Keeping up with the Joneses

In a recent article on how renters can avoid fear of financial failure we referred to the pressure people feel to stray into unhealthy spending patterns out of the type of peer pressure known as ‘keeping up with the Joneses’.

“You can avoid the mindset traps by not thinking that you have to ‘keep up with the Joneses’ and realise that often the picture people show is not the real or true picture,” said Hamish Ferguson, a director of Vision Property and Finance.

First, a quick refresher on what the saying means.

Keeping up with the Joneses is a common saying referring to the comparison to one’s neighbours as a benchmark for the accumulation of material goods or status.

To fail to “keep up with the Joneses” is perceived as demonstrating financial and/or cultural inferiority.

It comes from an American cartoon strip of the same name which started over a century ago.

Most of us like to think we are independently-minded enough to avoid falling into traps like this.

But as with the belief that most of us see ourselves as “above average” drivers, we tend to overstate our abilities.

As a result, we can easily avoid helpful behaviours like budgeting and slip into mindless spending and financial stress.

New research by Finder shows it’s that’s not the case that most of us avoid the ‘keeping up with the Joneses’ trap.

A national survey of 1,000 people found 47% of Aussies have felt pressured to spend money by their social circle.

The research found 1 in 5 (22 per cent) accumulated debt or spent more than they could afford because of the pressure to spend – equivalent to 4.3 million Australians.

Aussies feel peer pressured into anything from splitting bills to buying property.

More than a quarter of Aussies (28 per cent) have felt forced into splitting a restaurant bill evenly, when they had ordered less food than others.

The gender split on this ‘keeping up with the Joneses’ behaviour may not automatically confirm stereotypes.

The research showed men ($1,560) have overspent substantially more than women ($912) to keep up with friends and family.

Finder’s Katie Browne attributes some of how we handle peer pressure around money to the fact that it remains a taboo subject.

“Unfortunately money can cause rifts between friends and families at times,” she said.

“Everyone has different incomes, money values, and financial priorities and finding the spending sweet spot with friends can be a tricky situation to navigate.”

The research showed 1 in 7 (14 per cent) people have been coerced into going on an expensive holiday with loved ones.

A further 9 per cent have felt they had to fund a bucks or hens night, while 7 per cent have felt pressured into paying for someone else’s baby shower.

Some Australians even admit to buying expensive items like a nice car (8 per cent), a home (8 per cent) or designer items (8 per cent) to keep up with their friends and family.

Browne said feeling guilted into spending more just to keep up with friends is an easy way to blow your budget.

“While no-one wants to be a party pooper, consider suggesting a more affordable alternative when you are invited to a fancy dinner or on a pricey holiday. You can always be honest with your loved ones and say while you value spending time with them, you don’t want to spend too much money doing it.

“Money management apps – like the Finder app – can help you see your income and expenses all in one place and figure out how much you can afford to spend.

“At the end of the day, it’s your money and you get to decide how you spend it. If your friends are good friends they’ll want to see and spend time with you – and the location really shouldn’t matter.”

Millennials are the most vulnerable to financial peer pressure, with 69% having spent money because of social influence, and 36% admitting they’ve gone beyond their financial limits to do so.

Kate Browne, personal finance expert Finder, said money is still a taboo topic for many.

“Unfortunately money can cause rifts between friends and families at times.

“Everyone has different incomes, money values, and financial priorities and finding the spending sweet spot with friends can be a tricky situation to navigate.”

The research shows 1 in 7 (14%) people have been coerced into going on an expensive holiday with loved ones.

A further 9% have felt they had to fund a bucks or hens night, while 7% have felt pressured into paying for someone else’s baby shower.

Some Australians even admit to buying expensive items like a nice car (8%), a home (8%) or designer items (8%) to keep up with their friends and family.

Browne said feeling guilted into spending more just to keep up with friends is an easy way to blow your budget.

“While no-one wants to be a party pooper, consider suggesting a more affordable alternative when you are invited to a fancy dinner or on a pricey holiday. You can always be honest with your loved ones and say while you value spending time with them, you don’t want to spend too much money doing it.

“Money management apps – like the Finder app – can help you see your income and expenses all in one place and figure out how much you can afford to spend.

“At the end of the day, it’s your money and you get to decide how you spend it. If your friends are good friends they’ll want to see and spend time with you – and the location really shouldn’t matter.”

Millennials are the most vulnerable to financial peer pressure, with 69% having spent money because of social influence, and 36% admitting they’ve gone beyond their financial limits to do so.

Have you ever felt pressured to do any of the following with friends/family?
Split a bill evenly at a restaurant when you ordered less

28%

Go on an expensive holiday

14%

Buy concert/festival/sporting event tickets

10%

Pay for someone’s bucks/hens night

9%

Buy a house/apartment

8%

Buy a nice car

8%

Buy designer items

8%

Pay for someone’s baby shower

7%

Other

1%

None of the above

53%

What renters can practically do to improve their finances

In the first part of this series, we examined the mindset problem that can plague renters: fear of financial failure that comes with not owning your own home.

