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Financial stress devastating Australians

Financial stress devastating Australians

Financial stress devastating Australians, 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.

Financial stress devastating Australians
Marion Russell from North Narrabeen, Sydney
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Financial stress: 9 out of 10 suffering

Using mindfulness

Financial stress: 9 out of 10 suffering.

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.

An overwhelming 86 per cent said they would trial a free app or web-based platform that combined financial education, mindfulness sessions and goal-setting in an attempt to reduce their financial stress.

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Good mental health a much bigger factor in happiness than money

Using mindfulness

Good mental health a much bigger factor in happiness than money.

Earlier this week Norway was named the happiest nation on earth, by the United Nations researchers, just ahead of Denmark.

Northern European countries dominated, with Iceland, Finland, the Netherlands and Sweden also in the top 10; perhaps there really is something to the saying ‘cold hands, warm heart’.

Australia rated 9th happiest, the United States was 14th and the United Kingdom 19th.

The bottom five places were filled by Rwanda, Syria, Tanzania, Burundi and the Central African Republic.

Why should we care about something that might be considered frivolous compared to harder-headed indicators like economic growth, interest rates and GDP? Because the world is changing and economics no longer rules unchallenged.

As the report points out: “In June 2016 the OECD committed itself ‘to redefine the growth narrative to put people’s well-being at the center of governments’ efforts’. Norway came first, it is pointed out, despite weak oil prices. The nation depends heavily on oil and gas resources, but in recent years has sunk profits from those industries into a transparent, ethical, future fund.

The UN team behind ‘The World Happiness Report’ used data from telephone and face-to-face interviews conducted by Gallup with around 1000 people from 155 countries over three years (2014-2016). Respondents were asked to rate their life on a scale of 0-10.

A key chapter of a report, ‘The Key Determinants of Happiness and Misery’, included some fascinating insights for companies, policy-makers and individuals interested in what makes us happy and unhappy, and how we can go from one state to the other.

The chapter focused on deeper research done in four countries: the US, UK, Australia and Indonesia.

“In all three Western societies, diagnosed mental illness emerges as more important than income, employment or physical illness.” The reverse was true in Indonesia, although in all four countries mental illnesses were more significant to our happiness and misery than physical illnesses.

The research found our levels of income and education per se weren’t major factors in happiness. Our tendency to compare ourselves with others in these areas was a bigger problem.

“Household income per head explains under 2% of the variance of happiness in any country,” the authors wrote. “Moreover it is largely relative income that matters, so as countries have become richer, many have failed to experience any increase in their average happiness. A similar problem relates to education—people care largely about their education relative to that of others.

“In all countries the most powerful [improvements to misery] would come from the elimination of depression and anxiety disorders, which are the main form of mental illness. This would also be the least costly way of reducing misery.”

The report made no mention of financial stress as a factor in misery experienced by adults, but it is worth pointing out that research shows clear links between money worries and those major mental health issues, anxiety and depression.

In 2013, researchers from the University of Southampton found people with unsecured debt (such as credit card debt, student and personal loans) were 3.24 times more likely to suffer “mental disorders” than those without unsecured debt and 2.77 times as likely to have depression. Tragically they were 7.9 times more likely to take their own lives.

It is no surprise then that the World Happiness Report’s researchers found addressing the emotional health of children was more important to set someone up for a happy life than academic qualifications. A child’s experiences at school were found to be more important than their test scores.

“What in turn affects the emotional health and behaviour of the child? Parental income is a good predictor of a child’s academic qualifications (as is well known), but it is a much weaker predictor of the child’s emotional health and behaviour.

The best predictor of these is the mental health of the child’s mother.” Disappointingly for dads, researchers found a father’s mental health wasn’t as important in determining happiness and misery as a mother’s.

Again, the report made no mention of mindfulness – this wasn’t the work to go into the array of potential solutions.

But with mental health such a huge factor in determining the happiness or misery of people in the US, UK and Australia, and other research showing money worries are linked with anxiety and depression, mindfulness around money is without doubt one important and useful tool in the search for happiness.

Through many years, Norway has been rated one of the happiest countries in the world
Through many years, Norway has been rated one of the happiest countries in the world
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Can’t afford a comfortable retirement

Retirement Orange

Can’t afford a comfortable retirement.

