Perfect storm of credit card debt brewing for Australians during COVID-19.
Rapidly falling incomes, a move to card-only payments and a complete avoidance of cash is creating a “perfect storm” for Australians to find themselves in deep financial ruin.
Andrew Fleming, CEO of financial stress busting app Financial Mindfullness, says many Australians are unaware of the debt they are getting into by relying solely on personal credit.
“There is almost one credit card for every adult Australian. In January 2020 just before the crisis, there was $42.6 billion owing on credit cards with $28.4 billion accruing interest,” explains Mr Fleming.
Financial Mindfulness released its latest Financial Stress Survey and the results showed just how much damage financial stress is causing. The Sydney Morning Herald covered the story.
Nearly one in three Australians is feeling financially stressed, with damaging effects on mental and physical health and social relationships.
The CoreData/Financial Mindfulness Financial Stress Survey of 1000 people found 30 per cent of people reported financial stress, and the problem affects all socio-economic groups.
Marian Russell, from North Narrabeen on Sydney’s northern beaches, knows the feeling well.
Her husband, Zac, 28, works long hours as a carpenter while Ms Russell, 24, looks after the couple’s two children, Allegra, 2, and Bodie, 1.
Marian Russell with her two children, Allegra, 2, and Bodie, 1, at Warriewood beach. Credit: Daniel Munoz
The family lives pay cheque to pay cheque and struggles to pay off a debt they acquired when they bought a vehicle for Zac’s work.
“This week we literally had $30 after all the bills were paid. It’s sad but we’ve got to be thankful we’ve got food in the cupboard,” Ms Russell said.
“It’s taking its toll, not just on our relationship but emotionally, on myself. I have anxiety and depression and it doesn’t help not having my husband around because he has to work six days a week to keep food on the table. It’s a lot of pressure for a young mum.”
Ms Russell said her husband found it hard to switch off from work and the couple rarely get to go out together. Her husband’s family live nearby but are away until the end of the year, so free babysitting is off the cards for now. They got married in the registry office because money was too tight for a wedding and Ms Russell has shelved her plans for study.
Marian Russell had to take her children, Allegra, 2, and Bodie, 1, out of swimming lessons because of money worries. Credit: Daniel Munoz
Her biggest fear is not providing for her children. She cancelled their swimming lessons because it cost too much, a decision that weighs heavily given the family live so close to the beach.
Ms Russell said she would like to contribute financially but if she went back to her former work in retail, the cost of childcare would leave the family only $10 a day better off. “I would love to work but it’s not worth it,” she said.
Instead she sells her art online, under the name LunaTribeDesign on Instagram and Facebook, providing some “pocket money” and a much-needed emotional boost.
Ms Russell said they were lucky to live in a good rental property but she doubts they will be able to get ahead while living in Sydney.
The financial stress survey found money worries were widespread across all socio-economic groups. Clinical psychologist Dr Nicola Gates, who was involved in the study, said people on high incomes reported financial stress as well.
“It can be over-commitment but also things can change profoundly for people,” Dr Gates said.
“A client in my practice had a recreational sport accident … he came off his jet ski and hadn’t set himself up well with insurance, so the family lost the major breadwinner just like that. So where do the school fees come from? How does the mortgage get paid? People’s financial position can be more precarious than they realise.”
Dr Gates was aware financial stress was a problem for her clients but was surprised the survey suggested it was so high in the general population.
Potential reasons include the high cost of housing, lack of wages growth, perceptions of job insecurity and the fact financial literacy has not kept up with the complexity of the financial system.
“Financial stress is very prevalent and there’s a lot of shame and embarrassment around financial stress and as a result people don’t really talk about it,” Dr Gates said. “Shame is a particularly acute risk for mental illness.”
The psychological burden of stress has a physical effect on the body, with lack of sleep and lowered immunity. And people often cope with financial stress in ways that can damage their health and relationships.
Thirty-five per cent of financially stressed respondents have used drugs or alcohol to manage negative feelings stemming from their money worries, while 38 per cent have been hurtful towards themselves or others.
