Overcoming the impact of financial stress
Helping clients identify financial goals and helping them create a plan to achieve them is significantly more likely to alleviate financial stress, Vicki Doyle writes.
Financial stress is now a fact of life for more than one in four Australian workers, with new research showing that confidence in our personal financial situations has continued to decline in the past two years.
The research, undertaken by AMP for its 2016 Financial Wellness report, indicates that only 48 per cent of Australians feel confident in their financial position in 2016, compared with an already low 54 per cent in 2014.
This lower confidence is despite an increase in the amount of disposable cash held by Australians, which has risen 6.3 per cent over the past two years.
These statistics paint a fairly sombre picture for the state of the nation when it comes to personal financial security. At the same time, it also reiterates the important role of Australians taking control of their finances, seeking support and accessing the right tools to help them plan for a brighter future.
Financial stress is an issue we need to address, because we know it has significant and multifaceted ramifications, not only to the health and wellbeing of many Australians, but on workplace and business productivity.
A staggering 2.8 million employees in Australia are now under financial stress, representing one in four workers.
Those suffering are more likely to be unable to work due to stress-related sickness, with the workplace productivity cost impact estimated to be $47 billion in lost annual revenue.
Delving deeper into the research findings illustrates just how significant and wide-ranging the impact on productivity is.
Financially stressed employees lose on average 6.9 hours of productive work per week and, on average, are absent 1.3 hours per week due to stress-related sickness.
Interestingly, stress is highest among workers in accommodation and food services, with 35 per cent of people these industries feeling the financial pinch. Those in the healthcare and social support industries are at 32 per cent, while those in administrative services are not far behind at 31 per cent.
The cyclical nature of mining has taken its toll, with its number of financial stressed employees almost tripling from nine per cent in 2014 to 26 per cent in 2016.
Brisbane is our most financially stressed city, with 30 per cent of its workers stressed. This was followed by Adelaide (25 per cent), Perth (23 per cent), Sydney (20 per cent) and Melbourne (19 per cent). Darwin and Hobart were the least financially stressed at 18 and 16 per cent, respectively.
From a gender perspective, women are more likely than men to experience financial stress, at 30 per cent, compared to 19 per cent of males. And, unsurprisingly, single-parent families are at higher risk at 36 per cent, compared to dual-parent households at 21 per cent.
Overcoming the stress
The drivers of financial stress should not hold any surprises.
Bad debt, mortgage repayments, a sense of not adequately supporting family and missing bills are all identified by the research as the main drivers, as is the need to save for retirement, particularly among employees aged 50 years and above.
In fact, concern about retirement is the main cause of financial stress for one-in-five financially-stressed employees aged 50 to 59 and almost a third of employees aged 60 or above.
While the data is concerning, there are things we can do differently.
"Goals" is a word increasingly discussed across the financial services industry, with good reason.
We know from our customers at AMP, that those with clearly defined financial goals and a plan to achieve them, irrespective of their affluence, age, gender, location and type of work, are significantly more likely to have financial peace of mind.
You don't have to look hard at popular culture to get a wider sense of the value of goals.
Sporting legend, Muhammad Ali, used to say that goals were what kept him going.
Artist Pablo Picasso famously said: "Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success".
Countless others, in all walks of life, emphasise the value of goal setting.
Irrespective of the desired outcome, they provide a sense of purpose and are the foundation for achievement, be that sporting victory, a work of art, or reducing financial stress.
The financial goals identified as most relevant for AMP customers correlate closely with the drivers of financial stress.
Our customers have told us they want to be debt free as soon as possible. They want to live the retirement they aspire to. They want financial clutter removed from their minds and their finances simplified, and they want their income protected in case an unplanned life event uproots their ability to work.
Of course, everyone's circumstances are unique. So not everyone's goals will be the same.
The important thing is that the goals are identified and a plan of action is developed and implemented to achieve them, and it is the second two components where many of us fall down.
Helping Australians to reduce their financial stress
While the majority of people, at around 80 per cent of the workforce, already have financial goals in mind, only 18 per cent of these people have a defined plan to achieve their goals.
We know the real value financial advisers provide in helping Australians to bring clarity and shape to their financial goals. And those who receive financial advice are more likely to achieve better financial outcomes.
To help alleviate financial stress in the workforce, we need to consider more ways to encourage employees to use financial tools and seek support to help them take control of their finances, be debt free and plan for the retirement they have always aspired to.
Employers can also be a powerful influence by supporting financial wellness in the workplace. This can be through encouraging employees to improve their skills and knowledge to manage their finances.
Providing support during life's key moments, such as buying a house or starting a family can also make a significant impact on financial wellness.
So the challenge for many of us in the financial services and superannuation industry is how we can support more Australians to recognise their financial stress triggers and seek the right help to plan for a better tomorrow.
Vicki Doyle is the director for corporate superannuation at AMP.
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