Paying bills Paying bills and staying ahead.
Back in 2017 when the Financial Mindfulness journey began we asked our growing army of Facebook followers what were the biggest financial stressors in their lives.
Paying bills and staying ahead
How to Reduce Financial Stress in simple ways
How to Reduce Financial Stress in simple ways.
Every human being aspires to gain financial independence. In times such as these, facing financial pressure is a reality.
Continue reading “How to Reduce Financial Stress in simple ways”
What you need to know to be a mindful shopper
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”
Money and relationships
Money and relationships.
Many elements can lead to relationship tensions and even breakdown.
One of the most difficult to change can be disputes or differences over money.
Perhaps strangely, often ‘opposites’ attract when it comes to money and relationships.
“You’ll often see a spender/saver dynamic in a couple,” says Lea Clothier, a Behavioural Money Coach.
The reason for this can be based on deeply set value systems. Money can be tied to, for example, freedom, security or success.
“Money can represent all three to us, but we often have a dominant main value system around it,” says Ms Clothier.
Value systems and money
Understanding the underlying values in your relationship will give us insight into our behaviour and what is happening when there is tension over money.
Someone who sees money as a means to freedom is likely to be more of a spender, Ms Clothier says.
They are also less likely to stick to or use a budget (which they find restrictive). They may enjoy spending money on experiences and enjoying life.
On the other hand, someone who sees money as all about security may use their money more restrictively.
They are likely to be more savings-focused, manage money more tightly, and stick to a budget.
‘For these people, having a cash reserve gives them peace of mind and reduces financial anxiety,’ Ms Clothier says.
Those who see money as a measure of success may display their wealth through their choice of career, the car they drive, and the clothes they wear.
They may have big financial goals and see money as the tool to achieving these, Ms Clothier says.
Money is likely to be at the centre of or influence many of their major life decisions.
Conflict over money
Conflict can happen in partnerships and relationships when people have conflicting money values.
Imagine a relationship where one person is freedom-focused and the other security-focused.
The actions one person takes could be seen to compromise the other’s need for freedom or security.
Where money values are fundamental to us and clash with someone else’s equally strongly held beliefs, conflict seems inevitable at some point.
Understanding each other’s values around money can help reduce conflict and diffuse conflict.
“Many couples don’t manage money together as a team,” Ms Clothier says.
Getting ‘on the same page’ financially means both are taking an interest in finances in the relationship. Ideally, both also have an active role.
Ultimately a shared household spending plan is a great idea, so both partners work together towards joint financial goals.
Keeping some financial independence is also a good idea, perhaps in the form of having a small amount managed separately, so each can choose to spend independently of common money goals and actions.
But this should be transparent: any habit of hiding money will undermine trust.
Financial stability, relationship stability
Financial stress and financial instability are leading causes of stress globally and often contribute to marital and relationship breakdown.
Improving our sense of financial security and stability provides peace of mind and invariably helps to steady many partnerships, Ms Clothier says.
“It can create a platform for individuals to pursue their dreams and for a couple to achieve shared goals,” she said.
Financial stability is also the foundation for a stronger financial future and makes goals and dreams more affordable.
Financial stability is created through two essential elements: communication and cash flow, Ms Clothier says.
Money is a very emotional topic, which can make communicating about it difficult.
Learning to be open and transparent about money matters and communicate clearly about them is essential to remove the tension that money often causes in relationships.
Managing cash flow is the foundation of all financial plans.
“It’s about being mindful of every dollar that flows into your life and intentional with the very dollar that flows out,” says Ms Clothier.
When we have a system and process in place to manage our cash flow and ensure we are spending less than we earn, paying off debt as quickly as possible and building a cash buffer, we can begin to focus our attention on growing our wealth investing it.
Many people go straight to the investing part, only to find they are building on a shaky foundation.
If you are doing this, seek some help getting your fundamentals right – improving your cash flow situation to spend less than you make.
The dealbreakers of money and relationships
A major dealbreaker regarding money that will undermine a relationship, perhaps surprisingly, is poor communication.
Even worse is lacking transparency – which to a partner can quickly erode that most important element in any partnership: trust.
This applies to all stages of a relationship – including the beginning of one.
A partner with an undisclosed historical debt is a partner with a burden that can harm a relationship.