Almost nine in 10 financially stressed respondents regularly miss social events because of money worries, compared with only one in five of those not financially stressed.
More than seven out of 10 people who are financially stressed regularly lose sleep because of money issues, compared with less than one in 10 of those who are not financially stressed.
And more than half of financially stressed respondents report considerable difficulty concentrating due to money worries, compared with only 3 per cent of those who are not financially stressed.
By Caitlin Fitzsimmons
Updated September 4, 2017 — 11.29am first published at 12.15am in the Sydney Morning Hearld
We asked you, our Financial Mindfulness Facebook family – across Australia, the United States and the United Kingdom – to take part in a survey about financial stress in your life. The results are in.
Financial stress, which comes with a strong set of beliefs, is a huge factor in your lives. Monthly bills – such as credit cards and other regular payments – disorganisation, income and unexpected expenses are the major causes of your financial stress.
Constantly stressed about money
One of the most striking findings of our July 2017 survey was that an extraordinary 94 per cent of respondents experienced financial stress – defined as “feeling discomfort and/or worry about making financial decisions” – at least “fairly often”.
A surprising 35 per cent experienced this kind of financial stress “all the time”, while just over a quarter were affected “very often”.
We also asked you a series of questions that haven’t been widely posed to the public before about financial stress. Your answers showed the seriousness of people’s struggles around money.
Why does financial stress hurt our concentration?
Because other studies have showed that financial stress can cause issues with concentration in our daily lives, we asked exactly what about your financial worries affects your concentration.
“I can’t stop thinking about debt and [my] financial struggle,” was a typical response we received to one of the questions we posed. “Thinking several things at once and always having the uncertainties and insecurities present in [my] mind. Focus is clouded with fear,” said another woman.
Similarly, this: “I cannot concentrate since money is always on my mind. Worrying about how to pay all the bills and keep the kids fed make it difficult to focus.”
Another wrote of the damage that a lack of knowledge was having for her and her partner: “Just being disorganized, my boyfriend and I have no control over our finances and we do not know where to start. We are trying to [get help] but we’re still not dedicated to [the] advice.”
Why do we deliberately avoid thinking about the problem?
We know financial stress comes with self-defeating beliefs. Our survey showed the fears behind these beliefs.
“If I think about it too much I panic,” was a typical response, while another admitted suffering from “head in the sand syndrome”.
Responses to this question revealed some real emotional distress when dealing with money: actually facing their financial problems was “too overwhelming”, “exhausting”, “too embarrassing”, “too stressful”, “I want it to go away”, “seems impossible, “it scares me and hurts”.
That makes a response like the following totally understandable: “I run away from things I don’t know how to handle.” This response seemed a bit more worrying: “It’s good to avoid thinking about it because the more you think about it, you give the problem more energy.”
From so much worry, it’s a short step to this: “It makes me depressed and not want to do anything or see any people.”
We asked about mindfulness too: what do people think it is? Interesting the least popular choice was “meditation”. The most popular was “being more aware”, followed by “making conscious decisions more often.”
How would a life without financial stress look?
We also asked exactly how people would even know if their financial had reduced, a reasonable question given the pervasiveness and complexity of the problem.
Easily the most popular option was “I would not worry about money as often”, which got more than twice the votes that “I would feel calmer making financial decisions” then “I would pay bills and meet my repayments without a problem”.
Way down the list was “I would have more money”, suggesting absence of financial stress is not about wealth.
You want to try to solve financial stress with mindfulness
Happily for us, a huge majority of respondents would try our program – which is a personalised financial stress reduction program, delivered by an app.
Does it strike you as strange that the biggest stressor we face isn’t talked about in plans offered to help with our stress?
In recent years employers have recognised the personal stresses experienced by staff can affect productivity and the bottom line, due partly to the sheer amount of our lives we spend at work and no doubt partly due to increased workloads.
In response, workplace ‘wellness’ programs are everywhere these days, especially in large companies – acknowledging the impact of unhappy staff on the bottom line.
