Measuring financial stress.
In the second part of our financial stress webinar series, Dr Nicola Gates provides a detailed look at measuring financial stress.
Measuring financial stress
The business case for financial wellness programs
The business case for financial wellness programs.
Financial wellness has been a buzzphrase in the workplace for many years, with good reason.
Continue reading “The business case for financial wellness programs”
Revisiting your 2022 goals
Revisiting your 2022 goals.
Most of us recognise the importance of setting goals, but what happens when we break promises to ourselves and a goal suddenly looks unachievable?
The warning signs of compulsive shopping
The warning signs of compulsive shopping.
The humdrum feelings we get from returning to work after a holiday, that ‘back to reality feeling, can hide complex behaviours that lead to financial stress.
Pandemic put’s young families under huge financial stress
Pandemic put’s young families under huge financial stress.
Even if you don’t have children, you may be aware through your friendships and networks of the burden that the Covid-19 pandemic has placed on families.
Continue reading “Pandemic put’s young families under huge financial stress”
Managing financial stress – Decision making, literacy, learning new skills
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).
Money doesn’t make you happy, but bad debt makes you sick
Money doesn’t make you happy, but bad debt makes you sick.
You can’t buy happiness, goes the old saying. We also know that being in poverty decreases happiness, but instinctively we know having lots of money doesn’t guarantee happiness.
Research backs up the motherhood statement too. In a landmark study, Daniel Kahneman and Angus Deaton, of Princeton University found that after an income of US$75,000, earning more money does not increase happiness.
In 2010, the pair studied the survey responses of 450,000 Americans and found that “high income buys life satisfaction but not happiness”, aka emotional wellbeing.
Then in 2020, three Harvard researchers, Ashley Whillans, Lucía Macchia and Elizabeth Dunn looked at whether prioritising time over money left us happier than focusing on money over time by studying 1000 students graduating from the University of British Columbia.
In short, the students who aimed for money were less happy a year after they graduated than those who made time a priority.
It seems even more obvious that people with lots of debt are not happy, but the extent to which this is true is shocking.
In 2016, Australian investment advice company Acorns Grow Australia surveyed 1000 people and found 70 per cent suffered depression and anxiety because of their money worries, while 76 per cent had trouble sleeping for the same reason. More than half assigned physical health problems to money worries.
In 2013, University of Southampton researchers Thomas Richardson, Ronald Roberts and Peter Elliott found links between severe unsecured debts (such as credit card debt, student and personal loans) and poor health, especially mental health by reviewing 65 previous studies.
Those with unsecured debts were 3.24 times more likely to suffer “mental disorders” than those without unsecured debt and 2.77 times as likely to have depression. They were 2.68 times more likely to be problem drinkers but a scary 8.57 times as likely to be dependent on drugs. Sadly, people with debt are 7.9 times more likely to take their own lives.
Back to the Acorns survey results, a third of Australians aged between 25 and 44 had “abused” alcohol because of financial stress, while 20 per cent coped with money worries by using illegal drugs. It did not say how many turned to prescription drugs to manage.
“The majority of studies found that more severe debt is related to worse health,” the Southampton university team found. Their research was published in the Clinical Psychology Review.
Then there’s the phenomenon of ‘debt-anger’, in which instead of getting fearful about money, people in debt get very angry. By definition, the person affected becomes stressed, and can experience damage to their relationships, feelings of isolation and despair and even weaken one’s immune system.
Australia has world-leading levels of household debt according to most measures. When debt is taken as a percentage of net disposable income, Australia had the fifth highest debt per household out of 35 OECD nations, at nearly 210 per cent of net income, in 2020.
Australia was also the worst in the Asia-Pacific region, in relation to its household debt-to-GDP ratio, according to The Asian Banker website.
Even though most of Australia’s household debt is related to wealth creation or an asset, such as a home loan (the average mortgage debt is $350,000), well over a third of Australians (37 per cent) report they are struggling to repay their debt.
In various research the percentage of Americans struggling with debt is anywhere between 30 per cent and 70 per cent. Even the smaller number is a huge worry.
Citizens of both nations – and people throughout the so-called ‘first-world’ – repeatedly cite money worries as at or near the very top stressors in their lives in surveys and studies.
The Southampton university study didn’t go into which came first – poor mental health or money problems. But the links are clear and so is the message: heavy financial stress will either make you sick, or keep you that way.
The study also didn’t go into what to do about severe financial stress – but there’s plenty of advice out there. The traditional options include consolidating debt, budgeting and financial planning, or studying or working longer hours to try and land a more lucrative role. The latter approaches can come with their own problems: the stress that results from overwork and social disconnection.