It’s well accepted that renting rather than owning your home is regarded as a sign of financial struggle, even if it’s not true.

That perception can act as a deterrent to creating financial freedom let alone becoming financially independent.

You can read our suggestions for overcoming that mindset in the first part of this series here.

That is an important first step towards overcoming the perceived hurdle of renting in achieving financial freedom.

A foundation of financial freedom

Being able to save more than we spend is a common-sense foundation in finding financial freedom and it should never be ignored.

A renter’s belief that their rent payments make savings impossible is extremely damaging to this fundamental step.

The reality is that a renter should – so long as they are paying an appropriate level of rent – have the ability to increase savings beyond that of a homeowner.

A homeowner has to pay rates, insurance and factor in repairs and maintenance.

Also, a mortgage will often be higher than rent from a repayment point of view.

“The renter should be trying to get into the mindset that this cashflow difference or saving for them should be put away for savings,” says Hamish Ferguson, a director of Vision Property and Finance.

A basic example is that an $800,000 established home that is more than 10 years old could have up to $8,000 per annum needing to be allowed for in expenses and possibly another $4,000 per year in the difference between rent and mortgage repayments.

That is $1,000 per month that the average renter could put towards savings or some sort of investment, he argues.

Paying the right amount of rent

So long as a renter’s rent payments are set at an accurate level of their income they should have more freedom to grow personal wealth in a way that they may not actually recognise or realize.

What if your rent actually doesn’t allow you to save?

The widely-accepted guideline is the 30 per cent rule, which recommends that you don’t more than 30 per cent of your gross income on renting a home.

It’s not an exact guideline and in an expensive capital city, it can be hard to stick to. But you shouldn’t be way over that. If you’re spending 40 per cent or more of your gross income on rent, you may be renting beyond your means.

That means if you earn $1,500 a week before tax, you’d be unwise to pay much more than $450 rent per week. Doing this is called placing yourself in ‘rental stress’.

This brings up another huge advantage of renting over home ownership: the ability to move somewhere cheaper quickly.

If a renter falls on hard times or realises they are paying too much rent, they can move to a lower cost property. It is much more challenging for a home owner to do this.

Renters sometimes have more freedom to negotiate in a contract than they realise too.

“Depending on the market it is possible to negotiate if rents are falling,” Mr Ferguson says.

“As home ownership in Australia is slowly declining and the government is conscious of reducing the benefits for property investors, this is not that common.”

What is more common, he says, is if the renter is thinking of moving due to cost increases they can:

    1. sign longer-term leases to try and reduce the effect of rental increases
    2. if they look after the property well, the owner is less likely to want to lose the tenant. This increases their bargaining power
    3. Sometimes for small increases or if they are a good tenant they can encourage the landlord to improve the property. This might mean getting an air conditioner, putting in a new oven or dishwasher or other small improvements.

Those small wins earned from being a reliable tenant can be translated into financial benefits.

Another thing renters can do to save money is legally sub-let a room.

They are allowed to do this however they do need to seek permission from the landlord. Most leases will specify how many people will be occupying the property.

What else can a renter do to improve their financial position? 

There has always been active debate around home ownership and whether the renter can achieve the same position as a homeowner.

If the same level of discipline is held between a homeowner and renter, the same level of wealth can be achieved if the income levels are the same.

Often but not always, it is harder for the renter as it is hard to create the right level of discipline around their finances so that the right level of money is put away for long term investing.

Here are some other ideas to help renters save money and improve their financial position:

    • Improve your financial literacy;
    • Face your debts and start reducing them;
    • Have good regular habits with regular bills, i.e. set aside money for bills (i.e. car registration, pet bills) and ‘unexpected’ expenses;
    • Do a budget and maintain it;
    • Introduce some realistic financial goals;
    • Introduce a mindful approach to managing your money;
    • Address and/or eliminate damaging financial behaviours such as compulsive spending and gambling;
    • Reduce discretionary spending i.e. eating out;
    • Cut energy costs i.e. ditch the second fridge, heat/cool one room at a time, dry clothes outside instead of using a dryer;
    • Live close to work to save money on transport;
    • Sell unwanted items;
    • Pay your rent on time – having a good relationship with your landlord is worth money; and
    • Have a plan for investing

How renters can avoid fear of financial failure

Whether or not it’s always true, renting your home rather than owning it is seen as a marker of financial struggle in Australia.

Likewise, home ownership is widely regarded as an indicator of financial independence – or at least a step towards it.

If someone owns their home, either alone or as part of a couple or group investment, there is a perception of personal wealth versus the relative lower net worth of a renter.

Of course, it’s not always true. People have many different reasons for renting – often because they are only in a town temporarily.

But for those living permanently in a town, renting – especially in some parts of a city – is associated with a lower socio-economic position and financial stress.

