Financial stress and under-earning

Financial stress and under-earning

Financial stress and under-earning.

When people think about answers to financial stress a lot of energy and attention is paid to our spending. Where does all our money go, we are urged to ask of ourselves and our partners.

The implication is clear: if we suffer financial stress we share a flaw – impulsive and sometimes reckless spending. We can easily go straight to the conclusion that we are over-spenders, who use spending to numb out boredom and difficult emotions. We might even think we are greedy.

For some people, sadly, those are harsh truths. But just as many people try with all their willpower and attention to detail and live within their means, and cannot seem to make ends meet. For many people, a polar opposite problem to over-spending applies under-earning.

Earning less than your skills suggests it wouldn’t be a major problem if it wasn’t so damn expensive to live; so huge numbers of people are driven into debt.

It isn’t cheap to live in Australia, especially in a capital city like Sydney.

According to Numbeo (the world’s largest cost of living database), the cost of living in Australia is 17.6% higher than in the United States. In fact, it’s cheaper to live in countries such as France, United Kingdom, Germany and Canada.

US households on average carry US$145,000 (A$187,400) in debt, according to the personal finance website The Ascent. In Australia the figure is even higher, skyrocketing beyond A$250,000. Much of those debts are mortgage repayments, an essential cost and also an investment in our futures.

But what about credit card debt? In the US, the average credit card debt per household is US$7,000 according to nerdwallet.com, while the average American with a student loan owes $56,000 and the average car loan is $27,000.

Card debt is lower in Australia, around A$2500 per cardholder, while car loans are slightly higher here.

It’s not yet known what the average debts owed to credit services like Afterpay and ZipMoney are as they are too new, but the national bill in Australia is thought to be over $1 billion.

“Many people believe that card and personal loan debts come from heedless spending, and to get out of debt you have to stop buying luxuries and living a lifestyle beyond your means,” says Andrew Fleming, Founder and CEO of Financial Mindfulness.

These assumptions are often wrong he says. “Often people use cards, credit services and loans because their incomes don’t match their expenses, especially when an unexpected expense comes along,” he says.

In most western economies it is well known that the cost of living – let alone the price of major life expenses like property – has outpaced inflation and wages for many years.

One answer to how we cope with going back even when we have the best of intentions is to confront the issue raised near the start of this article: under-earning.

But beyond a state, most of us find difficult, even shameful to talk about, what is under-earning, exactly?

First, it’s useful to identify what under-earning is not.

Barbara Stanny, author of Overcoming Underearning: A Five Step Plan for a Richer Life wrote in Forbes in 2011 that an under-earner is not someone who chooses a low income or a simpler life without much work.

“It is always a CONDITION OF DEPRIVATION[sic] not just of money, but of time, joy, freedom, choices and self-esteem,” Stanny wrote.

Under-earners are often drowning in debt and vague about money, she wrote. They might even have an “anti-money attitude”, unwittingly sabotage their own career prospects and underestimate their value at work. Often they are also co-dependent (meaning they put others’ needs ahead of their own).

Under-earning is a chronic condition that’s not going to be fixed in a day, let alone by reading an article, but awareness of it can start to break decades-long negative cycles.

People work through deep-seated issues like using anything from various forms of therapy to mindfulness practice.

The latter approach can help alleviate financial stresses and strains at two levels. “Mindfulness practice won’t necessarily change your earnings,” says Andrew Fleming.

“But it will give you a new awareness of what you are doing and help change your approach to what and how you spend and what you earn.”

He says regular mindfulness practice will help people clearly see the reality of their situation, “instead of being stuck … with your mind racing 100 miles an hour” – and will give you the calm to deal with it.

And you’ll need that calmness because negative, even painful feelings are likely to come out of seeing the realities behind your financial stress.

“Frustration and discomfort can be a sign of a breakthrough, a new awareness,” Fleming says.

“It might help you take action, perhaps asking for a pay rise and being confident when doing so, having an authentic conversation with the boss or it might put you into gear to pursue a better-paid vocation, either within the same company, the same industry or by doing something totally new.”

How to stop spending too much at Christmas

How to stop spending too much at Christmas

How to stop spending too much at Christmas.