One widely praised and usually inexpensive option is to be mindful about money. Mindfulness, defined by some as moment-by-moment awareness, helps to still the mind and improve messy and negative thinking. A huge amount of research worldwide has shown mindfulness positively affects a range of mental health issues including depression, anxiety, memory loss and sleeplessness.
If you are experiencing distress in your life and live in Australia call: Lifeline 131114, Mensline 1300 789 978 or Beyond Blue 1300 224 636; regarding debt problems, the National Debt Helpline may be of use on 1800 007 007.
Financial stress a perennial reason couples split
Financial stress a perennial reason couples split.
It’s February already and in a lot of relationships that means money worries will be to the fore.
It’s well known amongst lawyers that returning to work after the holidays brings up dissatisfaction amongst couples.
The pressure of being forced together more often, especially with the added burden of home-schooling during the pandemic, has only increased tension for many couples.
The first working Monday of the year is even known as “Divorce Day” by some lawyers because of the increase in enquiries about separation after the stress of Christmas and the New Year.
Dig a little deeper and you’ll see a correlation between that stress and the bills coming in following holiday spending. A lot of it is financial stress.
Money stress has long been a source of relationship pressure.
“Arguments about money is by far the top predictor of divorce,’ said Kansas City associate professor Sonya Britt, from the university’s family studies and human services program, in 2013.
“It’s not children, sex, in-laws or anything else. It’s money – for both men and women,”
Britt, who specialises in “financial conflict within relationships” ran a study of 4500 couples as part of America’s National Survey of Families and Households.
It was published in Family Relations, a journal of applied family studies. The study accounted for income, net worth and debt and found “it didn’t matter how much you made or how much you were worth.
“Arguments about money are the top predictor for divorce because it happens at all levels.”
Britt also found arguments about money took longer to resolve and recover from than other disagreements and used harsher language.
Her research seems to be backed up by people who sought information on relationship therapy in Australia.
An online survey of 2050 people who visited Relationships Australia’s website in late 2015 found nearly 85 per cent thought “financial problems were likely to push couples apart”. More than three quarters of the respondents were women.
This was a big increase on the last time the counselling provider surveyed web visitors on money issues, in 2011. Back then 71 per cent thought money dramas could split couples.
The survey drilled further into why money worries might lead to separation – and the answers were varied. But several of the main causes related to stress; 25 per cent thought financial problems caused “too much stress”, while another 15 per cent answered: “a lot of people can’t cope with the stress”.
Nineteen per cent said money troubles “caused fights” and 12 per cent said such issues “caused blame”.
But the biggest single reason cited in the survey was the more diplomatic “people have different priorities/expectations”, which is another way of saying people disagree about money – presumably how much is enough, as well as how to spend and /or save it.
One finding in particular from the survey showed how mixed up couples are about money: around three quarters of female respondents reported that their male partner managed finances, exactly the reverse of how male respondents answered the question.
In other words, while everybody seems to think they are in charge of the money, nobody seems to be communicating well about finances.
This was backed up by a different set of questions Relationships Australia asked respondents in 2019 – the degree to which couples discussed finances.
Prior to making a commitment to their current of most recent partner, 56% of survey respondents reported they had not discussed how they would manage their couple finances if one of them no longer had an income.
A significant majority of women (74%) and men (69%) reported they had not discussed how they would divide their finances if their relationship ended.
“A mindful approach to money is without doubt a more successful one and a key to living mindfully is being able to accept reality for what it is – good, bad or neutral,” said Andrew Fleming, CEO/Founder of Financial Mindfulness.
It’s not a great leap to see that this can stretch to couples keeping secrets from each other about their finances.
“When we can accept reality, we can admit where we are at with money, not be so intimidated by it and we can discuss financial problems within relationships too.”
“That takes a lot of stress out of relationships, and everyone benefits from that.”
Want to avoid financial stress: ask yourself these questions
Want to avoid financial stress: ask yourself these questions.
There’s never been so many options for accessing cash quickly as there are today, and that’s very appealing around this time of year – especially this year, with many more people unemployed as a result of the ‘pandemic induced’ economic disruption.
Nobody wants to be in financial stress (or distress) or have money worries. But sometimes a quick fix becomes a long-term problem if we ‘go there’ over and over.
We all know the quick fixes to cashflow problems available today. On top of the huge success of ‘buy now, pay later’ products like Afterpay and ZipMoney, people are increasingly signing up to so-called ‘pay-on-demand’ services that – for a fee of around 5 per cent – will let you draw cash against your pay before it is deposited into your bank account.