“Unlike some of our European counterparts, Aussies have always had this desire to own their own piece of turf. I think there is a stigma if you don’t own your own home,” says Hamish Ferguson, Newcastle Director of Vision Property and Finance.

This is arguably especially even truer in Australia’s big cities than its regional areas – where property values and price growth are usually much lower than in big towns and cities, often based on demand.

It’s a painful reality for renters that the median Sydney house price increased by $1,100 a day in 2021 – dramatically more than most could hope to save.

Overall Sydney median house prices grew an astonishing 33 per cent in the previous 12 months to $1.6 million.

In Canberra, median house price growth was even higher at 36.6 per cent (to $1.18 million), in Adelaide, it was 27.5 per cent (to $731.547) and it was 25.7 per cent in Brisbane (up to $792,065). In Melbourne, prices grew 18.6 per cent (to $1.1 million).

This of course has a positive impact on home owners’ financial positions.

Their investments look safe and savvy and in a powerful practical reality, they can borrow against their increased equity to purchase more property or capitalise on what they already have.

So long as property prices do not tumble many homeowners’ financial futures look reasonably assured.

But what impact does price growth have on renters, apart from making owning homes look more and more out of reach in capital cities?

Can renters get caught up in negative belief systems and perceptions of a two-tiered system extending to financial instability.

Can and do they begin to ‘give up’ on financial independence because of this?

For many, the answer would be a resounding ‘yes’.

How to avoid the mindset traps around home ownership

The polar opposite perception of financial independence is financial struggle, which is provocative and emotive.

There’s little wonder that positive and negative mindsets come with these positions – whether they are totally true, partly true or just perceived.

“Often people place the stigma of not owning a home on themselves,” notes Mr Ferguson.

He says the first mindset trap to avoid is that if I owned a home “it would solve all my problems”.

This belief is simplistic.

Owning a home is a huge commitment, often a lifelong one and it doesn’t guarantee financial success when you sign a contract.

In fact, any big contract that involves large sums of money requiring a long-term commitment to make repayments is inherently a financial risk.

You need to be well prepared to enter such a contract and have contingency plans in case your personal situation changes.

So, what can renters do about the negative mindset they might fall into?

Is it possible to avoid self-defeating patterns that might ingrain financial difficulties just because you’re a renter?

The reality is if someone is not really ready to buy that renting – within your means and with a savings goal – is by far a better option than scrambling to buy a home and that could instantly put you into mortgage stress.

Mortgage stress is most commonly defined as a household spending more than 30 per cent of your pre-tax income on home loan repayments.

“You can avoid the mindset traps by not thinking that you have to ‘keep up with the Joneses’ and realise that often the picture people show is not the real or true picture,” Mr Ferguson says.

Mindsets that tell us either home ownership is straightforward, or that it is out of reach, are unhelpful. Both are types of ‘black and white thinking’ that can lock us out of seeing other possibilities.

Getting into financial reality to overcome black and white thinking

We need to be in reality about our financial position and what’s involved with all the steps towards buying a home – and alternative investment options.

An absolutely vital first step is to learn how to monitor and measure your own wealth, ongoing financial position, and get advice around this.

Do you have a clear idea not just of your current income versus expenditure, but of how this might change in the next 5-10 years?

Factors influencing this include:

    • Your health and that of loved ones;
    • Whether your employment is stable;
    • The likelihood of increasing or losing income;
    • Having a family, schooling; and
    • The stability of your other financial commitments, i.e. business ownership.

“A good example is if someone comes to me wanting to purchase a property but I tell them they are up to two years away from doing this,” Mr Ferguson says.

“The hard decision is to either work towards this for two years or ask what else can be done.

“Often people give up as the goal is too far away and it is too hard to break a big goal up into smaller goals.”

The real benefits of renting

Can renting be a good thing, can it have positive outcomes financially?

Absolutely yes it can – provided renters maintain discipline around their personal finances.

“Home ownership is often only good because it forces people to pay down the loan and create equity,” Mr Ferguson says.

“If you don’t choose property then it is important to psychologically apply the same level of discipline to putting money away.”

This is hard to do in today’s society where immediate gratification and appearing successful on the outside seem too important and prevalent.

The benefits of renting include:

    • More freedom to travel the country and the world;
    • Less of a financial commitment, especially upfront;
    • No maintenance costs or repair bills;
    • No property taxes;
    • Greater ability to reduce living costs if your situation changes; and
    • You are likely to have more disposable income.

It’s worth noting that there are downsides to home ownership too. Remember the point about ‘keeping up with the Joneses’. That clichés has survived so long because it’s true.

These include:

    • Huge upfront costs and high-pressure transactions;
    • High costs of maintenance, many of which are ‘hidden’;
    • Mortgage stress is a constant pressure;
    • Chaos caused by defaulting on mortgage; and
    • Relationship breakup can mean you lose a house anyway.

