, the optimum state is one of financial mindfulness.
Financial mindfulness is described as having awareness and paying attention to your finances and financial behaviours. It means more than being money smart or financially savvy, as it includes the capacity to regulate emotional responses that can lead to unhelpful financial behaviour and financial stress.
There is no doubt financial stress is a serious problem. But a key to finding solutions to financial stress is in understanding what it is – and what it is not.
Here are five common beliefs about financial stress – we assess if they are true or false.
Belief 1 – Financial stress is just another type of stress, and stress is normal (so get over it)
Broadly speaking, stress is a physiological reaction to stimulus and is not always bad. “Stress can be helpful and good when it motivates people to accomplish more,” says the American Institute of Stress, while pointing out stress is “a highly subjective phenomenon that it defies definition”.
Technically, the word “stress” is interchangeable with “pressure”, and more often, we use stress when we really mean “distress” or “strain”. Financial stress is a reaction to pressure around money, which can quickly turn to distress. This is undoubtedly partly because – thanks to consumerism – Western society tells us acquiring new stuff is a sign of success. Who would disagree that, in a nutshell, we want more than we need?
Stress can be acute, recurring or chronic. The stress of any type can feel upsetting, but chronic stress can cause illness: the longer we are under money pressure, the worse we feel. That’s where financial stress can be so damaging: it’s mentally exhausting to continually struggle with payments that have no end in sight.
If you add in the tendency to medicate our stress by spending on excesses or luxuries – especially things you won’t or cannot talk about – it’s likely chronic financial stress will take hold.
One expert on financial stress in the United States, DR J. Galen Buckwalter, has identified a syndrome called “acute financial stress disorder”. Think of all the drivers: credit cards, loan and especially mortgage repayments, stress-relief spending and for people on lower incomes, basics like food, heating and rent.
If that last sentence makes it sound like financial hardship is the cause of financial stress, not always.
MOSTLY FALSE
Belief 2 – Financial stress is the same thing as hardship
The Australian Bureau of Statistics’ indicators for measuring financial stress include being unable to pay various bills on time and being “unable to raise $2000 in a week for something important”. However, further reading shows its indicators are pointers to “households … experiencing economic hardship”.
But that is only part of the story of financial stress: it’s likely many more people are under financial distress. Much of the stress we suffer happens because we’ve convinced we need bigger or newer possessions. Or because of rising prices of, for example, housing.
Disturbing revelations about mortgage stress in recent weeks include the news that 130,000 households in New South Wales and Victoria are spending an unsustainable 30 per cent more on repaying their mortgages. More than half of all Tasmanian households are in this position.
The maximum households should spend on repayments, according to many financial advisors, is no more than 30 per cent of gross income.
With interest rate changes long overdue and the unpredictability of unexpected expenses, spending so much money on a mortgage is a recipe for financial stress. That quickly turns to distress with major expenses or a spending habit that is hard to control.
Rent is “unaffordable” or “severely unaffordable” for the majority of people living within an hour’s drive of Sydney city, according to the SGS Rental Affordability Index (and even worse if you live in the city). This means the cost of renting for most people in or near the city puts them under “housing stress”. The situation is not as severe in Melbourne, although most inner-city rental properties qualify as “unaffordable”.
But few homeowners or renters – at least not those in regular work – would qualify for government assistance based on financial hardship, even if they are struggling to stay afloat.
FALSE
Belief 3 – Everyone is financially stressed
From one extreme to the other.
When we talk about chronic and damaging financial stress – the kind defined by the Australian Bureau of Statistics’ financial stress indicators such as having trouble paying bills on time – then no, not everyone is financially stressed.
But it’s very common, and the chances are it’s affecting someone in your family or someone you interact with regularly at work. The Australian Psychological Society’s Stress and Wellbeing Report in 2019 found 35 per cent of Australians report having “a significant level of distress in their lives”.
That report found “personal finances” (49%) were the single biggest cause of stress for Australians for the preceding five years, ahead of “family issues” (45%) and “personal health” (44%).
Those numbers suggest that someone around you is financially stressed, and probably a few people.
ANZ Bank chief executive Shayne Elliott says the lender is preparing to deal with a much larger number of financially distressed customers next year as government support fades, though ultra-low interest rates will give struggling borrowers more time.
The critical question that may never be answered is why some people suffer financial stress while others faced with similar challenges do not.
The American Institute of Stress uses the analogy of people on a roller coaster to show the difficulty of predicting distress. Some people thrive on the shock and discomfort of the roller coaster experience, while for others, it’s pure torture.
