Our financial priorities tend to change as we move through life
Over the past five years, Australians have had greater disposable income and are spending more, while consumer confidence is growing1. And in line with these market metrics, AMP’s Financial Wellness Index has shown a marked improvement, with more Australian employees feeling financially secure in 2018 compared with previous surveys.
Source: Financial Wellness in the Australian Workplace, The Behavioural Architects, Report 2018.
AMP commissioned global insight and research consultancy, The Behavioural Architects, to undertake the research for Financial Wellness in the Australian Workplace. The results were gathered by online interviews with over 2,000 Australian employees. The ensure the research was reflective of employed Australians, the results were post-weighted against data from the Australian Bureau of Statistics (ABS). The Financial Wellness study is conducted by AMP every two years and has been running since 2014.
But AMP’s 2018 Financial Wellness Index shows there are still 2.44 million employed Australians feeling moderately or severely financially stressed. Levels of stress usually depend on where you live, what industry you work in, what family situation you’re in and - not surprisingly - how much you earn. Our 2018 survey results show:
- if you live in Brisbane or Adelaide you’re more likely to be financially stressed than if you live in Sydney or Perth
- if you work in the transport, support services or food service industries you’re more likely to be financially stressed than if you work in mining, IT or public administration
- if you’re part of a single parent family you’re more likely to be financially stressed than other Australians
- and if you earn between $50,000 and $74,999 you’re more likely to be financially stressed than if you earn between $100,000 and $149,999.
But another major factor is your stage of life. Your attitude towards your finances is likely to change as you move through life, from renting to home ownership to property investment, from a new relationship to parenthood to becoming a grandparent, from starting out in your career to holding down a big job to downsizing after years of hard work.
Dealing with financial stress
With all the pressure to get established in the world, it’s perhaps surprising the 2018 Financial Wellness Index found only one in five Australians under 30 is financially stressed.
And for most of us, stress levels tend to increase as we get older and our commitments increase, unless we’re lucky enough to be a higher income earner.
Then as we start to approach retirement stress levels tend to decline, as our financial commitments ease off before falling further still in retirement.
Source: Financial Wellness in the Australian Workplace, The Behavioural Architects, Report 2018
The good news from the 2018 Financial Wellness Index is that only 7% of Australian retirees aged 65 or over report being stressed about money. So if you’re feeling the pinch earlier in life there is light at the end of the tunnel. But that’s cold comfort if you’re in the thick of it with the kids, mortgage and bills to pay.
Let’s take a closer look at how your financial wellness is likely to change through your lifetime and what you can do to reduce your stress levels.
When you’re starting out in your career, in your relationships and in your adult life, it’s an exciting time. All roads lead open and there are so many possible futures. But with choice can come uncertainty. It’s easy to become paralysed by all the possibilities. Older generations can joke about smashed avocado breakfasts but sometimes it can feel as though it’s never been harder to get established in the world. And as for owning a home…it can feel like an impossible dream. You know you need to start saving for the bigger ticket items but it all seems a bit abstract. Meanwhile you might be on a graduate or apprentice wage and facing peer pressure to spend when you’re out and about. There’s plenty going on socially and that’s where a lot of your disposable income is going. To get on top of your finances it’s a good idea to start with the basics - budgeting, debt and saving. Get those right and you’re well on the way to establishing good habits for life. And these days you can do it all on your mobile.
- Learn how to manage your money with an online budgeting tool like AMP’s budget planner calculator.
- Start chipping away at a deposit for your first home as soon as you can, and make sure you look into government subsidies like the First Home Super Saver Scheme.
- Think about your super - the earlier you start putting more away for later in life, the more you’ll benefit from the long-term effects of compound interest.
- Set yourself achievable and realistic goals - short, medium and long term.
- Start planning to reach your savings goal sooner with an account like the AMP Saver Account.
In the thick of it
There’s no time to draw breath. You’re juggling frantically at home and at work…it’s easy to lose track of what’s going out every week, let alone the bigger financial picture. Any talk about long-term retirement planning can seem unrealistic faced with the day-to-day demands of putting food on the table and the need to pay any school fees and keep up with mortgage repayments. There could be ways to structure your finances to reduce your tax burden and increase your super contributions while still meeting your short-term financial commitments. You’re at a stage of life when planning is critical. And when it comes to money, you’re a bit more savvy these days and starting to think more like an investor than a saver. Are your investments inside and outside super working as hard as possible and do you have the right balance between risk and return for your life stage?
- Consider whether you could benefit from professional financial advice to help you work out how to structure your finances to achieve your goals.
- Look at the different ways to invest your money to build your wealth.
- Think about how you’re going to manage education costs.
- Get your debt under control by minimising bad debt and maximising good debt.
Approaching the finish line
Phew! The end is finally in sight. The kids have flown the coop, the mortgage is either paid off or at least more manageable and your financial commitments are finally starting to diminish. You’re potentially still earning a decent wage but now you have fewer outgoings you might be able to free up some more funds for your super savings. Retirement by now should be front of mind - both in terms of what sort of lifestyle you want to enjoy and how you’re planning to finance it. You can finally see the bigger picture taking shape and it’s important to make the most of these final years in the workforce to set yourself up.
- Find out more about whether a transition to retirement income stream is right for you.
- Start planning as early as you can to set yourself up for the retirement you want.
- Think about how much you’ll need to retire comfortably.
- Look at maximising your contributions into super’s tax-effective framework.
- Work out the right income option for your retirement.
Enjoying the fruits of your hard work
After worrying about money, family and work for so long you’re relishing a simpler life. You’ve worked hard to put all the pieces in place and now it’s time to kick back and enjoy a well-earned retirement. Sure, you’re still concerned about interest rates, retirement income and making provision for health and aged care. And you might be keeping your hand in with some consulting, part-time or voluntary work. But life is simpler and good health permitting there’s more time for the good things in life.
- Think about meeting the social, physical and emotional challenges of retirement by finding new ways to stay well.
- Think about how to best manage your money in retirement, including your savings, debt and estate plan.
- Start working out which retirement living option might best suit you later in retirement - whether it’s renovating, relocating or moving into a retirement village or aged care facility.
- Consider what type of pension might suit you best.
1Financial Wellness in the Australian Workplace, The Behavioural Architects, Report 2018. Intermediary Source: Tradingecomics.com; Primary Sources –ABS, RBA, Westpac.
3 biggest household expenses05 November 2019 | Manage my money We check out the three largest contributors to household spending in Australia and where people would source cash if living expenses increased. Find out more with AMP. Read more
5 life insurance questions you’ve always wanted to ask24 April 2019 | Manage my money Find out what impact your weight, age and smoking status may have on your ability to buy life insurance. This list from AMP explains the impact of these factors. Read more
Tips for when you land your first full-time job29 January 2019 | Manage my money Congratulations on scoring your first full-time job. To get you up to speed with some of the important money-related stuff, here are some tips from AMP. Read more
This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
All banking products are issued by AMP Bank Limited ABN 15 081 596 009, AFSL and Australian Credit Licence 234517.
All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.