How renters can still work towards financial independence without owning a home

​Once you let go of the mindset that you’ll be a failure if you don’t own your property, you make room for other investment options and choices.

An exchange-traded fund (ETF), managed funds including shares are seen as a successful alternative by many experts.

Vanguard Index Report said shares averaged 9.31% in gross returns each year in a 10-year period to June 2021 in Australia. This makes it the second-highest-returning Australian asset behind residential property.

Around $2,000 is enough to get started with a share portfolio, but you shouldn’t expect returns for around five years.

There is no need to borrow to get going and in a crisis,  you can remove your investment in a matter of days.

They can start a managed fund or shares portfolio or they can purchase their first property in a lower priced area and rent it out as two examples.

A renter can also focus their savings on some sort of small business or side hustle to create a better income stream

It all starts with budgeting and recognising your own negative mindset so you can become more open to other investment options.

Facing debt hangovers

The first few weeks of the New Year is one of the best times of the year in Australia.

The weather is great, the pace of life has slowed down and most of us get to holiday and spend more time with our families.

Coming into February we are easing back into work and into reality.

One of the realities we invariably have to face is repaying debts accumulated in the preceding weeks.

Many of us started accumulating extra debts from mid-November (with Black Friday and Cyber Monday sales) through Christmas, right up to mid-January – including the expenses of sending kids back to school.

This is debt run up on our credit cards, store cards, Afterpay (or equivalent Buy Now Pay Later products) account or even sometimes from short-term loans. The piper always needs to be paid, as the old saying goes.

“The reality of holidays is over, kids go back to school. Credit card and BNPL statements have started to roll in and you could be counting the cost,” says Andrew Fleming, founder of Financial Mindfulness.

A pattern of being in debt often creates financial stress.

Is debt always bad?

“While a limited amount of debt isn’t necessarily bad,” says Lea Clothier, a behavioural money coach in her Creating a mindful Relationship with money course,” an excessive amount can often delay us from reaching our goals.”

Not all debt is created equal and by that, we mean that some debts are better than others.

“Debt used to purchase an asset that produces an income or will increase in value is better than the debt we have for things that won’t increase in value,” she says.

The latter is referred to as consumer debt and we often use it to buy household items, clothing, holidays and other expenses.

A great investment that we can actually make is paying off the interest on our debt. Repaying the debt will free up our cash flow and provide us with a return that is likely to be higher than other investments.

The problem occurs when we begin to accumulate multiple debts and ignore the red flags around those.

“Think of debt like putting on weight,” she says.

“If we gain a few extra kilos we can decide to eat less and exercise more and we can generally lose the weight without too much problem.

“But if we wait until we’ve gained 20 kilos, it’s going to take a lot more effort and a longer time to lose the weight. Comparably, if we get into trouble with our debt and spending habits, we can often get back into financial shape just by deciding to spend less and not use our card as much, or at all.

“But if we wait until we’re struggling with debt and owe a large amount, then it’s going to take us longer to repay, cost us more and we may have fewer solutions available to us to fix the situation we’re in.

It is important to note that if a debt problem is ignored, or swept under the rug, financial stress can become acute or chronic – or both.

Once we get into reality and face our debt hangover – and hopefully avert a debt crisis – we can begin to work out how to prevent debt hangovers from recurring.

We do this by planning and setting some clear goals around debts.

How do you know if debt might be a problem in your life?

If we are not actually confronted by a sheriff or debt collector, it’s easy to think we are avoiding the debt problems because they don’t feel urgent – until the crisis hits.

Meanwhile, things could be happening in the background that will have very serious consequences for you – such as a bankruptcy process beginning or a bad credit rating being earned.

Many of us aren’t aware that each time we apply for a new loan, finance at a department store or even sign up for a contract for a mobile phone, rental property, electricity or gas then it’s likely that it will be recorded on our credit report, Ms Clothier says.”

“When we borrow money, a lender looks at information about our credit experiences to decide whether to lend us money. Our bill-paying history and the number and types of accounts we have, whether we are late paying bills or making payments, how much we have in total debt are all considered.”

Here are the signs that you need to face reality with your debts:

    • If you are avoiding looking at your debts (i.e. not opening bills/reminder emails);
    • If you don’t know how much you owe;
    • If you are struggling to make ends meet;
    • If you are using debt to pay off debt (i.e. using cards to pay off other debt);
    • You regularly incur late fees;
    • If you are hiding debt levels from your partner or loved ones;
    • If the thought of debt is keeping you up at night;
    • If the thought of debt is you causing stress during waking hours and affecting your concentration;
    • If you feel like you are stuck on a treadmill of repayments and can never get ahead;
    • You regularly take on more debt with a nagging feeling you aren’t on top of the debt you already have; and
    • You are a reputation amongst family and friends of owing people money.

As you read over those red flags, it should begin to occur how much effort is expended in avoiding debt problems.

You deserve some peace from always feeling under attack from debt and repayments.