New financial services arise (and succeed) because someone has identified a need and met that need. That’s fair enough. Financial products and services that give people flexibility and help them out of a squeeze are welcome. There are a lot of positives when one considers all the angles and different perspectives.
These new services, referred to above, are sign of the times. They also tell us some important things – that many people basically live paycheck to paycheck and that there is a groundswell of support for the idea that employers shouldn’t pay in arrears and instead should pay as people earn.
We need to be clear – and we urge mums, dads and singles to be clear about what these services really are: they are loans that have to be repaid.
As a rule, we cannot endorse the regular use of fee-based short-term loans to get by every week.
Here are at least four reasons:
- Paying regular fees for basically spending your own money is just adding another debit to your account, and it’s not insignificant (Think about it: how often would you pay $15 to withdraw $300 from an ATM?)
- The second reason is there’s a basic truth that these service providers (let’s call them small lenders, as that’s what they are) want you to ignore: spending more than you earn every week is a dangerous habit.
- Financial stress. See points 1 and 2.
- We believe that with ‘mindful spending’ – spending done with full awareness of your financial position and your needs and wants – you can reduce, and avoid, damaging financial stress.
The good news is that by using awareness and acceptance of your financial position, you can feel much more in control of your personal finances and your week-to-week expenses.
With a healthier financial mindset – where you aren’t experiencing the symptoms and impacts of financial stress – short-term loans become what they were designed for: a useful solution to an emergency cash flow problem.
Here are some questions to ask yourself if you regularly use ‘buy now, pay later’ services like Afterpay, and have used – or want to use – ‘pay on demand’ apps and services.
- When was the last time you looked at your credit card statement? If you are avoiding it, why is that?
- How many ‘buy now, pay later’ accounts do you have?
- Do you keep track of the total amounts owed? Are those totals increasing over time?
- How often do you use buy now pay later services?
- What do you buy using these products? To solve emergency money issues, or for normal living expenses? (Note: clothes and haircuts are rarely an emergency)
- How often would you use ‘pay on demand’ (getting an advance on your pay) apps and services?
- What would you buy with the money you receive from ‘pay on demand’ services?
- Is your overall financial position better or worse after using ‘buy now, pay later’ and/or ‘pay on demand’ services?
- What would it really take to improve your overall financial position?
The real cost of gift-giving: financial stress – part 3
The real cost of gift-giving: financial stress – part 3.
In ancient history giving gifts began as part of the ritual of worship and over the centuries it has morphed into a show of appreciation. In the age of mass consumerism gift-giving has become an expensive habit too, especially in holiday season.
While most of us worry about money to some degree, gift-giving has costs we usually bear without much complaint; giving is a respected value, it feels good and it’s accepted as a cultural obligation. Besides, we have special labels for people who don’t play along with gift-giving: who wants to be labelled Scrooge or the Grinch?
Let’s take a look at one specific festive custom: the excessive expectation everyone will have a present for everyone else who arrives on Christmas Eve or Christmas Day – whether they are young nieces and nephews, twentysomethings, cousins, partners of relatives.
Even exes in attendance get a gift. It’s probably no exaggeration to say half the gifts exchanged in these situations are politely put in a cupboard when they arrive home – and forgotten. The obligation to provide a pile of gifts – of appropriate value – across extended families can add tension to what is often already awkward family gathering. It almost certainly adds to seasonal financial stress.
Never mind that in the affluent West that many of us take months to repay debts incurred at Christmas time and in Black Friday and Boxing Day sales. So, at least reasons to buy expensive gifts are out of the way after Christmas, right?
Wrong. February and March tend to have the most weddings in Australia, which means wedding costs and wedding gifts for guests. February and March also have a lot of birthday spending, as those are the second and third most common months to have a baby. From there, the retail calendar kicks in: with gift-giving the norm in Easter, then for Mother’s Day – not to mention birthdays and anniversaries for the rest of the year.
Another type of gift-giving that is anecdotally growing is also worth noting: buying ourselves gifts and treats for our birthdays or just ‘getting through hard times’ such as COVID, often just because we see appealing items in big seasonal sales.
So, how can we avoid the financial stress that comes from adding new debt to existing debt, and the symptoms and impacts of that financial stress?
Some of us at some point have completed a budget (even if we can’t always stick to it) and humble enough to get financial advice to try and do better. We are not clueless.
But without an overhaul in our thinking, choosing gifts will remain stressful for many people. There can be a huge array of options and a nagging temptation to show our appreciation – for ourselves and others – by over‐spending.