Hiding purchases and spending habits and having secret stashes of money will also destabilise a relationship.
Teamwork and shared responsibility regarding joint finances are essential. It’s constructive, but its absence is a big negative.
Working together on a joint budget, a spending and saving plan builds a sense of partnership – and trust because the goals are shared. Both partners can enjoy the feeling of achievement that comes from successful planning with structure and clarity.
If there’s debt, work out a debt management plan either together or with complete transparency.
“Lacking a plan means that our finances often control us, rather than us controlling it,” Ms Clothier says.
“It also means we are less likely to achieve our goals and dreams because we don’t have the means or method to achieving them.”
Another huge dealbreaker is procrastination.
So many typical money milestones fall on a particular date, so that that avoidance can be very costly.
So don’t put off paying the credit card bills or the insurance – that will create tension in a couple and family.
This also applies to investment. The saying goes: the best time to invest is yesterday and the second-best time is now.
Some regret over financial behaviours and decisions is inevitable and painful, but communication over shared goals can help prompt action rather than avoidance.
Another look at communication
In countries where the cost of living is high, money is one of the most emotive regular topics we face.
Shame, guilt, fear, anxiety, jealousy – all big emotions – are all common around money.
We can feel anger, too and even slip into useless or even damaging fantasies over finances.
And most of this happens in one place – inside our heads.
Learning to be open and transparent about money matters and communicate clearly can remove significant triggers for tension and disagreement.
It’s important to remember that a lot of financial behaviour is habitual.
“Most of us don’t bring much awareness or mindfulness to what we do with our money on a day to day basis,” Ms Clothier says.
Our money habits, particularly negative, can be detrimental to our finances and cause conflict in a relationship.
If you or your spouse notice some unhelpful financial behaviours, it’s important not to launch into judgement, blame or attack. Instead, offering support to see what is driving the habit or behaviour is more beneficial.
It’s important to explore – with honesty – if there are ways that one or more bad money habits, we have either individually or as a couple could be reduced or replaced with something healthier.
Suppose money is a source of regular conflict in your relationship. In that case, it may pay to consult with a financial counsellor, money coach or financial adviser who could support you to get back on the same page with your finances.
Often, they can provide perspective, an objective view, great support and practical tools to work together and master the art of managing money as a couple.
It’s important to note again that money challenges can reveal significant underlying issues, such as the need for security, freedom, or success.
Suppose the behaviour of one or other partners in a relationship is controlling or obsessive in pursuit of these values, leading to major relationship clashes. In that case, marriage counselling or couples therapy might also be helpful.
Why you need to stay mindful with your use of ‘buy now pay later’ services
Buy now pay later.
Popular new payment services like Afterpay, Openpay, Zip Pay and soon, Paypal’s ‘Pay in 4’ – collectively known as ‘buy now pay later’ services – perform something of a trick in the minds of consumers.
The trick results in people walking out of a store with a television, a carry bag of clothes, and high-end vacuum cleaners before they have fully paid partially switches off a healthy fear of debt.
But like credit cards, they are a form of credit – basically a loan – and with the real potential to increase financial stress in users.
With buy now pay later services, the consumer can purchase items with only paying the first instalment of the purchase value, then paying the remaining instalments in the future over the next 6 – 8 weeks. It’s like a cross between a layby service and credit cards but you get the product or service now.
The appeal of BNPL payment services
Buy now pay later is attractive for the buyer because the buyer had to only pay a portion of the item before they could take it home.
This appeal combined with clever marketing has become hugely popular.
In one recent Afterpay ad, Hollywood actor Rebel Wilson tells her on-screen boyfriend Afterpay is like eating a whole tub of ice cream at once but spreading the calories over six weeks.
This brilliantly captures the allure of the ‘instant gratification’ culture that is not just popular with millennials but with many people in nearly all age groups.
Afterpay boasts on their website they let customers get what they want when they want it, increasing average order value by up to 40%.
It is estimated one-in-five Australian consumers use a buy now pay later service, with over six million active accounts. The Reserve Bank of Australia says Afterpay is most popular with 3.4 million accounts, ahead of Zip Pay with 2.5 million.
The value of purchases made nearly tripled in Australia between 2017-18 and 2019-20, from just over $3 billion to over $9 billion.
