Can we think clearly under financial stress?


A long-standing career in financial counselling prompted UniSuper member and University of Canberra lecturer, Gregory Mowle, to investigate the role financial literacy plays in decision making.

Mr Mowle spoke to us about the standout themes of his research so far.

A contract role as a debt collector early in my career quickly revealed that consumers struggling with debt were often unaware of their options. So I took the knowledge I’d built up in credit and debt recovery to roles as a financial counsellor at Lifeline and The Smith Family—and subsequently, to a consumer credit education role at the Australian Securities and Investments Commission.

Six years at Lifeline was incredibly satisfying but also challenging. I assumed I’d be asked to create budgets or for advice on managing debts etc. Instead, people simply talked about life. In many cases, the financial stuff was just an aside. So it became hard to know what came first—money problems led to relationship and family problems or vice versa.

Listening to people talk about their lives helped me determine the best approach for tackling their debt.

For example, if I was seeing someone considering bankruptcy, it might become clear that bankruptcy wouldn’t solve anything for them, as they’d be straight down to the high-cost lenders a month afterward.

So it became obvious that listening to and understanding a person’s story is so important. This has really flowed through to the research I’m doing now. You learn that it’s never as simple as saying, ‘well if they just learned how to budget, things would be fine.’ People’s lives are very complex.

My research into why people turn to payday lenders and bankruptcy, has unveiled some common triggers of financial stress.

A lack of stability in employment or in employment income, the increasing casualisation of the workforce and prevalence of part-time and contract work makes it very hard to plan or budget. It’s very challenging to put money aside for bills and to tell creditors, ‘this is what I can afford to pay every week to catch up’, if you can’t forecast your income. 

Financial problems are often caused by relationship breakdown.

Around two thirds of my financial counselling clients were female, a statistic backed up by other research which shows that men—particularly Australian men—are very reluctant to ask for help. I saw a lot of single mothers who were receiving minimal or no child support, and women who couldn’t contact a former partner due to domestic violence situations.

Culture can also influence financial decision-making.

Australians often have a ‘she’ll be right’ or ‘it won’t happen to me’ attitude. At some stage in life, most people hear or read that, if you’re in trouble with debt, financial counselling should be your first port of call. It’s free and independently provided by community-based organisations such as Lifeline. But often when people hear these messages they’re not in debt, so they don’t take it in. Consequently—whether it’s one or 10 years on—when they get into debt, they can’t recall that message and think, ‘what do I do now?’

The stress that comes with bankruptcy weighs heavily on people’s capacity to make sound financial decisions.

My interviews showed that, when the threat of being sued or someone knocking down their door was consuming them, people weren’t thinking clearly. So they took the wrong option or they simply didn’t know what to do. Many of my interviewees did what people commonly do nowadays—they Googled ‘trouble paying debts’. Of course, what comes up is debt management companies. Many of the bankrupts clicked on these ads, assuming if they came up first on Google, they must be legitimate. Some paid these companies $1,000 to complete their bankruptcy papers—$1,000 they didn’t have, for services performed freely by financial counsellors. 

The effects of bankruptcy on mental health was a very strong theme.

The stress of not knowing what was going to happen, affected their work, filtered through to their household, their concentration. And rather than feeling relief post-bankruptcy, most felt great shame, embarrassment and stigma 
Similar themes emerged with the payday lending clients. The stress of constantly being behind with bills filtered through to their relationships and their children—who get a real sense of being marginalised. 

While public policy seems to assume that people make financial decisions based on their financial literacy, my interviews suggest it’s not about that at all

It’s generally an income-related issue and also a time problem.
I’ve discovered that while people want to learn more about money, they don’t have time to trawl through brochures and websites. So they’ll often short-circuit this issue by asking family and friends for advice.

Almost 70% of those I interviewed revealed that family and friends had recommended their payday lender.

Turning to family and friends is ok if you’re asking for coffee recommendations. But financial decisions are complicated, so you’ve got to know what you’re talking about. My concern is that if someone gets their advice from family and friends, it means those people are doing the same thing, and we end up with a domino effect.

Struggling with your finances?

Contact Lifeline’s free financial counselling helpline at 1800 007 007. 
Contact UniSuper Advice to discuss your options.