Christmas is by far the busiest time of the year for shopping and many of us deal with the pressure and financial stress of the annual retail frenzy with an increasingly popular new behaviour – self-gifting.

If you’re not familiar with the concept of self-gifting, you might be just a bit in denial. Think of it as December retail therapy: we all know that feeling – we are out shopping for Christmas gifts and we see a sexy new gadget, T-shirt with a funny slogan or a stylish home accessory in a store and realise the person it would be a perfect present for is actually ourselves. So, we buy it, you know, as a treat!

Retail therapy sounds nice – we fool ourselves it’s ok because it’s a type of therapy and we are told: “Therapy: Good!”

Retail therapy is of course popular all year round, especially after a shocking week at work, or an argument with our partner, or when we’re just feeling the blues.

But is it therapeutic if we buy non-essential to just manage predictable and recurring stress? Or is it really impulse spending?

Spending money impulsively can make us ‘feel better’ and ‘more alive’. But it can be a serious problem if this is something we begin to do regularly, especially with expensive items, as a way of coping. And let’s face it, jobs and relationships – and life in general – can be stressful for extended periods. New COVID-19 lockdowns are also very stressful especially on the eve of Christmas.

Data on impulse spending is contradictory – with one survey showing Aussies claim to have reduced our impulse buying while another shows that more than three quarters of us impulse buy when we shop via mobile. So it’s helpful to define it: when react to temptation by mindlessly spending money we haven’t budgeted on.

According to a poll of 1003 consumers by US website creditcards.com, five out of six Americans admit to impulse buying. One in five people had spent more than US$1000 on impulse, which rose to one in three for people earning over US$75,000.

Seven strategies to manage your impulse buying

  1. You are much less likely to buy on impulse if you plan your shopping trip therefore write a shopping list before you go.
  2. Avoid sales (or nominate an item you want and don’t break that agreement with yourself). A price discount is a real trigger for impulse spenders often buying things they don’t need.
  3. Don’t shop when you are emotional.
  4. Remind yourself of your longer-term financial goals before you spend.
  5. Wait a day before you purchase non-essential items.
  6. Make a budget for spending on ‘extras’ or treats and stick to it.
  7. Eat before you leave home to shop, this avoids spending extra money on food items as you will not be hungry during shopping time.

It’s not a huge leap to switch from a default state of mindless impulse spending to one of financial mindfulness– which means having awareness and paying attention to your finances and financial behaviours.

Working through complex and difficult problems that may trigger impulse buying is of course not easy. But let’s not forget what a hugely painful thing financial stress is. Ask yourself honestly, is your impulse buying adding to your financial stress? It’s a question worth pausing to consider honestly.

Financial worries are now accepted as a leading cause of stress in people’s lives throughout the western world.  Impulse spending therefore just compounds the problem.

Contactless payments surge 44% during COVID-19

Get to know simple ways of how to manage credit cards.

Credit card giant Mastercard reported a major shift in consumer behaviour that has seen 44% of Aussies decrease their use of cash when making purchases in-person since the outbreak of the coronavirus pandemic, as shoppers fear germs on cash.

The research found that more than half (52%) of Aussies are more aware of the dirtiness of cash as a result of COVID-19, while one in five (21%) said the risk of germs has made them not use cash at all.

Eight in ten (79%) of Australians agree contactless payments are a cleaner way to pay.

Founder and CEO of Financial Mindfulness Andrew Fleming said the combination of reduced incomes and a move away from using cash is the “perfect storm” for credit card debt which could drive up financial stress.

You can read the full article here.

From cash to cashless
From cash to cashless

Perfect storm of credit card debt brewing for Australians during COVID-19

Essential Tips to Tackle Post Holiday Debt

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.

Read the full article here.

Shop till you Drop

Shop till you Drop

Shop till you Drop.

We are still on holidays, right? Well the majority of us are enjoying the holidays somewhere with our family and friends.  The hangover from Christmas and New Year is all but over, but one hangover that hasn’t left us is our credit card bill from Christmas and the so-called holiday ‘sales’, financial stress looms.

Chances are we still can be engaged in the frenzy of ‘The Stocktake SALE’, ‘The CLEARANCE SALE’, ‘Super Daily Deals’, ‘50 months interest free, no deposit, no interest (read full terms)’, ‘It’s the Season to SAVE BIG’, ‘After Christmas SALE and CLEARANCE’, etc.