A huge 47 per cent of Australians between 26 and 64 – 6.1 million people – are not likely to have enough money, even accounting for superannuation, assets and the aged pension, to maintain a “comfortable standard of living” in retirement.

That’s according to CommBank’s ‘Retire Ready Index’, which is compiled using data from 10 million Australians’ superannuation accounts and Australian Bureau of Statistics’ data on personal wealth.

On the flip-side, 53 per cent of people in the same age bracket should have enough for a comfortable retirement, although that figure drops alarmingly to just 17 per cent if the aged pension were not available.

Although there are no signs the aged pension is under threat, there are fears about its long-term sustainability, especially after then-assistant Australian Federal treasurer Kelly O’Dwyer claimed in 2016 that the “objective behind the superannuation system” was for people to not rely on the pension.

The pricetag for a “comfortable” retirement, according to figures released last September by the Association of Superannuation Funds of Australia, is $43,372 a year for singles and $59,619 for couples.

Having enough money to budget these amounts each year from age 67 (from 2023 that will be the age at which Australians qualify for the pension) until death is what it means to be “ready” for a comfortable retirement. The calculations use average life expectancy.

ASFA said this “comfortable” standard would afford: “a broad range of leisure and recreational activities [and] a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel”.

A “modest” retirement could be attained with $23,996 a year for singles and $34,560 for couples. No further details were offered on what a ‘modest’ retirement meant, but one might guess it means choices would have to be made between holidays of any kind, a car and/or a low level of health insurance.

Overall, one in two households expect to be ready for retirement – but by far the strongest households in this sense are those run by couples. While only 27 per cent of singles are on track to be ready, 76 per cent of couples expect to be ready.

Breaking down singles’ retirement readiness by gender reveals some major concerns for women: because of lower incomes, time lost from their careers to raise children and longer life expectancies, only 22 per cent of single women are expected to be ready for retirement at 67, while the figure is 31 per cent for single men.

It’s a given that mindless spending habits including impulse spending – which happens when people are feeling anger, guilt, stress or boredom – are affecting people’s ability to save enough for retirement.

A mindful approach to all personal finance issues, especially over-spending and under-earning, is gaining momentum as a solution.

Impulse spending
Impulse spending
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Find your pulse, stop impulse buying

Retirement Orange

Find your pulse, stop impulse buying

Who hasn’t indulged in a little retail therapy from time to time, especially after a shocking day at work, or an argument with your partner?

It often seems like a good time to buy a pair of new shoes perhaps, go to a movie or buy an album, a bottle of wine, a therapeutic massage to de-stress or even sign up to a gym membership.

So it can feel a little impulsive to spend money we haven’t budgeted on, so what? On the surface it seems like we are taking care of ourselves: doing something to comfort ourselves to deal with the anger or frustration of having our feelings trampled, or not living up to our own or someone else’s expectations.

According to a poll of 1003 consumers by US website creditcards.com, five out of six American 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.

Spending money impulsively can make you ‘feel better’ and ‘more alive’. It can certainly seem exciting, and it’s hardly as reckless as taking drugs or gambling, right?

But it can be a serious problem if this is something we begin to regularly, or 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.

Fortunately there are plenty of strategies to manage your impulse buying urges –according to BetaBait.com (a website helping start-ups connect with early adopters) you are much less likely to buy on impulse if you plan your shopping trip or walk to the shops rather than drive.

It found that sales are a trigger for impulse spenders (a staggering 88 per cent of impulse buys are items “on sale” – even if you didn’t need that item). It also said impulse spending often happens when you feel “angry, stressed, guilty or bored”.

Let’s consider that last point: when you feel “angry, stressed, guilty of bored”. Anyone would admit the issues making us angry, stressed, guilty and bored – or sad, or ashamed, or lonely – are not solved by a bottle (or a case) of wine, or upgrading computer or bike or car, or booking a holiday or seeing a movie.

Chances are we are just escaping feelings which will overwhelm us again in a few hours or days.

Working through complex and difficult problems is of course not easy. But we also forget what a hugely painful thing financial stress is. Ask yourself honestly, is your impulse buying adding to your financial stress?

Financial worries are now accepted as a leading cause of stress in people’s lives throughout the western world.

“Member financial wellness, engagement and measurable behaviour change is what we are aiming for. Members learn through awareness and education to build sustainable healthy habits.” says Financial Mindfulness Founder & CEO, Andrew Fleming.