Shop till you Drop – Financial Stress

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

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

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

According to BetaBait.com (a website helping start-ups connect with early adopters), 88 percent of the total impulse purchases are created primarily because the items are on sale. Rather than purchasing useful or necessary items, impulse shoppers buy primarily because it puts them in a better mood. In addition, many impulse purchases are made because people feel that they can’t pass up an extremely attractive offer.  Retailers know this all too well and exploit it.

So, what do we do about it?

In a recent interview by Money and Life last month, I was asked to identify some helpful tips to break the cycle of spending and debt. http://www.moneyandlife.com.au/individuals/family-and-life-events/dealing-stress-debt-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 US$906 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.

Andrew Fleming
2nd January 2018

Financial stress behind mental health insurance claim spikes

New research reveals that financial stress is a hidden mental health trigger for Australians to submit insurance claims, part of a trend alarming the life insurance industry. The financial stress burden faced by Australians is, according to analysis by Rice Warner, a major factor in the escalating numbers of mental health-related claims that insurers are wrestling with.

In a report commissioned by an Australian start-up, Financial Mindfulness, to examine the viability of a program to reduce personal financial stress, it was estimated that well over half of mental health-related insurance claims are due to financial stress.

“It is not unreasonable to assume that 60 % of mental health claims have financial stress as a primary or secondary contributor,” Rice Warner consultant Heather Brown wrote.

Other research also commissioned by Financial Mindfulness in July 2017 found that Australians under financial stress suffered severe impacts on their mental and physical health and relationships. While musculoskeletal conditions are the biggest category of claims for both IP and TPD claims, it is widely acknowledged that mental health is the fastest growing cause of insurance claims. Many agree because decades of stigma is lifting. Rice Warner’s Group Insurance Claims Experience Study, a huge research project into 140,000 claims across 16 superannuation funds from 2011 to 2014, revealed another stunning finding, about the leading causes of IP claims in particular.

Mental health issues were the leading cause of IP claims during most Australian prime child rearing and career-building years (25 to 45 years). IP insurance premiums are worth an estimated $4.1 billion in annual premiums.The types of insurance most affected by mental health claims are Total and Permanent Disability and Income Protection. 20% of all IP claims are due to mental health issues or suicide, while the figure was 15% for TPD.

According to Financial Mindfulness Founder and CEO, Andrew Fleming: “The trend of mental health insurance claims lead us to believe that this is the number one issue facing the life insurance industry. What is the major reason behind mental health claims? Financial stress.

“Financial stress is having a major impact on Australians mental health. Recently we announced our results from a detailed survey on Financial stress which highlighted the severity of the problem.” More than one in three Australian’s surveyed (38%) worried about money “all the time”.

Those who identified as being financially stressed, said anxiety (66%), depression (64%) and social isolation (55%) were the consequences of financial stress.

Peter Vincent
13th November 2017

Personal financial stress devastating Australian lives

FINANCIAL STRESS PRESS RELEASE: 4th September 2017

Close to 1 in 3 Australians suffer from significant financial stress, which has for the first time been comprehensively examined in new research by CoreData.
The results show financial stress leads to anti-social behaviour, relationship conflict and breakdown, isolation, sleep loss and symptoms of depression.
Most of us are aware of financial stress; the phrase appears daily in media coverage of money issues. But how money worries diminish Australians’ quality of life hasn’t been fully understood – until now.

But how money worries diminish Australians’ quality of life hasn’t been fully understood – until now. Australian start-up Financial Mindfulness commissioned global research firm CoreData in July 2017 to question 1000 Australians about what financial stress does to their relationships and their physical and physical and mental health.

CoreData dug deeper into the issue than anyone ever has in Australia, creating the first ever personal Financial Stress Index, based on responses to 17 questions.The results show nearly one in three people (30.4%) are suffering from significant financial stress and they are struggling compared to those who are not financially-stressed. Women were more likely to be more financially-stressed than men (33.4% v 27.6%).

Dr Nicola Gates, chief scientific advisor for Financial Mindfulness, said significant financial stress was “a lot more common than I had believed”.
“Worse 80% of them report severe discomfort – psychological and physical discomfort as a result,” Dr Gates said. “Financial stress is an issue that needs to be talked about in order to reduce stigma and shame, and to bring about intervention.” 35 cent of respondents suffering financial stress admitted using drugs or alcohol to manage negative feelings associated with personal finances during the past month. That level of abuse was a remarkable 18 times higher than people not under financial stress.

More than 66 per cent of those suffering financial stress said money worries directly led to feelings of fear, anxiety and/or depression – three times higher than people unaffected by financial stress. “Financial stress, like other stress, is a significant threat to our mental health and can lead to mental illness,” Dr Gates said. “For example, financial stress can cause a person to feel shame and develop a sense of failure which may lead them to become depressed.”
One of the most surprising findings was that financial stress is felt broadly, and not only experienced in low-income households. Respondents on salaries of up to $150,000 a year with investments of up to $750,000 were only marginally less financially-stressed than those who earned up to $90,000 with investments of up to $350,000.The findings also showed that financially-stressed Australians reported:

  • Their physical health was affected nearly six times as much as those not financially stressed (60.8% v 10.5%).
  • Arguing about money with family/partner nearly four times as much (75.8% v 21.4%).
  • Feeling at least considerably irritable / having angry outbursts over their money twenty times more (52.2% v 2.6%).
  • Having problems sleeping at eight times the rate of those not financially stressed (71.3% v 8.7%).
  • More than a third (35.2%) used alcohol or drugs to deal with financial stress.
  • 52.4% have trouble concentrating (vs. 3.3%), 16 times higher.
  • 37.8% have been hurtful towards themselves or others, 17 times higher.
  • Nearly nine out of 10 (88.0%) avoid social functions reasonably often, four times higher.
  • Worrying about money “most of the time”, at six times the rate of those not stressed (71.0% v 11.7%)

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

Peter Vincent
13th November 2017