Now there’s evidence from the United States that workplace wellness programs might be missing the mark but not addressing one of the biggest causes of issues in the personal lives of workers – their personal finances.
A new online survey of 511 American employees, done in mid-April by Four Seasons Financial Education, found people wanted financial stress addressed in their corporate wellness plan but 70 per cent of those whose company did offer something said assistance on personal finances was not included.
It’s not just in the US that this mismatch is happening.
Financial wellness is not commonly an element in corporate wellness programs in Australian workplaces either.
Corporate wellness programs have longed focused largely on physical wellbeing, so they offer health checks, fitness classes, nutrition, massage and team bonding. Few look at mental health, although mental health problems are experienced by a huge number of people.
According to the Australian Psychological Society, 26 per cent of Australians report having “moderate to extremely severe depression symptoms”.
“Only a small proportion of employers recognise work-life balance, depression and stress as important health issues for staff,” the report found.
According to AMP’s Financial Wellness Report, based on interviews with 2000 employees in 2016, 24 per cent of employees feel financial stress. While there is no suggestion personal finance issues create mental health issues for everyone, there is undoubtedly a correlation.
While some new generation wellness programs branch into stress testing, yoga and meditation as a way of combating stress, few acknowledge the importance of improving mental health or drill down to examine the leading causes of stress for workers.
The Australian Psychological Society’s 2015 Stress and wellbeing report, which came from online interviews with 1731 Australians, found : “[Personal] financial issues are rated as the top cause of stress over the five years, while also of concern is the increase in the number of people turning to gambling to manage stress (now one in five).”
Furthermore, the report concluded: “31% of employees say they have taken unexpected time off to deal with a financial issue and 41% admit being distracted at work because of financial worries.” The study surveyed 300 managers and 500 fulltime employees.
One of the report’s four calls to action was “Win minds and hearts by encouraging emotional and financial wellness.”
The latest research into women’s struggles with money, Mary Pilon of Bloomberg notes, can make for dreary news.
“Women earn less than their male counterparts, pay harsher workplace penalties for pursuing parenthood, struggle more with debt, and save less for retirement,” Pilon wrote of the situation in the United States, although she could easily have been writing about Australia.
Crucially, women also lose years from their careers by raising children, they do mountains of unpaid (and often unappreciated) domestic work and to top it all off – when facing financial stress – often give birth to under-weight babies.
Many also still face nagging historical stereotypes that women can’t manage money – despite evidence showing women shoulder more financial decision-making and responsibility in families, marriages and relationships than ever before. Sound like a recipe for financial stress?
Forget ‘dreary’ – the news about women and money can be downright depressing.
But according to new research from the National Association of Realtors, single women in the US are leaving single men in the dust for home ownership compared to single men.
The NAR says 17 per cent of American homebuyers are single women compared to single men, who make up just 7 per cent of the market.
Pilon spoke to “30-something” Michelle Jackson who bought a one bedroom apartment in Denver in 2007 which she plans to renovate and is even considering buying a second property.
“I’m so happy,” Jackson said. “It’s completely changed how I feel connected to the place where I’m living. It’s one of the best things I’ve ever done.”
Jackson’s motivation could easily echo the story of many Australian women: “I wanted to have my own place,” she said.
“A lot of people in my circle of friends were women purchasing their homes when they got married, but I still felt like I wanted to build my own wealth and buy.
“If and when I met someone, it’s something that just added to what I bring to the relationship. It didn’t make sense to wait.”
In Australia single men still lead single women when it comes to applications for mortgage finance, according to Aussie Home Loan data reported by domain.com.au in 2016, but the gap is closing. Aussie Home Loans data said 12.34 of mortgage applicants were single men and 11.22 were single women.
Swinburne University social researcher Andrea Sharam said historical discrimination against Australian women in the loan approval process was shifting.
“It’s appalling to suggest women are more financially illiterate than men,” Sharam told domain.com.au.
“I think younger women in particularly are now thinking about housing as something they do as a part of their life plan … it doesn’t matter if they get a partner or not.”
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