Financial stress: how much is it costing you?
Money worries can have serious consequences. With Australians currently in more debt than ever before, Wellness Daily explores the full impact of financial stress on individuals and businesses.
There is no shortage of news out there telling us how difficult it is to afford a home, that rents are rising, energy bills are skyrocketing, childcare bills are through the roof and wage growth is basically stagnant. It doesn’t promote a great feeling in one’s gut. In fact, it can be pretty overwhelming.
The scale of our debt obsession has led the Reserve Bank of Australia to make repeated warnings throughout 2017. Our household debt-to-income ratio is approaching 190 per cent, meaning that for every dollar earned we hold nearly $2 in debt.
It turns out the majority of Aussies find it difficult to manage their money, don’t budget well and don’t live within their means.
A Galaxy Research poll conducted on behalf of Fox Symes found that 52 per cent of Australians are not confident with managing their money.
In particular, 42 per cent overall (44 per cent of women and 41 per cent of men) say they attempt to stick to a budget but are not always successful.
Breaking it down into generations, 42 per cent of Baby Boomers, 53 per cent of Gen X and 64 per cent of Gen Y said they had trouble managing their money and sticking to a budget.
Fox Symes executive director Deborah Southon believes one of the primary reasons people fall into debt is because they spend more than they earn.
“The only way to effectively manage money is to create a budget and stick to it,” she said.
“Of course, this requires discipline, but the benefits are significant. We all have financial aspirations and goals and these can be achieved through budgeting.”
The side effects of financial stress
While the prevalence of financial stress among Australians is well known, until recently there has been little information about what this pressure actually does to us.
Australian start-up Financial Mindfulness commissioned global research firm CoreData in July 2017 to question 1,000 Australians about what financial stress does to their relationships and their physical and physical and mental health.
The results show financial stress leads to anti-social behaviour, relationship conflict and breakdown, isolation, sleep loss and symptoms of depression.
Dr Nicola Gates, chief scientific adviser for Financial Mindfulness, said significant financial stress was a lot more common than she had believed.
“Financial stress is an issue that needs to be talked about in order to reduce stigma and shame, and to bring about intervention.”
According to the research, 35 cent of respondents suffering financial stress admitted using drugs or alcohol to manage negative feelings associated with personal finances.
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.
Financial stress is costing companies
Professional services giant PwC’s 2017 Employee Financial Wellness Survey found evidence of a correlation between an employee’s financial wellbeing and a company’s bottom line.
The survey found that nearly one-third of all employees are distracted by personal financial issues while at work, with almost half of them spending three hours or more each week handling personal finances at work.
“Financial stressors are not only negatively impacting employees, but are costing employers. Stressed employees are found to be less productive, take time off from work to deal with their finances, and are more likely to cite health issues caused by financial stress,” PwC partner and national practice leader Kent E Allison said.
“These findings are concerning and potentially significant for companies looking to evaluate the return on investment of a financial wellness program.”
In 2016, AMP conducted research to identify exactly what triggered financial stress and what can be done to maximise the financial wellness of working Australians.
The financial services provider interviewed 2,105 workers aged 18 and over to assess their financial state and explore common triggers of financial stress.
The results show that 24 per cent of employed Australians are financially stressed, costing their employers an estimated $47.2 billion a year in lost revenue through absenteeism and being distracted at work.
The survey identified five key triggers:
• the level of debt
• the burden of a mortgage
• the level of retirement preparedness
• the responsibility of supporting a family
• the inability to pay bills when they arrive.