More than 50 per cent of Australians have said that they fail to save at least 10 per cent of their salary from each pay cycle, new data has revealed.
According to Mortgage Choice’s Australian Financial Savviness White Paper, 53.4 per cent of Australians failed to save a decent portion of their income, with 26 per cent stating that they save nothing each month and instead live pay cheque to pay cheque.
“Alarmingly, 6 per cent said they actually spend more than they earn each month, which means they are forever trapped in a negative debt cycle,” Mortgage Choice chief executive officer John Flavell said.
“When we look closer at the data, those aged between 30 and 49 were the least likely to save at least 10 per cent of their salary.”
The survey found that 56.9 per cent of Australians aged between 40 and 49 years failed to save 10 per cent of their regular earnings. Similarly, 55.8 per cent of Australians aged between 30 and 39 were in the same situation.
Mr Flavell said that he was surprised to see such a significant proportion of Australians failing to stash money away for a rainy day or unexpected expenses.
“According to the white paper, 77.2 per cent of Australians consider themselves to be ‘financially savvy’. Yet, despite this, more than 50 per cent of surveyed respondents are also failing to save money on a regular basis,” the CEO said.
“While it’s not uncommon for people to live pay cheque to pay cheque and spend everything they earn each pay cycle, this is an incredibly risky financial behaviour.
“The reality is you cannot predict unforeseen events, such as losing your job, an unexpected medical emergency, or sudden and large bills. From time to time, unexpected expenses will rear their ugly head and Australians really need to have a financial buffer in place to pay for these expenses. Otherwise, they may find themselves having to take out a personal loan or use a credit card and this can result in added financial hardship.
“Where possible, it is critical that you consistently save a portion of your regular income if you aren’t doing so already.”
Mr Flavell added that Australians can break the cycle of living pay cheque to pay cheque by having a plan in place.
“When you receive your regular salary, don’t save what’s left over, but rather, set up an automatic transfer and send some of your money into a separate savings account,” Mr Flavell said. “Depending on your situation, you should start with a realistic portion that you can commit to, such as 10 per cent of your regular income.
“Moreover, you should track your spending by having a budget in place. Take note of where your money is going and consider cutting out purchases that you no longer need or use, such as gym memberships and eating out. Be purposeful with your spending, so instead of purchasing items as soon as they arise, hold back and wait.
“That said, while it is good to be frugal in certain areas, you should still allow for discretionary spending by giving yourself a set allowance. Make sure it is a realistic figure that is in a range that allows you to save while still enjoying your money.”
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James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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