The Reserve Bank of Australia (RBA) has increased rates for the twelfth consecutive time amid rising inflation concerns, increasing apprehension among Australians about their ability to meet expenses and financial commitments, with almost two thirds already struggling to meet their financial commitments according to new data released today.
New data from Money.com.au reveals that 63 per cent of Australians have encountered challenges in making ends meet over the past 12 months, with 17 per cent struggling to pay bills on time and 11 per cent unable to meet their financial obligations altogether.
The findings were derived from a survey of an independent panel of 1005 Australians, commissioned by Money.com.au, a leading finance platform that provides consumers and businesses with access to car, personal and business loans through its innovative Money Matchmaker® technology.
The full survey results including state and age breakdown can be found here: Money Matchmaker® | Are Aussies struggling to pay their bills?
The study also looked at ways Aussies are trying to alleviate financial pressure during this time, with 78 per cent of respondents admitting to taking some action.
The most popular is budget tracking with more than half (58 per cent) respondents stating that they engaged in this practice.
A quarter (25 per cent) of Australians have switched their energy, gas, or phone providers to save on bills, and 23 per cent have changed insurers to reduce their premiums.
Despite mortgage rates sitting at an 11-year high, the study found that only 9 per cent of respondents have consolidated their debts into a lower-interest loan.
Licensed financial adviser and Money.com.au spokesperson Helen Baker recommends those worried about their finances should review where they are spending their money:
“Recent announcement by the RBA will do little to alleviate borrowers’ worries. Anyone concerned by their financial situation should do a quick health check of their spending and develop three spending plans: the first is the absolute minimum you can spend to get by, while meeting all your debt payments, the second is the ‘living your best life’ plan – without going too far beyond your means -, and the third is a compromise between the two. By identifying these, it’s a lot easier to see what lifestyle choices can be adjusted depending on your financial situation.”
Older Australians report being less affected by economic pressures.
Respondents aged 50 and above were least likely to have struggled paying expenses in the last 12 months. Almost half (49 per cent) of the cohort said they had met all their expenses, without finding payments challenging. This compares with 31 per cent of 31-50-year-olds and 27 per cent of 18-30-year-olds who reported the same.
Helen explains that older Australians experience less financial pressure because they often have smaller loans to pay and more assets built up over time:
“Since housing was more affordable 10-20 years ago, their home loans were smaller to begin with. As a result, even with a $100k mortgage at a 5% rate, they are still better off than younger homeowners who have recently taken out $700k loans at the same rate.”
NSW residents struggling to pay bills but are seeking ways to manage their money.
By State, NSW residents seem to be feeling the pinch the most with some regions experiencing a 24 per cent increase in their utility bills.
The data showed 66 per cent of NSW respondents have been struggling to pay expenses.
This compares to 55 per cent of South Australians, 61 per cent West Australians, 62 per cent of Victorians and 63 per cent of Queenslanders.
NSW respondents were also most likely to have attempted to alleviate their financial distress; with 80 per cent choosing one or more actions to improve their monetary situation, compared to 69 per cent of West Australians, 78 per cent of Queenslanders, and 79 per cent of South Australians and Victorians.
Helen says: “Even if you’re not yet affected by financial pressures, it’s better to get ahead of the game and cut costs where you can. The priority should be cleaning up, or at least controlling, your debt. It’s tempting to rely on a credit card if you’re feeling the pinch, but always check whether you have the lowest rate available, and make sure you can meet payment obligations.”
Tips to ease financial stress
Helen has shared with us some useful tips to help ease financial stress.
- Get control over what you can get control over. It’s easy to get overwhelmed and let bills or repayment notices pile up, but don’t put your head in the sand or it will get worse.
- Don’t be afraid to pick up the phone. Talk to your bank, mortgage broker, or even a financial adviser if you are having issues. They are expecting your call and have a variety of solutions to assist.
- Assess what your top three spending commitments are – for most, it is usually their rent or mortgage, insurances, and transport. But it may actually be your “fun” money which is taking up a lot of your spending. So see what you can cut out from the biggest portions of your budget: saving 10% on the bigger spends is generally better than saving 20% on a small expense.
- Print out all your bills so you can view them side by side and see whether any bills can be combined. Take note of all their payment due dates and add to a digital calendar, that way you can set up alerts which let you know a bill is coming up in the next few days, helping you avoid the shock factor.
- Look at injecting the front end. Hospitality and many organisations are looking for staff. Can you do a shift a week and use that to target debt or other provisions?
- If you have a car loan, could you sign up as a driver for a ride sharing app? You can use it to pick up passengers along journeys you normally travel and offset your expenses like petrol, rego, insurance and tax deduction.
- Be considerate when food shopping: 15% of food is wasted, so make sure you use up leftovers and shop in season. Take a calculator when you go shopping and add up along the way.