The link between financial stress and mental health issues is real, guests at our recent National Safe Work Month breakfast in Brisbane heard.
“They go hand in hand and there’s also flow-on impacts to business,” Ben Thompson, Education Manager, AustralianSuper, said.
“People who have financial stress tend to have higher absenteeism. They tend to be less productive because they’re worried about money, and they tend to be looking for an employer who’s going to look after them better.”
According to the Australian Psychology Society, financial stress has been the top cause of mental health issues for the past five years.
Meanwhile, the Clinical Psychological Review found the likelihood of having mental health problems was three times higher for those with financial stress.
Mr Thompson said surveys had shown that one in three people could not access $500 in the event of an emergency and one in two people lived from pay cheque to pay cheque.
“One of the big barriers around people getting help around their mental health and their finances is money,” Mr Thompson said.
“They’re all inter-related. A lot of people say: ‘I wish I started planning 20 years ago.’
“It’s time to get people thinking about their financial affairs earlier. If someone’s been redundant, they probably wish they had some financial education six months prior.”
Mr Thompson shared four tips to help people manage their own financial wellbeing.
“Understand where your money is going,” Mr Thompson said.
“This can be difficult since we live in a time where we are bombarded with so much information. We only have to turn on the TV to see what we are missing out on or scroll through social media to see what everyone else is apparently doing.
“Think about spending consciously and forming a budget.”
Understanding your own credit
“People don’t accrue financial products for fun,” Mr Thompson said.
“They accrue them either because something unexpected has happened or they’re in crisis. You only have to think about when someone takes out a credit card to replace a fridge, then something else happens. There's that spiralling effect.
“Credit can play a really important role in your life, but it can also work against you.”
Check your current providers
“It’s important to understand where your money is going,” Mr Thompson said.
Take control of your super earlier
“When I was a financial planner, too often I would sit down with a couple and say: ‘How can I help?’
“And quite often they would hand over unopened envelopes. Those unopened envelopes were super statements. If it was a couple, they would often have two or three unopened envelopes and typically they were in bad funds, and they were paying multiple insurances along the way.
“They were difficult conversations and in reality, I knew they were retiring with half the amount of money they could have had.”
So, how do you take control of your super?
Following these five steps will help.
Compare and choose
“In many senses, the industry has grown up a lot so it’s a lot easier to compare super funds,” Mr Thompson said.
“It’s a lot more transparent so you want to be in a strong-performing fund with low fees. Make sure you’re aware of the insurances within the fund and you’re not paying too much for those.”
“The ATO is doing a lot of work these days where they are actively reuniting people with their lost super accounts,” Mr Thompson said.
“New legislation called ‘stapling’ is coming. It means your super fund will follow you from employer to employer as opposed to you accruing super funds along the way.
“Consolidation is always a key consideration. You don’t want to be paying multiple fees, for potentially multiple insurances, which all eat into your retirement wallet.”
“Although cashflow may be tight for many people given the pandemic, it’s important to let people know that there are different options with regards to building their super,” Mr Thompson said.
“Make them aware that they do need help and advice and to take advantage of the different tax savings available through those different strategies.”
“A lot of people aren’t even aware that they have insurance within their super account,” Mr Thompson said.
“Within super, [insurance] is a really cost-effective way to protect you and your family. What I’m seeing is a lot people who may have missed large chunks of work who don’t have income coming in. They fail to realise they have income protection in their own super account.
“Also, make sure you check your beneficiaries.”
“If you are in a good super fund, make sure you stay with that super fund throughout your working life,” Mr Thompson said.
“When you do retire, be aware that you have options to convert your super from Phase 1 into Phase 2, which allows you to pay yourself an income and take out extra lump sums, if needed.
“A lot of people get to retirement and they’re so happy that they can get their hands on their super that they withdraw the lot. They put it in a bank account, they start earning minimal interest and if it’s a large sum of money, they’re paying tax on that.
“These are the important things that anyone can do during their working lives to have a much better retirement outcome, which means more options in retirement.”
Mr Thompson said there were four factors to consider in retirement.
Sea change? Tree change? Any physical challenges that will require you to modify your home?
Physical and mental.
“It’s important to have security in retirement and super is a fantastic way to ensure that,” Mr Thompson said.
“It’s important to put money away for tomorrow to ensure you have options for retirement.”
“When people retire, they often leave their networks behind,” Mr Thompson said.
“Whether they had all their social networks in their working lives or whether they found a sense of self-worth through their career, it’s important to plan for what you’re going to do in your retired years and where your support networks are going to be.
“I’ve seen scenarios where people have dreamed about a sea change and all of a sudden, they retire, go to the beach and realise all their support networks are back where they lived.
“These are important considerations.
“Most people, particularly when they’re about to retire, focus purely on the wealth element. ‘Do I have enough money to retire?’
“What a lot of people fail to plan for is what they’re actually going to do in retirement.
“Again, in my financial advice days, I’d sit down with a couple who were retiring and ask: ‘What are you going to do?’
“They’d look at me and say: ‘We’re here to sort out our finances.’
“And I’d say that’s the easy part; I can crunch the numbers and work out how much you can live on, but what are you going to do with all this newfound time?’
“Quite often I’d ask the bloke who was sitting there with his arms crossed and he’d say: ‘I’m going to clean the shed.’
“My next question was: ‘How large is the shed? Is that going to take you three days, a week, a month?’
“It’s really important to think of the holistic side of financial planning.
“The conversation has started but there’s a lot of work to be done. Part of the solution is financial education.”
Wendy Larter is the Senior Content Writer at Ai Group. She is a former journalist with more than 20 years’ experience as a reporter, features writer, contributor and sub-editor for newspapers and magazines including The Courier-Mail in Brisbane and Metro, News of the World, The Times and Elle in the UK.