The first steps to facing the reality of your debt

It’s important not to shirk the hard work laid out here, so be prepared to get into action.

Firstly, write down everything that you owe. Get clear on the amount owing, the repayments, the interest rate, the frequency, and the number of payments left.

Use a planner to do this, marking down the amounts and dates so you can clearly see how one affects another. Make sure you understand the totals.

“Allocate your income, after living costs to debt repayments. The difference is the hole you need to attack,” says Mr Fleming. Review your budget and see how you can prioritise paying off debt, then review your spending habits too.

Do you have a budget? If not, learning how to budget is an essential step.

You should make a note right here and do some background work on budgeting and how to maintain a budget as soon as possible.

Consider what has caused the debt. Was it some kind of regular but non-essential spending?

Can you make changes to your shopping and spending habits? If the thought of this is very difficult, it might be time to work with a coach or support person to upskill yourself in your financial education and skills.

Are there things that you can cut back on, or redirect money towards the debt temporarily to help you get back on track?

Can you sell any unwanted or unused items to free up cashflow?

Can you consolidate your higher-interest debt to a lower interest alternative?

If you have a home loan you might be able to roll personal or credit card debt into it or do a balance transfer.

But be sure to cut up the credit or store cards so you’re not tempted to reuse them.

Changing your thinking around debt

Let go of any shame. We tend to carry guilt and shame with debt. But these emotions don’t help us in getting out of the situation.

No really, releasing shame is vital here. If you don’t know how to do this, it’s based on forgiving yourself and taking positive actions to build confidence.

It’s important to understand the ‘action’ part of the way out of debt problems. You took some unhelpful actions to get into debt, now you must take useful and helpful corrective actions.

Having honest conversations is one such incredibly important action.

If you’re struggling to pay – it’s really important that you speak with your creditors.

The paying bills module of the Financial Mindfulness app has some really good tips on how to manage this!

The worst thing we can do is ignore debt. Burying our heads in the sand isn’t going to make the problem go away.

There are many options if we discuss it with others to come up with a solution.

“Remember a problem shared is a problem halved,” Ms Clothier says.

Speak with your creditors, they want to support you and can help you come to an arrangement about making repayments that you can afford.

Two approaches to confronting debt

Getting your strategy right – or at least having a strategy – is usually essential to effectively confronting a problem.

Here are two ways that we can approach paying off multiple debts.

“We continue to make minimum repayments on all debts but with any surplus income we have we can focus on either a head vs. heart approach,” Ms Clothier says.

The logical approach – the ‘head’ approach – directs us to pay off the debt that has the highest interest rate first, she says.

This is the logical way to do it as this debt is costing more to repay.

The ‘heart’ approach, Ms Clothier says, prioritises the idea of making small wins first.

This says that paying off the debt with the smallest amount owing first will be the quickest for us to achieve an important accomplishment.

Paying out the smallest debt first will help us get started and once repaid it helps to free up more cash flow towards paying our other larger debts.

‘It doesn’t matter what option you chose as both options work,’ she says.

There is no one solution to dealing with debt – you will come across many different strategies and suggestions.

But the one solid gold rule with debt is this: stop ignoring it and start facing it.

 

 

 

 

 

 

 

 

The pandemic put young families under a huge financial stress burden

Even if you don’t have children, you may be aware through your friendships and networks of the burden that the Covid-19 pandemic has placed on families.

Parents had to somehow find time to simultaneously work from home, manage, motivate and teach their children all day long – losing most of the very little time they had to themselves.

Many had to work into the evenings to complete their paid work, resulting in lost sleep, or cut their work hours, resulting in reduced household incomes.

The stress placed on those parents was literally extraordinary – and it was widely reported to be leading in some families to relationship breakdown.

Now new research has emerged showing that families with children – especially young children – appear are a cohort facing some of the highest levels of financial stress.

A Melbourne University study, done in in collaboration with the Centre for Community Child Health at the Murdoch Children’s Research Institute, and the Brotherhood of St Laurence, found over two thirds (68 per cent) of Australian families with children under the age of five have persistently reported barely being able to make ends meet – or worse – during the pandemic.

The data came from Melbourne Institute’s Taking the Pulse of the Nation which surveyed about 1200 Australians aged 18 and over every two weeks between June 2020 and September 2021.

It found that stress was not diminishing with an end to the pandemic in sight.

The proportion of these families reporting high levels of stress has risen in September 2021 to 37 percent, compared with 34 percent a year earlier, the study authors found.

Just under two-thirds (63 per cent) of families with older children and 60 percent of families with no children at home reported financial stress during the pandemic.

The reported financial stress was worse for families living in ‘moderate’ levels of poverty.

The survey’s authors found the last 12 to 18 months has likely exacerbated the financial problems faced by those living in poverty or on low incomes.

Poverty is not the only cause of financial stress – it is possible to suffer from profound financial stress at average or higher income levels – but it is undoubtedly a factor.

