Get to know simple ways of how to manage credit cards.
Who doesn’t like spending money on things that they want to buy? It is during these purchases that credit cards are used.
Continue reading “Get to know simple ways of how to manage credit cards.”
Learn quick and easy ways of how to reduce debt.
Finance is a large part of a person’s life. Who doesn’t require substantial amount of money to lead a happy and fulfilling life.
Continue reading “Learn quick and easy ways of how to reduce debt”
What you need to know to be a mindful shopper.
The pandemic has placed enormous pressure on the global supply chain, which has led to retailers warning goods will take longer to arrive than they would have before the pandemic.
Continue reading “What you need to know to be a mindful shopper”
Under-earning and financial stress.
‘Under-earning’ – that some people earn less than what they’d like to or even deserve to earn – might sound like an odd idea to people with faith in a free market.
Loss of employment.
Losing a job is one of the most stressful things that can happen to a person.
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).
Disorganised finances.
A persistent, nagging fear of money is all too real for many people.
The medical word for it is Chrematophobia, also known as Chrometophobia and its sufferers have a much higher likelihood than average to experience financial stress.
The individual reasons are probably as varied and nuanced as the number of sufferers, but it’s a reasonable assumption that we haven’t learned how to manage money effectively.
One way to consider the fear of money is to ask: how many with such fears are disorganised with their finances?
We’re not suggesting an answer to Chrematophobia – we’ll leave that to you, your financial counsellor, and even your psychologist.
But we can help encourage people to look at the widespread issue of disorganised finances.
Why does it happen?
For some, it will be deep-seated issues, and again, we won’t go into that. But it’s worth considering whether you do fall into that camp before considering the next point – and getting extra help if you do.
Avoiding our finances to the point they become disorganised can feel strangely empowering in the short term.
We all know that feeling: ‘I don’t have to do this difficult thing if I don’t want to or maybe ‘This is boring/hard/exhausting, so I’ll get back to it tomorrow/next week/next month’.
This is avoidance, with more than a little misguided rebellion at its heart.
Whatever is underneath our avoidance of maintaining our finances, the result is often the same: it’s a bit of an ‘own goal’.
‘It can be a bit like a teenager not wanting to clean their room. They don’t see a need for it,’ says Hamish Ferguson, a Director at Vision Property and Finance.
It is frustrating when they can’t find an important document or number, but unless it becomes a large enough pain point, people generally don’t – or won’t – understand the need and don’t make it important.
One thing we all have, of course, is plenty of distraction these days.
There are usually too many other things we believe need to be done now or make more important – and we focus on those instead of our finances.
“Examples could be keeping the boss happy, dealing with children or a spouse that wants attention or even just allocating time to more pleasurable activities such as TV, time with friends or outdoor activities,” says Mr Ferguson.
The link between financial stress and disorganised finances
If we don’t pay attention to our finances, they don’t usually improve. This may seem obvious,s but it’s important to act on it.
Paying no attention to our financial situation means some form of financial stress, and even distress becomes inevitable.
If you can’t see this coming, you probably need some new habits with money!
“Generally, the more stressed we are, the less logical we think and or the more disorganised we become,” Mr Ferguson says.
With a stressed mindset, we don’t tend to manage our time well because we spend more time on the stressor than the solution.
“We often fail to realise that being organised with money will reduce the time that we tend to think about money, which should give us more freedom and time to spend in more pleasurable areas,” Mr Ferguson says.
The importance of regular routines around money
The busier we are (or more’ time poor’ we are), the more important having healthy routines are.
Most people can recognise that sense of not having enough time in the day.
“So, building structure and routine around our finances is essential,” Mr Ferguson says.
Some examples of healthy routines with money are:
What’s a good place to start if my finances are disorganised?
“Being disorganised with finances is often an indication that bills are not being paid on time, savings are limited (or even non-existent) there isn’t a savings habit or goal,” Mr Ferguson says.
When we experience any bill as an unexpected expense, we need new habits with money and quickly.
In the most basic terms, a person disorganised with finances often doesn’t know how or where to allocate money helpfully over the long term.
Becoming organised would mean thinking about the following:
Once or twice a year, it is helpful to sit down and analyse three months’ worth of transactions.