Retailers love the services because they give the appearance of a new, cool, easy option when paying for your shopping – one that lets you walk out with products after spending just a quarter or one-fifth of its value.
How BNPL taps into the psychology of consumer spending
Buy now pay later have cleverly tapped into the consumer spending psychology and convinced shoppers to open their wallets – even though they don’t realise that is what they are doing.
Deferring payments is a relief to consumers, a positive feeling that reduces the pain of paying cold hard cash and even the nagging ‘I shouldn’t be doing this’ feeling that comes with using credit cards.
According to Dr Carey Morewedge, Asst. Professor at Carnegie Mellon University, the ‘pain’ of paying feels like it is reduced when using a buy now pay later service because we actually equate an imagined ‘pool of resources’ to having more cash.
M2P’s fintech blog explains the idea in an article titled ‘Factors and Psychology Behind the Great BNPL Allure’.
The larger your resource, the greater will be the inclination to make costlier purchases. For example, when shopping using BNPL, you feel like spending a small fraction of money from a large reserve with no immediate deadline.
So, the pain of paying becomes dramatically less with BNPL.
Whereas drawing a few currency notes out of your pocket seems like you are consuming a large portion of the available fund. Thus the pain of paying in immediate cash payment is more significant.’
Of course, buy now pay later providers know exactly what they are doing.
If a consumer cannot meet their end of the deal – and repay the full price within the agreed number of instalments, they are hit with late fees and charges, which vary depending on the fine print in the terms and conditions of each BNPL service.
It’s a very different mindset to using credit cards, which were first launched in Australia in 1974 and have peaked in usage in the past decade.
In 2020, there were 14.8 million consumer and business credit cards in Australia – more than one for every adult.
As credit card use has declined, the card companies have tried various marketing ploys to boost the use of their services, such as loyalty points schemes to 0% balance transfers.
But because so many people got into trouble with the complex and expensive interest payments on credit card companies, providers go out of their way to make it clear how repayments work.
According to Illion, Millennials under the age of 30 are twice as likely as their parents to fall more than two months behind in their credit card payments, suggesting they have greater difficulty balancing spending and debt, regardless of their credit limit.
The perils of buy now pay later services
The perils of credit card misuse are now well-known and widely understood. But the perils of buy now pay later are still developing as they are relatively new.
Afterpay, Zip pay, Openpay and equivalents remain relatively unregulated compared to the banks – meaning the gloss has not yet come off the services.
The perceived ‘win: win’ does not consider that our spending behaviour sometimes doesn’t make sense – for instance, how we can spend money based on our need to distract or ‘feel’ better rather than our need to stay within our limits.
Who could say they have never spent without thinking through all the consequences of a purchase? Probably none of us.
While it is entirely human to do so, it is the definition of mindless spending.
According to the Australian Financial Review, in 2020, Afterpay made $70 million from late fees, representing 20 per cent of its revenue.
The Australian Securities and Investment Commission also found that one in five buy now pay later customers were regularly missing payments.
An alarming half of users aged under 29 had taken out other loans to pay their buy now pay later debts.
How to use BNPL payment services safely
Just because buy now pay later services are relatively new, and the mixed impacts don’t make them bad news for everyone.
Andrew Fleming, Founder and CEO of Financial Mindfulness, says; ‘the way to avoid trouble with these payment services is the same as using any type of credit.’
‘Budgeting and sticking to your budget is key to ensure you do not get into trouble with BNPL products, but it also relates to any type of credit product, impulse spending is not wise’ he said.
‘Understand the product properly, including the fine print. Use BNPL services following your spending budget.’
‘The line between safe and unsafe use of these services is the difference between spending according to your budget and ‘reckless spending and not paying on-time’, he said.
You’ll have to decide for yourself what constitutes reckless, but it’s safe to assume that putting everyday shopping on instalments is not sensible.
To make the most of buy now pay later services, the optimum state of mind is one of financial mindfulness, which we define as ‘having awareness and paying attention to your finances and financial behaviours’.
But you have to hand it to the Founders of Afterpay, who discovered early the behaviour change with Millennials preferring to engage in cashless and credit-free spending lifestyles.
They have become a huge success story. The company was started 7 years ago and recently sold to Twitter founder Jack Dorsey’s Square for $39 billion making it the largest deal in Australian corporate history.
How to maintain a budget
How to maintain a budget.