“Many times, we create our stress because of faulty perceptions you can learn to correct,” The institute explains. The use of the word ‘perception’ indicates that the institute of stress believes this is partly a problem of thinking as much as anything else.
It elaborates: “all of our experimental and clinical research confirms that the sense of having little or no control is always distressful – and that’s what stress is all about.”
This suggests our personal relationship with the unexpected is a factor that perhaps a sense of helplessness determines whether we turn a normal level of stress into distress.
So, what do we do about financial stress?
PARTLY TRUE
Belief 4 – financial stress will go away if I have more money
A windfall or pay rise is the holy grail for the chronically financially stressed, but unless you are debt-free – or are one in a million and suddenly get rich – it’s unlikely to work for long.
Chances are, the reasons you are chronically stressed about money are more complex than how much you earn (or the state of the housing or job market), as suggested by the above. It may seem the outside world is causing your financial stress, but it’s also possible at least some of your financial stress comes from inside you.
For example, if you can be prone to impulse spending, wanting to buy the latest expensive gadget, or even have a tendency to shower people in your life with gifts, you will likely spend much of that extra money.
Or if you committed yourself to spend 40 per cent (or more) of your salary on your mortgage or rent and a pay rise gets your head above the waterline, might that extra income justify the risky decision you made to over-commit?
If a windfall were the cure to financial stress, then the ultimate solution would be a lottery win, right? Wrong. A shocking 70 per cent of lottery winners end up bankrupt, according to America’s National Endowment for Financial Education.
The truth is that the cost of living, especially in a capital city, combined with servicing debt caused by a lifestyle beyond what you need creates financial stress. Full stop.
When dealing with or preventing financial distress, it is not just about how much money you can acquire. But, unfortunately, that may be missing the point.
So, time to be honest: how much freedom do you have around your spending?
What may be causing you as much distress as the dollar figures keeping you up at night and distracting you at work is the stress itself. In other words, ruminating on the problem of ‘how do I get better with money is probably a painful process.
Perhaps it’s time to go back a step and examine your whole relationship with money?
FALSE
Belief 5 – You can only help someone under financial stress by giving them money or financial education
There’s no doubt the answers to financial stress – which at least superficially presents as having trouble meeting financial obligations – has a few elements.
Some of those include effectively setting goals that promote change, learning more about how to manage money – Andrew Fleming, Founder & CEO of Financial Mindfulness says “in addition to improving financial literacy and goal setting, being self aware of your current financial behaviours, good or bad, is so important to unearth those unconscious behaviours. For example, why did I buy another phone when the one I had is perfectly fine. I ended up paying more than I had to and the upgrade features didn’t change anything significant. It was an impulsive decision I made at the time. The clever marketing achieved is purpose at my expense.”
ANZ’s national survey of adult financial literacy showed many Australians have strong levels of understanding around money. However, there were still many people who didn’t save regularly (23%) and did not feel in control of their finances (22%).
“Those most likely to feel out of control were … household incomes of $65,000 or less with children at home and people with a mortgage of $300,000 or more and a household income of less than $100,000,” the report found.
Marc Richardson, says; “mindfulness is very effective at shifting old, hard-to-shift negative beliefs we have about money, such as “I’m no good with money”, “spending makes me feel better” and “money is stressful”.
“Through mindfulness, we can raise awareness of our thought patterns,” he says.
“It’s only through raising awareness of when our negative emotions arise that we can develop capacities to deal with thoughts and feelings. Mindfulness is a beneficial strategy for breaking the cycle of negative thought patterns that lead to negative emotions and enhance feelings of helplessness, hopelessness, and then negative behaviours.
“In fact, without mindfulness, it would be tough for us to catch the underlying attitude which then governs our thoughts, reactions and behaviour.”
MOSTLY FALSE
Key insights from the FSI report.
A significant focus of Financial Mindfulness is the tracking and reporting of our Financial Stress Index (FSI), which allows us to benchmark and compare the impact of financial stress on Australians. The FSI has now become a leading financial stress measure in Australia.
The FSI is a comprehensive measure of the financial factors and biopsychosocial consequences of financial stress.
It is evidence-based and was researched and developed by neuropsychologists and financial experts to better understand how financial stress impacts individual wellbeing.
March 2021 marked the release of FSI data collected from the period August 2020 to February 2021 – overlapping with the extension of one of the Australian Government’s key pandemic supports, JobKeeper.