Financial stress can arise during short term specific financial demands such as change in employment, or from a chronic and long-term financial concern, such as increasing debt with interest repayments or difficulty repaying a home mortgage.

The problem with financial stress is that it does not just impact our finances, it can have a significant effect on our wellbeing including our physical and mental health along with our relationships, work, behaviour and potentially our environment.

Financial Mindfulness research has shown that you haven’t got financial security, you actually can’t meet your health requirements and that financial stability has an impact on health and wellbeing.

Our research also showed shows that poor financial security and financial stress lead to a lot of aggression in people’s interpersonal relationships, and we know it has a significant impact on relationships.

‘Financial security is a fundamental aspect of health and wellbeing, and some people say it’s a fundamental right,’ said Financial Mindfulness’s Dr Nicola Gates.

According to the Melbourne University study’s authors, higher levels of reported stress by families with young children is likely to be associated with the challenges presented by the pandemic, including limited access to childcare and schooling, especially in areas that have faced continued lockdowns.

‘Having to balance working-from-home and caring for children inevitably leads to changes in hours worked and/or employment circumstances,’ wrote Professor A. Abigail Payne, University of Melbourne.

The study’s authors saw big implications for children’s’ development in families living in poverty.

Critical to shaping and supporting children’s futures is their family’s ability to afford essential goods and services.

There is a broad consensus that early family environments are the main predictors of children’s cognitive and non-cognitive abilities.

‘The pandemic should be a catalyst to consider how those living in or dangerously close to poverty can be better supported,’ wrote Professor Payne, noting that statistically poverty is persistent.

She noted community and peer support networks could be utilised to supplement government policies and programs.

‘Have we sufficiently considered the importance of providing a financial helping hand during particular periods of need that can result in positive outcomes over both the short and long term?’

Follow this blog and know How to Reduce Financial Stress in simple ways.

The current blog tries to look into financial stress and find out solutions related to the problem. Every human being aspires to gain financial independence. In times such as these, facing financial pressure is a reality. The typical mindset says that the more money you can earn helps to keep you are satisfied and stress-free. Let me tell you, that is not a reality. If you want to know How to Reduce Financial Stress in effective ways, get to us at Financial Mindfulness. Check out the various mechanisms that will help you to cope up with this kind of stress. If you need any help, do feel free to consult the experts who are thoroughly trained in this field.

Overall any stress can affect your health, both mental and physical. Financial issues can give rise to pressure that can be labeled as toxic. Let us talk about some of the ways that can affect your health:

1. Problems in healthcare: Scarcity of money often makes people neglect their health. We know it is often said ‘Health is wealth,’ but at times when you face a financial crisis, you tend to overlook the most important aspect of your life. People try to include homemade remedies which may provide temporary relief, but these are not long term solutions. Learn How to Reduce Financial Stress and at the same time take care of your health from the experts at Financial Mindfulness. Check out the various ways that are discussed and expert opinions and apply the ones that seem the most useful.

2. Mental health issue: There have been many cases where it has been found that the mental health and financial status is interlinked. If the financial condition is found to be unstable, then it has adverse effects on mental health. Gradually problems like depression, anxiety, and the likes of health conditions set in. Get to know all the easy and effective ways of Reducing Financial Stress from the team of professionals who have the expertise in Financial Mindfulness. Check out the official website and get in touch with the team. We will be delighted to help you out. We hope you have a good day. Keep safe and remain stress-free.

3. Physical Health: Stress can have an impact on physical health as well. Maintaining a healthy equilibrium between mental health and physical health is of utmost necessity. It has been found that shortage of financial security has given rise to stress that have a significant effect on the whole. Migraines, sleep disorders, and many more abnormal physical conditions are found. Learning How to Reduce Financial Stress in the most effective and straightforward ways from the connoisseurs at Financial Mindfulness is easy. Check out the official website, and we are sure you will find all the useful and strategic information stored with us. We look forward to interact with you soon.

4. Problematic Coping Behaviour- Behaviour in people is affected due to financial stress. Due to financial stress, people tend to resort to certain habits that are dangerous to their health. Such habits include overeating, binge- eating and even resorting to alcohol. A large percentage of people have been found to consume unhealthy food items to cope up with stress. Allow Financial Mindfulness to help you fight out How to Reduce Financial Stress. Head over to the official website and check out in details. We are sure you will find the most useful ways. We are here for you.

What are the various ways you can cope up and reduce your financial stress? Check out here!

Difficult times are inevitable in life. While facing a crisis, you may find it hard to visualize any way to tackle your financial stress. However, it is very important to think and assess the situation. It is never too late to learn any skill and also applying it. Here are some of the ways that can help you know How to Reduce Financial Stress. Check this out!

1. Extra Income- this is very important. Make sure that you do not stick to only one source of income. Acquire enough skills in various avenues that attract you and try to gain financial support out of these streams. If you feel that you have a shortage of money, turn your hobby into a side hustle. This will help you keep engaged in an additional vocation without creating an extra stress.