Setting up a budget is a great step toward improving your relationship with money and, ultimately, your financial position.
How to budget successfully
How to budget successfully.
Last week, we established that budgeting isn’t easy, so you need to understand why it’s a behaviour that must be followed up with regular—and even daily—actions.
Why do a personal budget
Why do a personal budget.
We have started a new financial year. Like in previous financial years, new rules come into effect.
New clinical help on the horizon for shopalcoholics
New clinical help on the horizon for shopalcoholics.
We all instinctively know that compulsive, mindless spending can be a problem.
We see it in those around us and even in ourselves at times – especially when stress drives the perceived need to ‘escape’ mentally.
Whatever is behind compulsive shopping, buying, spending, even shopalcoholism – whatever we call it – it can and does result in unnecessary financial stress and even distress if the behaviour goes on uninterrupted.
Financial stress is a condition that can respond positively to a mindfulness program, especially when coupled with other interventions, such as improved goal-setting, financial literacy, and behavioural tools.
These combined can help sufferers produce a preferred state of financial mindfulness.
But not many people realise compulsive shopping has also been described in clinical settings since the early 20th century – more than 100 years.
Despite this, until now there has been no officially recognised diagnosis for the disorder.
That seems surprising how commonplace it appears to be, and how it is widely accepted as growing and as a contributor to issues like personal debt and overconsumption at personal and even macro levels.
Now science has moved a step closer to being able to help people with this behaviour – which is finally being recognised as a condition to be treated.
Flinders University reports that for the first time, world experts in psychology have built a framework to diagnose Compulsive Buying-Shopping Disorder.
This means there could be new pathways for help for people struggling to manage their spending behaviour and mental wellbeing.
The framework, published in the internationally recognised Journal of Behavioral Addictions, confirms that compulsive over-spending can be regarded as a disorder.
The news gives researchers and clinicians tools to design targeted interventions for this potentially devastating condition.
The new guidelines, published in the Journal of Behavioral Addictions, confirm that excessive buying and shopping can be so serious as to constitute a disorder, giving researchers and clinicians new powers to develop more targeted interventions for this debilitating condition.
Evidence-based criteria for Compulsive Buying-Shopping Disorder (CBSD) will be developed by an international team, including Professor Mike Kyrios from Flinders University’s Órama Institute for Mental Health and Wellbeing and Professor Astrid Müller from the Hannover Medical School in Germany.
A study of 138 researchers and clinicians from 35 countries has begun the work.
The research was a collaboration with researchers from the Hannover Medical School at the University of Duisburg-Essen and University of Dresden in Germany funded by the German Academic Exchange Service and Universities Australia.
Professor Kyrios described the new work as a “game-changer” for research into the issue, which could underpin the development of much-needed treatments and improved diagnostic processes to follow.
“In over 20 years, since I started investigating excessive buying, there has been an absence of commonly agreed diagnostic criteria which has hampered the perceived seriousness of the problem, as well as research efforts and consequently the development of evidence-based treatments,” Professor Kyrios said.
Evidence-based treatments should now be possible with agreement on diagnostic criteria.
New diagnostic criteria include the recognition of “excessive purchasing of items without utilising them for their intended purposes”.
In the context of the criteria, excessiveness is described as “diminished control over buying/shopping”.
Another feature of the disorder is that “buying/shopping is used to regulate internal states, e.g., generating positive emotions or relieving negative mood”.
“Clients who show excessive buying behaviour commonly have difficulties in regulating their emotions, so buying or shopping is then used to feel better. Paradoxically, if someone with Compulsive Buying-Shopping Disorder goes on a shopping trip, this will briefly improve their negative feelings, but will soon lead to strong feelings of shame, guilt and embarrassment.”
The Delphi research method was used to reach a consensus from the researchers and clinicians involved in a complex psychological disorder.
“The Delphi technique is an ideal method to integrate diverse perspectives from international and interdisciplinary experts in the field of Compulsive Buying-Shopping Disorder,” says co-investigator Dr. Dan Fassnacht, Senior Lecturer in Psychology at Flinders University.
“This helped us to developed diagnostic criteria featuring large agreement among experts in the field, and is an important milestone to better understand and treat this behaviour.”
Dr. Kathina Ali, Research Fellow at Flinders University and co-investigator of the study adds: “Previously, it was difficult to compare studies without agreed criteria.”