If this seems too onerous, looking at some software to help you be proactive here may be worth considering.
Also, many banks now offer basic cashflow analysis.
“Are you using the free tools available to you? There are plenty,” Mr Ferguson says.
A final word on goal setting.
‘This is very, very important,” he says.
Financial goal setting actions can be as simple as looking at major expenses on the horizon and breaking down the need into weekly or fortnightly amounts to putting away can help become organised.
But they can also be empowering when we look forward to what we want to do with the next 5-10 years: buy a property? Travel? Open a business?
The possibilities become almost endless when our finances become organised, and we can start making financial goals and achieving them.
What to do if lockdown has caused me financial stress.
Right now, millions of Australians are under public health orders to stay at home in an attempt to reduce the spread of the Delta variant of the Covid-19 virus all around the country.
More than half of all Australians face this uncomfortable but necessary reality, and it is producing feelings including loneliness, fear, worry, depression, and stress.
The unprecedented – and extended – interruption to normal life has worn so thin that for many, it’s starting to feel like a depressing new norm.
Uncertainty and fear were defining characteristics of the pandemic from the outset.
The uncertainty isn’t something we can do much about: nobody has a crystal ball.
Fears are a little more tangible. We fear for the health and safety of our families and ourselves.
Thankfully, there are plenty of official and expert resources to help people deal with their mental health during the pandemic.
Here’s a great government link with plenty of advice and links to specific types of support.
The respected Black Dog Institute has produced 10 tips for managing anxiety during Covid-19.
We suggest you use these links if you need them.
People also fear for their finances, and this isn’t just a ‘first world problem’; it’s real and much deeper.
While some of us are saving because we are not going out, the lockdown means many people cannot get to work and have lost hours, and therefore, their wages are reduced. In mid-August, it was revealed 150 child care centres closed – all have staff, and all those staffs lost wages.
In 2020 Australia experienced negative wage growth due to the pandemic-led economic downturn.
Or even worse, some have lost their jobs. This is acknowledged by the government’s latest round of Covid disaster payments.
Everyone losing wages or their job will experience financial stress, sometimes at an acute level, and if these changed circumstances persist or worsen, the financial stress will likely become chronic.
Fearing for our financial security shakes us to our core; for many of us, it feels like it’s about our very survival, even a matter of life and death.
Financial stress has moved from a fringe issue to a serious, even core problem. It is acknowledged by the likes of the Black Dog Institute’ managing financial stress during lockdown.’
‘Mental and financial health can be a vicious cycle,’ says Black Dog. ‘Financial instability can lead to poor mental health, which can make taking action to protect your financial situation harder.’
‘When people are under pressure, they may start drinking more or avoid talking to family and friends, which can make it even harder to cope.’
This blog looks at financial stress during Covid lockdowns – why we feel stressed, what we can do with financial fears, and what practical steps we can take.
Why do we feel financial stress during lockdowns
Hamish Ferguson, a Director at Vision Property and Finance, says it’s important to acknowledge that feeling financial stress during a lockdown is to be expected.
“Lockdowns introduce unpredictability into our lives. One of the requirements of effective cashflow management is being able to predict both your future income and expenses.”
There is a saying that in the absence of good information, people will make poor decisions.
There is a lot of emotion in the community, and at times misinformation spreads. This poor-quality information can affect people who give it too much attention, and some will either not look after themselves or spend too much money thinking that this is an excellent way to reduce stress.
‘Many of us will spend more money when we have higher levels of emotion,’ Mr. Ferguson says.
‘It is quite clear that emotion levels in society are higher, so this will produce binge spending or emotional spending at a higher level.’
What can we do about our financial fear during a lockdown?
Practicing mindfulness is not just about sitting down to meditate, though that is recommended.
Mindfulness is actually about paying attention to thoughts and feelings and is said by experts to resemble curiosity as a state of mind.
So be curious about how your spending patterns are changing and where your money is going.
That helps us achieve financial mindfulness, which is simply described as having awareness and paying attention to your finances and financial behaviours.
It means more than being money smart or financially savvy, as it includes the capacity to regulate emotional responses that can lead to unhelpful financial behaviour and financial stress.
