Know Why People Are Still Living Paycheck to Paycheck

Man with financial problem

Living paycheck to paycheck is one of the worst financial situations for Australians, but that’s how thousands of them are managing their income and budget.

A 2017 UBank research revealed that 33% of Aussies ended up being penniless during payday. Many are also withdrawing as much as $31 billion from their savings annually. Several factors can force Aussies to struggle, trying to make ends meet. These include the following:

1. Income vs. Spending Growth

Inflation is constant, driving prices up. The Australian Bureau of Statistics recommended that after-tax income should increase by at least 2% to keep up with the higher cost of living. Wage hike, however, continues to flat-line. For the second quarter of 2019, salaries went up by only 0.6%.

Overall, it stuck at 2.3% annually, boosted only by a slight increase in pay in the public sector. Wage increases can also vary among states and jobs. Health care workers saw the highest pay jump at 3.3%. Victoria, on the other hand, outpaces other countries such as New South Wales in improving salaries.

2. Cost of Housing

Building a homeA mortgage is one of the significant expenses for an Australian household. Ideally, it should be no more than 28% of the budget. That’s not the reality, though.

According to the Parliament of Australia, housing affordability declined since the 1980s. From 1980 to 2015, the index for the price to income ratio increased by more than 75%. That means in Perth, a house that cost less than $42,000 in 1981 already had a price tag of $520,000 in 2016.

Most lenders now ask for a 20% down payment. Doing the math, in 2016, you needed at least $104,000 to secure a mortgage. The average median income in 2018 was $65,577.

3. Spending

Most Australians can benefit from advisory investment services in Perth due to their massive spending. According to the Australian Securities & Investment Commission (ASIC), households spent a whopping $666 billion on general living in 2016. About 12.6 billion it went to meat, nearly $15 billion to alcohol, and $20.4 billion to fashion.

They also spent more on recreation than on medical care, while pet pampering was almost a billion dollars. On any given week, eating out cost $44 while holidays were $77.

The Aussies are not only spending whatever limited income they have. They are also not saving. UBank’s study revealed that more than 33% of them didn’t own a dedicated savings account. Around 2 million had no more than $1,000 in their savings.

Almost half of the respondents didn’t maintain a weekly budget, while 60% said they didn’t have a savings plan. At least 45% of Australians would rather spend on experiences and items than on savings. Meanwhile, 22% said they struggled with trying to save money.

Wage increase is an issue that’s out of any employee’s hands. It’s a matter of decisiveness, strategy, and national policy. Spending, however, is something any earning person can control. Managing expenses doesn’t imply letting go of the things that make life more fun. Instead, it involves determining your needs and wants.