Financial Mindfulness believes the March 2021 FSI revealed significant insights about the impacts of financial stress especially when mapped against the findings from the previous six months – the early months of the Coronavirus pandemic, February to August 2020.
When Financial Mindfulness prepared the latest FSI report and provided key media outlets with the findings, those outlets reported news that reflected our key findings.
Those were:
“Uncertainty was a universal experience during the early stages of Covid,” said Financial Mindfulness CEO and Founder Andrew Fleming.
“Unfortunately, a lot of us humans have a habit of thinking the worst when faced with uncertainty.”
“Our data shows the first three months of COVID-19 saw a big upswing in people worried about their finances, many of whom became downhearted and overwhelmed about their finances.”
The Government stepped in and provided extensive financial support, employers set up ‘work from home’ arrangements that allowed businesses to stay afloat, and there was a realisation that the sky would not fall in.
FSI data comparing the six months to the end of February 2021 with the previous six months showed confidence returned.
“The bounce was significant, a lot of people started to experience less financial stress and identified as ’thriving’.”
“Money was saved due to lockdown measures and that drove an increase in personal savings.”
In an online article headlined More people say they are thriving financially than before Covid-19, influential news outlet The Australian, reported the key finding that ‘the level of those who considered themselves as financially thriving was 18.8 per cent, which crashed to 2.4 per cent during the first six months of the pandemic.’
The website, Money Management, also reported the same key finding in an online article titled Australians rebounding from pandemic.
The Australian also ran the article in its print edition, headlined More Thriving Financially but Those in Distress on Rise.
This headline reflected the other end of the financial stress spectrum – and showed that the numbers of people in financial distress have continued to rise since we first began measuring financial stress.
FSI data showed an increase in dysfunctional behaviours such as drinking, eating and smoking more.
People under financial stress and distress became aggressive to others, became distracted and started to ignore their financial situation.
People became agitated, felt tension, had trouble winding down and sleeping.
This was picked up by one of the most-read and popular news outlets in Australia, The Daily Mail in its online article headlined Revealed: The staggering number of Australians with less than $2000 in the bank – and why the slow Covid vaccination rollout could leave them financially ruined.
The article noted ‘Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.’
The Daily Mail also noted that aspect of the FSI was a ‘barometer of economic health’ in Australia.
“Ultimately we were not surprised about the financial fear everyone experienced during the initial impact of COVID and lockdowns,” Mr Fleming said.
“But we were very surprised about the extent of the bounce back, with so many people feeling financially confident.”
“We were also surprised and disappointed about the significant increase in people experiencing financial distress despite the bounce back, they are being left behind.”
Recently Financial Mindfulness has also been active in promoting mindfulness as a tool to help people manage their financial stress.
This concept was discussed in an article published by the website Financy recently, titled Using mindfulness to overcome financial stress.
The article was based on an exclusive interview with Dr Ellen Langer, secured by Financial Mindfulness.
That interview also produced blogs for this website, which you can read in two parts. The first part is here and the conclusion is here.
We believe mindfulness can be part of a solution to achieve a positive way of living where people maintain awareness and pay attention to their finances and financial behaviours.
We call that way of living financial mindfulness.
Financial Mindfulness recognises JobKeeper came to an end on March 28 and we look forward to finding out how this change affects people’s financial wellbeing in the next FSI reporting – which will be available at the start of August 2021.
Stay tuned and contact us if you would like to be updated and participate in our FSI work.
Australians rebounding from pandemic
Financial Mindfulness was reported in Money Management on its latest financial stress survey.
Australians assessed as “thriving” financially have rebounded after sliding backwards during the first six months of the COVID-19 pandemic, according to Financial Mindfulness.
The firm’s Financial Stress Index (FSI) showed that 25.8% of 645 respondents were rated as “thriving”, a proportion that was 18.8% pre-COVID, but crashed 2.4% during the first six months of 2020.
The research had also found an almost 10 times increase in those that experienced finance distress due to COVID-19, while 64% of people experienced financial shame.
Andrew Fleming, Financial Mindfulness chief executive and founder, said Government support likely stopped financial stress from spiralling as people became uncertain about their financial position during the pandemic.
“When people stopped going out, their personal savings increased and at the same time interest rates were adjusted to their lowest levels in history,” Fleming said.
“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, gross domestic product (GDP) levels increasing and another property boom.”
The proportion of respondents that were “managing” fell from 41.5% in the first six months of the pandemic to 26.1% in the six months from September 2020 to the end of February 2021.