‘One of the strategies that many professionals will suggest is to break down the information we receive into what we know to be true and separate it from what may or may not be true,’ says Mr. Ferguson.
This can help us to focus on more reliable information.
Another strategy is to focus on verbalising things we can be thankful for when stressed or anxious. For example, are you safe at home, and do you have good home-cooked meals and a relatively comfortable environment where you live?
Being thankful can help to balance the information we are receiving and not just focus on the negative.
An example of the power of positive thinking is that rather than just thinking “I might lose my job”, to say to yourself, “Last time this happened, my employer and the govt worked well together to enable me to keep my job. I don’t have any reason to think that this won’t happen again.”
We’d also suggest turning off the television, or the online and social media news updates, as often as possible.
Constant updates on Covid are not helpful to most people. Information from sources of dubious origin is even less helpful.
‘Sometimes we just need to switch the world off and enjoy the silence,’ Mr. Ferguson says.
He suggests reaching out to people in your community going through similar experiences, for example, work colleagues, family friends.
‘Especially reach out to those people that you see as positive or “glass half full”. They are more likely to help you balance your thoughts,’ Mr. Ferguson says.
What are some practical steps we can take
In a period where our emotions are potentially impacting our financial behaviour, especially in a negative way, it’s time to take a step back and look at the basics.
“Review all spending to ensure you are focusing on needs and not wants. Strip your budget back to bare basics,” says Mr. Ferguson.
He suggests focusing on identifying the real fears or stress points and finding someone to help you work through those.
“Community and communication are very important.”
If you are not budgeting or haven’t reviewed your budget for a while, then it’s an excellent opportunity to do so.
Why revisit my budget?
Instinctively, we know that budgeting allows us to manage money wisely, avoid financial stress, and be in control.
During a lockdown enforced by the government, one thing we don’t feel is in control. That’s not comfortable for many people. Budgeting helps us to get back some sense of control in our lives.
Also, it’s a habit that is always helpful to our financial situation.
Even if you have a budget, here’s a reminder of the main steps to building a budget:
Remember, most people who try to budget fail to get the benefits of a budget because they cannot maintain the practice.
Maintaining a budget involves several steps too:
You can read our complete blog series on budgeting at these links: why budgeting helps your personal finances, how to budget and maintaining a budget.
If you are still struggling with balancing your budget, you can seek support. You could consider contacting a financial counsellor or a budgeting coach for help.
Remember, budgeting is learning a new life skill; it takes practice. And at a time when you may feel worried, uncertain, or even out of control, it will help with financial fear and financial stress.
If you are struggling with your mental health, please seek help:
Proving the business case for financial wellness programs.
Financial wellness has been a buzz phrase in the workplace for a few years now – with good reason.
More and more data show how bad for productivity the problem of employee financial stress is.
In Australia, AMP’s 2020 Financial Wellness Report showed 1.8 million Australian workers suffering prolonged financial stress, costing $31 billion in lost productivity.
A survey by salary finance found American businesses are losing $500 billion per year due to employees’ personal financial stress.
Employers want to engage and retain productive employees – yet the day-to-day challenge of trying to pay bills and manage finances is leaving employees stressed and distracted at work, according to PwC.
That’s why blue-chip organisations seek to measure changes in financial stress, as PwC did recently, in its 2021 Employee Financial Wellness Survey of 1,600 full-time employed American adults.
It found that nearly two-thirds (63 per cent) of full-time employees said their financial stress has increased since the start of the pandemic.
Employees whose financial stress increased due to the pandemic were four times as likely to have experienced a decrease in overall household income and to find it difficult to meet household expenses on time each month.
They were twice as likely to have used short term credit in the last year, to have taken a loan or funds meant for their retirement and even to be considering postponing their retirement.
Of the employees who were more financially stressed, a high proportion (45 per cent) reported that their finances were a distraction at work, a majority (57 per cent) avoided medical treatment because of the cost and an overwhelming number (72 per cent) were interested in a company that cared more about their financial well-being than their current employer.
The United States is of course a different market, but the underlying principles apply to Australia: financial stress affects key metrics and it also worsened in the early stages of the pandemic.
In its 2021 Employee Financial Wellness Survey report, PwC outlined four steps it believes employers should take to strengthen workforce financial wellness.