That clever marketing pressure can flick a switch in our brains where we go into a kind of ‘trance’, handing over our credit cards, tapping away now in a cashless society on auto-pilot to suppress those logical thoughts of ‘we really shouldn’t be spending so much’.

According to BetaBait.com (a website helping start-ups connect with early adopters), 88 percent of the total impulse purchases are created primarily because the items are on sale.

Rather than purchasing useful or necessary items, impulse shoppers buy primarily because it puts them in a better mood. In addition, many impulse purchases are made because people feel that they can’t pass up an extremely attractive offer.  Retailers know this all too well and exploit it.

So, what do we do about it?

In a recent interview by Money and Life last month, I was asked to identify some helpful tips to break the cycle of spending and debt.

Dealing with the stress of debt and Christmas

BetaBait.com also found that when people shop with the purpose of buying immediate needs or forgotten items, the rate of compulsive buying falls by 53 percent.

Exactly how much do we spend on our credit cards?

The Australian Retailers Association expected Australians to spend $50 billion between mid-November and Christmas Eve. Aussie shoppers were tipped to spend a further $18 billion nationwide between Boxing Day and 15 January 2018.

According to ARA executive director, Russell Zimmerman, the jump is being driven by online retail. “With Amazon’s recent Australia launch, we are certain that online retail will be a driving force for post-Christmas sales with the ARA and Roy Morgan forecasting the ‘Other Retailing’ category to increase by more than four percent this year.”

Gumtree survey, which has found that Aussies are expecting to spend a staggering $10 billion dollars on Christmas presents alone, equating to more than $700 on gift giving per person.

Perhaps not surprisingly, the Gumtree research also found that almost 9 out of 10 Australians (86 percent) find Christmas puts a strain on their finances, with buying Christmas gifts dubbed as the biggest cause (66%) of this pressure.

The annual consumer survey by US company Statista found shoppers expected to spend an average of US6 on Christmas gifts alone in 2017, not counting other holiday costs and sales spending. This is a massive jump from the 2016 average of US$752.

In 2017, Christmas retail sales are forecast to grow to about 680.4 billion U.S. dollars; a 3.8 percent increase from 2016. Net result, Americans seem to be in a generous mood of giving more this year.  Does the Trump effect have anything to do with this?

In Australia, the Credit Card Debt Clock is ticking away and ticking upwards.  The MoneySmart clock shows how much Australians owe on credit cards. With around $32 billion owing, that’s an average of around $4,200 per cardholder. https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock

In the US, Americans have now hit a scary milestone, the highest credit card debt in U.S history.  According to the Federal Reserve, Americans had US$1.02 trillion in outstanding revolving credit in Oct 2017. When it comes to individual households, the average American family owes US$8,377.

For the first time since the Great Recession, lenders have given more consumers with sub-prime, or below average, credit scores, access to credit cards, but they are giving them lower spending limits, according to the credit reporting agency TransUnion.

So, what does this impulse spending all mean to our Financial Wellbeing

Answer: Financial Stress.

Financial Mindfulness conducted a survey on Financial Stress in Australia and found 1 in 3 Australians suffer Financial Stress.

The results of this press release appeared in the Sydney Morning Herald and the Financial Standard.

Marian Russell, one of Financial Mindfulness Facebook followers shared her personal experience on financial stress in the Sydney Morning Herald article.

New research is constantly being released on the impact financial stress is having on our financial wellbeing and general health worldwide.

According to the European Society of Cardiology, research recently presented at the 18th Annual Congress of the South African Heart Association, significant financial stress is associated with a 13-fold higher odds of having a heart attack.

So how can we get through the holidays not regretting our spending, not dreading the bloated repayments to come, then show up to work without that nagging sense of fear that comes from surviving with financial stress?

The answer lies in applying the principles of mindfulness – the proven practice of moment-by-moment awareness – to our finances. It means training our minds to slow down and make decisions that we won’t regret later.

An Australian start-up – Financial Mindfulness – is developing a financial stress reduction program designed to revolutionise the way we think and behave with our money. In the process, we can stay within our means and feel better about ourselves by saying goodbye to the worry of money.