2. Take control over your expenses and revenues- More money certainly does not mean happiness. It is a continuous process of the incoming and the outgoing money from your bank. You need to be very careful about where you want to place your money and in turn, devise methods of How to Reduce Financial Stress. There is always a need to keep a check over the money and channelize it in the best way possible.

3. Spend on items that are immensely essential- Cut down on your extravagances if you are experiencing a financial setback. May be clear the debts if there are any. Make a list of expenses that are not extra but essential. In this manner it will helpful to channelize the money and keep the financial stress off for a certain period of time.

4. Lessons from financial tools- Financial management is a huge task. It is always advised to know about any financial dealings before you can actually get your hands on it. Choose a particular financial tool like medical insurance and become thorough with all the aspects of it. We at Financial Mindfulness will help you know all about How to Reduce Financial Stress in the proper ways.

5. Do not compare- Please do not compare yourself to others. Everybody has his/her demands and wishes. Each individual is different. Try to chalk out a plan for yourself. This will help you tackle the Financial Stress and Mental Health. If you want take expert advice from the team at Financial Mindfulness. Check out the official website. We wish you good luck with managing your finances and leading a tension free life.

6. Identify the cause of your stress- This is one of the most important and the primary step to tackle any kind of stress, be it emotional or financial. Once you have successfully completed this step, it becomes easier to sort out a plan and work on it. Get to the official website of Financial Mindfulness and learn How to Reduce Financial Stress easily.

Easy ways to know about Financial Stress and Mental Health are right here!

In a grief-stricken world by the raging pandemic, it is pretty natural that our lives have been affected in a way like never before. Our methods of working and the way to look at the world have changed drastically. When there is no limit to the number of deaths that are taking place daily, it is but natural that people around the world are facing a crisis. This article is dedicated to talking about Financial Stress and Mental Health. Here we will help you understand the basic causes of the particular stress. Apart from that, we will also help you out with the remedies to the ever-growing problem. You can visit the official website of Financial Mindfulness and get in touch with a group of experts. We are here to help you out.

Financial stress is stemmed from money. It is the shortage of money but sometimes not knowing where to invest the money to keep it safe also causes a lot of trouble. There are times when financial stress can result in affecting an individual mentally. Learn how to deal with Financial Stress and Mental Health in simple ways from the experts at Financial Mindfulness. Check out the details and stay safe.

The following tips will be helpful to keep a check on the financial stress and take care of the mental health:

1. Create a routine of self-care- Due to the pandemic, there has been a constant fear in people’s lives, which has been given rise to a different lifestyle throughout the world, which is fashionably called the “new normal.” This is done to provide a ray of hope to the people across the globe. The phrase new normal has been used to look at life and give a fresh start to it. People should take this opportunity to create a new routine of self-care to help them take control of Financial Stress and Mental Health. Try engaging in activities that are indoors but at the same time are interesting enough to keep you occupied. Take care of your sleep schedule and try to get enough sleep to keep you feel fresh throughout the day. If you want to do something challenging, you can try out learning a new skill and try excelling at it. Try to include simple physical exercise.

2. Connecting with friends and family virtually- Connections nowadays are of utmost importance. In such times of medical emergencies, you never know when the need for a particular service might crop up. If you remain well connected with the family members and check on them at regular intervals, the feeling of isolation might seem lesser. Engage in Skype calls and zoom calls to provide hope to each other. Find out more ways to deal with Financial Stress and Mental Health from the officials at Financial Mindfulness. Check out the various links that provide help to people worldwide. Help is just a click away. Make sure you are connected to the different societies that might need help.

3. Online Therapy- Since everything has turned online, you should make the most available online therapies. Sometimes speaking it out to an expert might help you gather knowledge and find solutions regarding the problems you are facing. There are individual therapy sessions as well as group therapy sessions. You can engage in online sessions till the situation is brought under control. After that you can join in a counselling course offline. This will help you tackle Financial Stress and Mental Health.

4. Government Programs- The government has launched various programs related to how to combat the trauma of the COVID situation. Some of these include economic impact payments, extended unemployment benefits. Make proper use of the help that is made available. These can be stressful if you do not know the correct ways of processing these programs. Reach out for help if you are in need any get informed thoroughly.

5. Understand the money you are using and use it wisely- Money is directly proportional to financial stability. Make it a habit to think and check out the ways that you can stop spending more than that is required. Keep a record of what you spend on and try to cut down on your expenses if possible. Seek out Financial Stress and Mental Health solutions with the professionals at Financial Mindfulness.

6. Stay motivated- A positive lookout and mindset helps to fight battles like no other. Always try to find out something positive from your actions. Spend wisely. If you have debts to clear, make sure you do them only after repeated calculations.

