It’s possible to have a six-figure salary and still suffer from financial stress, but awareness is growing about the importance of tracking expenses and promoting financial health.
Financial wellness advocate Clayton Daniel is the author of Fund Your Ideal Lifestyle, a book inspired by his experience as a financial adviser. Just over 12 months ago, he sold his planning business, which was built around a lifestyle framework that helped everyday Australians improve their financial wellbeing.
“It’s not more money that makes life better; it’s better money management,” Mr Daniel told The Adviser's sister site Wellness Daily.
Adding, he said: “Money stress is not always about not having enough. A lot of the time, money stress is just thinking about it too much. For example, someone could be on $150,000 a year, but if they have a lot of fixed costs they are not tracking, then the majority of their money after tax takes a scenic journey through their bank account but really belongs to everyone else. People on decent salaries have financial stress.
“I had lunch with someone last week who is on $300,000 a year and is broke. It’s actually quite common.”
Mr Daniel said that the best way he has found to improve financial health is to think about money less and have technology take care of it.
“As long as you are clear with what you want to achieve, you can set most things up on automation.”
After experiencing his own challenges, Sydney-based entrepreneur and former CFO Andrew Fleming decided to launch an app that combined mindfulness with financial management.
As the founder and CEO of Financial Mindfulness, Mr Fleming is developing this financial stress reduction program based in Sydney’s Tyro FinTechHub.
Financial Mindfulness conducted its own research by commissioning CoreData to survey 1,000 Australians in July 2017. The main objective of this research was to understand the prevalence and severity of financial stress among Australian consumers.
The results showed that financial stress leads to drug and alcohol abuse, relationship conflict and breakdown, physical health deterioration, isolation, sleep loss, and severe emotional and physical discomfort around making financial decisions.
More than 66 per cent of those suffering financial stress said that money worries directly led to feelings of fear, anxiety and/or depression — three times higher than people unaffected by financial stress.
“When someone is stressed, they can’t take in information correctly because they are in panic mode,” Mr Fleming said. “The key is to use mindfulness to get people into a calmer state.”
In addition to mindfulness techniques, the Financial Mindfulness app has tools around financial education, goal setting and positive reinforcement.
“We also have tools to help you find your financial personality. The goal is to help you change your poor financial habits,” Mr Fleming said.
“When people are on autopilot, they medicate their feelings, like impulse buying with a credit card. At this time of year in particular, at Christmas, people have a habit of ignoring their credit card situation. They spend without thinking about the consequences. They are not being financially mindful.”
Melbourne-based Tribeca Financial is part of a growing number of planning firms that have refocused their energies towards financial wellness. Chief executive Ryan Watson said that the group came across the philosophy of financial wellness about two years ago.
“Money is only as important as the things it allows you to do and how well you enjoy that time with your friends and family.”
Before taking an appointment with a client, the group conducts a “pre-discovery” process. According to Mr Watson, this is where the adviser finds out what the client’s financial foundations are — their income, expenditure, assets and liabilities.
“Australia has a bit of a ‘keeping up with the Joneses’ piece. Everyone thinks that their friends and neighbours and coworkers have their lives sorted,” Mr Watson said.
“We try and get rid of that attitude, help clients identify what their long-term goals are and get them on a path towards running their own race.”
Are you a spender or a saver?
According to author and financial wellness advocate Clayton Daniel, the population is basically split equally into two camps: 50 per cent are spenders and 50 per cent are savers.
“You’ve got extreme spenders, those in $100,000 credit card debt regardless of their income,” Mr Daniel said. “Then you’ve got a moderate spender, someone with around $5,000 to $10,000 on their credit card. Then you’ve got someone who doesn’t get into credit card debt, but they will just spend everything every week.”
The other 50 per cent, the savers, can also operate from unhealthy extremes. Mr Daniel said that a fair chunk of people save their money for a particular spend, such as buying a car or going on a holiday.
“Then you have 3 per cent of people who barely spend anything,” the author said. “So, you’ve really only got about 20 per cent of the population who are saving for the purpose of investing.
“It’s all about knowing where you sit on that spectrum and then compensating for it. If you save everything you earn but are living a pretty average lifestyle, you can still be in stress just by over-saving.”