A smaller number of people in chronic financial stress, categorised as “distressed” continued to increase throughout the pandemic, with financial and psychological factors the main drivers.
Those who identified as excessively eating, drinking, smoking due to their financial situation returned to pre-COVID levels.
On average 16% of people often had physical stress relating to their money worries and 71% were distracted because of financial concerns.
Agitation was the most common somatic symptom of financial stress (71%), followed by tension (69%) and inability to “wind down” (65%).
Many took an “ignorance is bliss” approach, either ignoring the situation (57%) or recklessly spending (57%).
66% of people note financial stress had negatively impacted their relationships and 59% experienced conflict with loved ones.
“While it is clear that some people have bounced back, there are many Australians who unfortunately continue to experience considerable financial stress,” Dr Nicola Gates, Financial Mindfulness consultant clinical neuropsychologist said.
“Inequity is increasing in Australia, and increasing inequality is associated with increases in financial distress.”
Published in Money Management on 6 April 2021. Credit: Chris Dastoor
Staggering number of Australians with less than $2000 in the bank.
Financial Mindfulness was interviewed by the Daily Mail on the latest study on financial stress. These results show just how dire circumstances are for some Australian’s.
Revealed: The staggering number of Australians with less than $2000 in the bank – and why the slow Covid vaccination rollout could leave them financially ruined.
Financial Mindfulness study showed 34 per cent of people couldn’t raise $2,000 Almost half or 45 per cent of Australians can’t pay their weekly household bills Financial Mindfulness chief Andrew Fleming: those with low savings were at risk
Government and employers calling for halt to major minimum wage increases
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse.
Australia’s eight-year run of weak wages growth is set to continue with both the federal government and employer groups calling on the industrial empire to withhold pay increases, despite the strong economic recovery from the Covid recession.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found.
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse. Pictured is a stock image
Financial Mindfulness chief executive Andrew Fleming said people with less than $2,000 in bank savings were particularly at risk.
A medical expense or a hot water system blowing up or a car breaking down: an expected expense hits people for six,’ he told Daily Mail Australia.
‘A lot of people are living week to week.’
Consumers already struggling with a mortgage, rent or credit card bills are increasingly turning to buy now, pay later apps, like Afterpay or ZipCo, or pay on demand, where individuals pay $80 a month to get $2,000 in the bank before their employer pays them.
Mr. Fleming said many Australians were unaware of the penalties they faced if they were late with repayments during a personal financial emergency.
‘For those who can’t raise $2,000 for an unexpected expense in the last month, there’s a high probability they’re going to resort to these new products – does the user really understand what they’re doing?,’ he said.
The past year has been very volatile, with the Covid shutdowns causing a 7 per cent plunge in gross domestic product, the steepest downturn since the 1930s Great Depression.
But the final six months of 2020 saw a 6.5 per cent surge in economic growth, the fastest-ever half-yearly pace of GDP expansion.
Despite that, the federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1.
The federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1. Pictured is a cafe at Brunswick in Melbourne
‘Given the current uncertainties in the domestic and international economic outlook, the government therefore urges the panel to take a cautious approach.
Taking into account the importance of creating jobs for Australians and ensuring the viability of the businesses, particularly small businesses, which provide the jobs which are crucial to the economic recovery and the wellbeing of Australian families,’ it said.
The National Farmers Federation went further in its submission to the annual wage review, arguing minimum wage workers should get no pay increase until the Covid vaccine was given to most Australians.
‘The NFF recommends that the minimum wage be maintained at current levels until economic conditions have improved, market volatility has decreased, and the level of financial risk lowered,’ it said.
‘These conditions can be reasonably expected to materialise once trends indicating a recovery can be confirmed and the risk of additional waves of infection minimalised following the roll-out of the AstraZeneca vaccine.’
Mr. Fleming said the prospect of more weak wages growth would put struggling consumers at risk.
‘If expenses are going up, out of your control, and income is stagnating, there’s a problem,’ he said.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found
On July 1 last year, the Fair Work Commission agreed to give minimum wage earners a $13 a week pay increase which saw their wages edge up slightly to $753.80 a week or $19.84 an hour.
The 1.75 per cent wage increase was below the inflation rate at the time of 2.2 per cent.
Since then, inflation was shrivelled to just 0.9 per cent, putting it well below the Reserve Bank of Australia’s 2 to 3 per cent target range.
As found in the Daily Mail
By STEPHEN JOHNSON, ECONOMICS REPORTER FOR DAILY MAIL AUSTRALIA.
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