They were:
The second point – what’s happening at home – is a difficult balancing act. It is clearly private, but also incredibly insightful, information.
Insights can be gained without breaching any privacy, by gaining employee permission and buy-in to anonymized data collection. But the need to tread carefully and ethically on this point cannot be overstated.
Leveraging positive momentum – such as employees who have improved their own financial position – is important because it reinforces good behaviour and builds trust. Constructive, positive reinforcement feeds on itself, producing positive results – as good leaders know well.
In identifying that 87 per cent of employees want help with their finances, PwC confirms the principles underpinning the financial wellness movement.
This is a case-by-case, site-by-site problem – but in general, people want tools and online delivery is almost always seen as advantageous today, especially with work-from-home so widespread.
The first item in PwC’s list of four steps – Make the business case for supporting employee financial health – is what we’ll concentrate on here because it sets the groundwork for everything else that follows.
PwC makes an important point at the outset: understand what changes in financial stress might be doing to your workforce.
To do that you have to choose key metrics.
The three PwC suggests are ‘productivity, retention, and physical health’.
Others might include absence rate, job satisfaction, engagement, turnover, career path ratios and the impact of training.
There may be other metrics you find more useful or relevant to your business.
The Financial Stress Index (FSI) provides a tool to track changes in key metrics over time, to provide some insight into what is happening for employees in order to develop effective solutions.
Most significantly, the FSI tracked self-reported changes across a sliding scale of financial stress categories.
Specific and measurable key metrics included in the FSI include:
The FSI provides behavioural insights into financial stress that could contribute to changes in other metrics, such as:
They also contained a rich data set that contained insight into what was happening at home for employees and indications of changes in employee mental health.
In March, comparative FSI insights as they applied to Australian survey respondents across three six-month periods were released.
Comparative data was collected on:
All the above data was collected within the context of levels of financial stress.
You can find out more about the FSI here.
Stressed about your finances or your mortgage.
Financial Mindfulness was covered in Yahoo Finance
If you’re experiencing financial stress, you’re dealing with two distinct issues: the money problems, and then the stress itself.
While Headspace has rolled out meditations specifically to help tackle financial stress, a new app has gone one step further to try and tackle both issues at once.
Developed with neuropsychologists, mindfulness and financial experts, the Financial Mindfulness app comes off the back of two years of research and aims to help people reduce financial, credit card and mortgage stress by addressing the way the stress itself is handled.
“The way we deal with particular stressors impacts everything that comes after,” said Financial Mindfulness founder and CEO Andrew Fleming.
Worrying obsessively with money can lead some to start seeing life as just keeping ahead of their financial problems. “Inevitably, that exhausts us.”
“When financial stress is reduced, we get some peace of mind, our relationships improve, and we are more engaged in our jobs.”
But can the Financial Mindfulness actually help me with my finances?
Just because the app is primarily aimed at tackling the ‘stress’ of financial stress doesn’t mean that app is light on financial guidance.
To improve users’ ease of mind and change habits, it uses a mix of financial literacy, goal-setting, and positive reinforcement to help develop new behaviours for better money management.
“Financial Mindfulness also has the ability to measure users levels of financial stress and then measure changes in those levels,” Fleming told Yahoo Finance.
“There has never been a solution available like this to ease the heavy burden of consumers’ financial stress.”
The app is available in the App Store and Google Play in both Australia and the US and offers two free learning modules: ‘Paying Bills’ and ‘Stress Management’.
You can access the rest of the modules, such as ‘Managing Credit Cards’, Managing Mortgages’ and ‘Unexpected Expenses’ for a one-off payment of $1.49 per module.
More than 20 modules are in the pipeline – expect to see ‘Managing Money in Relationships’, ‘Loss of Employment’, ‘Divorce & Separation’ and ‘Under-Earning’ before long.
Though the app only went to app stores this month, Fleming said user testing found financial stress was lowered after just one use of the app.
“Most users said their mood about personal finances also improved,” Fleming added.
“The users were intrigued because they’d never heard of a tool that addresses financial stress in this way.”
Published in Yahoo Finance on 6 September 2019. Credit: Chris Jessica Yun
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