“Now for the first time, we can start examining Compulsive Buying-Shopping Disorder more precisely which should help us improve our treatments for this disabling condition.”
Staggering number of Australians with less than $2000 in the bank
Staggering number of Australians with less than $2000 in the bank.
Financial Mindfulness was interviewed by the Daily Mail on the latest study on financial stress. These results show just how dire circumstances are for some Australian’s.
Revealed: The staggering number of Australians with less than $2000 in the bank – and why the slow Covid vaccination rollout could leave them financially ruined.
Financial Mindfulness study showed 34 per cent of people couldn’t raise $2,000 Almost half or 45 per cent of Australians can’t pay their weekly household bills Financial Mindfulness chief Andrew Fleming: those with low savings were at risk
Government and employers calling for halt to major minimum wage increases
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse.
Australia’s eight-year run of weak wages growth is set to continue with both the federal government and employer groups calling on the industrial empire to withhold pay increases, despite the strong economic recovery from the Covid recession.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found.
A surprising number of Australians would struggle to raise $2,000 for a hot water, car or medical emergency and a slow Covid vaccine rollout could make that worse. Pictured is a stock image
Financial Mindfulness chief executive Andrew Fleming said people with less than $2,000 in bank savings were particularly at risk.
A medical expense or a hot water system blowing up or a car breaking down: an expected expense hits people for six,’ he told Daily Mail Australia.
‘A lot of people are living week to week.’
Consumers already struggling with a mortgage, rent or credit card bills are increasingly turning to buy now, pay later apps, like Afterpay or ZipCo, or pay on demand, where individuals pay $80 a month to get $2,000 in the bank before their employer pays them.
Mr. Fleming said many Australians were unaware of the penalties they faced if they were late with repayments during a personal financial emergency.
‘For those who can’t raise $2,000 for an unexpected expense in the last month, there’s a high probability they’re going to resort to these new products – does the user really understand what they’re doing?,’ he said.
The past year has been very volatile, with the Covid shutdowns causing a 7 per cent plunge in gross domestic product, the steepest downturn since the 1930s Great Depression.
But the final six months of 2020 saw a 6.5 per cent surge in economic growth, the fastest-ever half-yearly pace of GDP expansion.
Despite that, the federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1.
The federal government is calling on the Fair Work Commission to refrain from giving Australia’s 2.2 million low-paid workers a substantial pay rise on July 1. Pictured is a cafe at Brunswick in Melbourne
‘Given the current uncertainties in the domestic and international economic outlook, the government therefore urges the panel to take a cautious approach.
Taking into account the importance of creating jobs for Australians and ensuring the viability of the businesses, particularly small businesses, which provide the jobs which are crucial to the economic recovery and the wellbeing of Australian families,’ it said.
The National Farmers Federation went further in its submission to the annual wage review, arguing minimum wage workers should get no pay increase until the Covid vaccine was given to most Australians.
‘The NFF recommends that the minimum wage be maintained at current levels until economic conditions have improved, market volatility has decreased, and the level of financial risk lowered,’ it said.
‘These conditions can be reasonably expected to materialise once trends indicating a recovery can be confirmed and the risk of additional waves of infection minimalised following the roll-out of the AstraZeneca vaccine.’
Mr. Fleming said the prospect of more weak wages growth would put struggling consumers at risk.
‘If expenses are going up, out of your control, and income is stagnating, there’s a problem,’ he said.
Money wellbeing app Financial Mindfulness surveyed 645 Australians and found 34 per cent of them would be unable to raise $2,000 to cover a financial emergency.
Almost half, or 45 per cent, could not meet their weekly household bills, the barometer of economic health taken in February 2021 found
On July 1 last year, the Fair Work Commission agreed to give minimum wage earners a $13 a week pay increase which saw their wages edge up slightly to $753.80 a week or $19.84 an hour.
The 1.75 per cent wage increase was below the inflation rate at the time of 2.2 per cent.
Since then, inflation was shrivelled to just 0.9 per cent, putting it well below the Reserve Bank of Australia’s 2 to 3 per cent target range.
As found in the Daily Mail
By STEPHEN JOHNSON, ECONOMICS REPORTER FOR DAILY MAIL AUSTRALIA.