7. Avoid Alcohol- Getting addicted to alcohol is one of the common problems people face while they are not being able to manage their finances. It might provide a temporary relief, but later on, it might get all the more difficult. The monetary expenses might create Financial Stress and Mental Health issues. Seek help while it is not too late. We are here to help you know How to Reduce Financial Stress? Check out the official website of Financial Mindfulness and learn more about it. We look forward to hear from you.

What are some of the signs that imply that you are facing financial stress?
Here is a list which helps to determine if you are suffering from monetary stress. Read it up.

1. Loss of control: Activities are not under the control of the individual. You might end up doing things that give you momentary pleasures to keep your problems at bay. This is a temporary way to deal with Financial Stress and Mental Health.

2. Loss of concentration: Every work needs the right kind of concentration. There are time limits that are set for each task to be completed. Without the right level of concentration, we cannot focus on our job. This might cause financial loss and in turn set in stress. If you face such problems, this might signify mental health issues. If you wish to learn more about the ways to tackle Financial Stress and Mental Health get to us at Financial Mindfulness. Please check out the official website and get to know more.

If you are interested in learning quick and easy ways of How to Reduce Debt please check this blog out!

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? Everybody does, right? When someone faces a financial crisis, they take help from institutions that can help them out. In this article, we tend to discuss various ways of How to Reduce Debt.

The first thing that you should know is what is debt? Let us find out in detail. In simple words, debt is defined as an amount of money that is borrowed by one party from another party in order to make payments that seem difficult to do so under normal circumstances. It is interesting to note that the money that is borrowed with the condition that it is always paid back with the added interest at a later date.

Interestingly, there are various types of debts, and each one is different from the other. If you get a complete knowledge of what these debts are and how you can handle them it becomes easier to learn How to Reduce Debt effectively.

So what are the various types of debts? Find them out right here!

There are different types of debts. It is not only for a single purpose that a person borrows an amount of money. Since the idea is different, so the name also differs. This is done to segregate one kind of debt from another. It becomes easier to understand why a particular debt is taken and also needs to be paid off within the stipulated time. So let us check out the variety of debts and their meaning.

Secured Debt This type of debt can be defined as any debt that is issued against any asset that can be defined as collateral. In order to know How to Reduce Debt it is important to know that a credit check is needed in order to understand how well the debt has been handled in the past. If the person who is borrowing the loan fails to repay the debt then the asset is to be handed on to the lender. A classic example of secured debt is a car loan. Money is supplied to buy the car but also claims to get ownership of the title of the car. If the money is not returned, then the lender can repossess the car. The rate of interest of these loans is quite reasonable—Trust Financial Mindfulness to learn How to Reduce Debt.

1. Unsecured Debt

This loan comes without any collateral. When any amount of money is lent without any asset attached, the money is leant purely on the belief that the borrower will repay the loan with the added interest. A contractual agreement is made to repay the funds. If there is any delay or default in the payment, the lender can ask for any money he wants. This can be done by taking legal steps. Examples of such debts include credit cards, medical bills, credit cards. Get to know How to Reduce Debt effectively from us at Financial Mindfulness.

2. Mortgages

This is the most common type of debt that people carry with themselves. Do you know why mortgage loans are taken? It is generally taken to buy homes. In this case, the real estate serves as the collateral. It is interesting to note that mortgages have the lowest rate of interest. The interest is tax-deductible for the people who itemize the taxes. You can pay for 30-50 years every month for your mortgage loans.

If you are interested in finding out about the other types of debts, please check out the official website of Financial Mindfulness. We will help you to figure out How to Reduce Debt in the most effective ways.

So what are the ways that will help you reduce your debt? Check it out here!

It is always a pragmatic thought that you should have enough funds to make it through for your leisure life when you retire. This is the forethought of a person when he is working so hard throughout his life. There are various ways that will help you stay debt-free and enjoy a pleasant life. Let us look at the ways you can avail a debt free life.

1. Start a debt management plan- This includes prioritizing the debts in order of urgency, creating a healthy budget, cutting down on extra spending, etc. How to Reduce Debt knows your entire budget.

2. Set a budget- Always check how much income you make monthly and y9ur monthly expenditure. This is very important. This will help you to manage your debts if you have any and enjoy your life as well.

3. Avoid using your credit cards- Please try and use cash whenever possible. The logic behind this is simple. If you pay in cash, you will tend to think before you spend.

4. Save as much as you can- It is highly recommended that you stop spending on things that are not very necessary. It is very tempting to do away with this habit, but once you try your best, things will indeed work out in your favor. There are simple ways you can design for yourself to save on monetary spending.

If you wish to learn more on How to Reduce Debt, please visit Financial Mindfulness and check out all the tricks we have in store for you. We will be glad to help you out. In addition, there are various exciting and accessible ways regarding How to Manage Credit Cards. So if you want to be effective and financially secure, get in touch with us right away.

Managing financial stress: Goals, mindfulness and monitoring progress

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).