If you have tried every trick to rein in spending on gifts it could be time to try something new – using mindfulness with your finances, also known as financial mindfulness. Mindfulness is described as moment‐by‐moment awareness.
Take the example of a teenager who “needs” for a sleek iPhone 10 as a gift, if not the newest flagship Apple phone, an iPhone 12 Pro Max. An iPhone 11 Pro Max will set you back at least $750 and a Pro Max 12 starts from the mid $1500s and rapidly goes up beyond $2000.
“We all have urges that we really, really want a new gadget like an iPhone, including me,” says Financial Mindfulness CEO and Founder, Andrew Fleming.
“It feels good to take it out of the box and start using it. The feeling of having the latest technology makes you feel cool and the children love it. Like anyone else I’ve learned those feelings don’t last long and they certainly don’t improve your life, despite what the ads tell us.
“Always having the latest iPhone won’t make me or anyone else truly happy. In fact always giving in to buying the new iPhone – or the latest of any brand of device – will actually decrease happiness because it will probably contribute to increased financial stress.”
The reason those sentiments feel uncomfortable is because they’re true. Researchers from Washington University and Seoul National University, Joseph Goodman and Sarah Lim, found that giving ‘experiences’ increases the happiness of recipients more than material gifts – even if people are not socially close.
Hence the boom for online companies selling “experiential” gifts: in Australia, RedBalloon; in the UK, Red Letter Days and in the United States, retailers like Cloud 9 Living and Great American Days.
But focusing on experiential as opposed to material gifts is unarguably only half of the answer.
While the research shows a hot‐air balloon ride or chocolate‐making course should satisfy the recipient more than boxed gift wrapped with a bow, if you try to please someone with the dollar value of your gift your debt problems could get worse and that is undeniably a problem.
Ever looked at the cost of sky‐diving, rodeo‐riding or maybe cage diving with sharks? You will spend hundreds, if not over a thousand dollars on these.
Financial stress is irrefutably linked to health problems like depression, anxiety and sleep disorders so it’s not a big leap to see that the expensive gifts you buy – whether material or experiential ‐ could paradoxically lead you to feel less likely to connect with other people.
Most of us know overspending will put pressure on us, but since when did knowing right from wrong stop human beings from making mistakes?
A parent, relative or partner with poor self‐control around money will often buckle to badgering from a child, or give into a yearning to people‐please, and buy that new smartphone, tablet, a holiday or even a car.
A daily mindfulness practice will lead to a more mindful approach to gift‐giving, so we do not drift into autopilot when buying. It’s inevitable this will lead us to confront some fundamental uncomfortable truths about money. “Mindfulness helps to calm the mind and with a calm mind we make better decisions,” Fleming says.
“Sometimes it’s a better decision to treat ourselves to a book or a movie or a massage instead of the latest smartphone.”
It’s important to note mindfulness is no silver bullet – it can however help you begin to change in that area. From there we can make some deep, meaningful changes: when we are forced to face old assumptions about money.
“There’s a big mindset change some of us need to make at times like Christmas, birthdays and weddings: how much we spend on people is not automatically a sign of our value and love for each other.”
Which brings us back to gifts. You can create lasting memories with creativity and your knowledge of a person.
How about home‐made cookies baked with personal messages – each describing why you love the recipient ‐ hidden in the dough? Or a hand‐made recipe book containing meal suggestions from the recipient’s family members?
Maybe get a t‐shirt printed with the recipient’s favourite funny saying or if you have time, plan a surprise outing and put thought into favourite stops and a destination, or even fill a tall jar with inspirational quotes written and printed in different colours.
If you have lots of time, learn the guitar then write someone a song and play it for them. If you don’t have much time, spend a couple of hours hand‐writing a letter telling the recipient what they mean to you. Could any gift feel better and teach about the real meaning of value?
Time is a key resource when it comes to gift-giving; you need to know someone or learn about them to know what might make them happy. And time is valuable. Benjamin Franklin was widely credited with the unforgettable line “time is money” in 1748 (although it’s been shown to have much earlier origins, perhaps even ancient Greece).
We can spend money and time, but where spending too much money might cause you crippling financial stress, spending a lot of time only enhances relationships – especially on children – by creating last memories.
Andrew Fleming says getting our minds to a state where we can see that spending time is just as valuable as money when it comes to gifts isn’t easy. “Everyone thinks they are time-poor.
One tool I know that can really transform how much time I think I have is mindfulness. Using mindfulness when I’m spending money means I make better decisions – no doubt about it.”
