Dreams Crushed by Cost-of-Living Nightmare

90% of Australians are making sacrifices to their financial dreams as the cost-of-living nightmare is killing household budgets, according to a national survey of 1,000 adult Australians conducted by PureProfile. The survey demonstrated a chasm between the financial aspirations of different age groups.

The survey revealed the increasingly high cost of living has forced 86% to rethink their financial goals with a view to making significant sacrifices, 35% admitted to making significant sacrifices to their financial aspirations as inflation and interest rate hikes are killing household budgets.

Millennials and Gen Xers were most likely to rethink their financial goals, with 40% from these groups reporting that “everything’s changed” in the face of rising affordability issues.

Baby Boomers (27%) less likely to report significant changes to their financial aspirations in the current climate.

There were significant differences in the aspirations of Baby Boomers and younger Aussies, with home ownership more likely to be ranked as the number one financial aspiration by 18–55-year-olds (52%), while those aged 55-years and over were more likely to rank a bucket list holiday or experience as their number one aspiration.

Baby Boomers reported wanting a more comfortable retirement than their parents before them, with holidays on top of the agenda. Approximately one-third of those aged 55-years and overstated that they wanted a more comfortable retirement when comparing their financial aspirations to those of their parents, with 20% saying they would like to travel more.

The research also included other notable findings about Australia’s financial aspirations and concerns, such as:

Debt

Financial anxieties are literally keeping us awake at night with 50% of adult Australians admitting that money worries are causing them to lose sleep. Women were more likely to be feeling the stress of money worries, with a staggering 60% of women saying finances have left them lying awake at night.

Overall, the survey found that the explosion of household expenses and mortgage and rising house prices was the second and third highest reasons for anxiety.

Home Ownership

10 consecutive interest rate rises have failed to deter Aussies from the dream of owning their own home. The survey found that 4 in 10 of 18-24-year-olds say home ownership is more important to them than their parents’ generation.

The survey comes as our mortgage affordability index reveals that the repayment burden on households in Sydney is sitting at levels not seen since the 1990s when the Reserve Bank’s (‘RBA’) cash rate was 16% p.a.

Financial Security

Financial security means a lot of different things to different people – with half of Aussies surveyed said they would need over $1 million in the bank to feel financially secure.

However, over a quarter of 18–24-year-olds revealed they would need less than $150,000 in the bank to make them feel financially secure – despite the fact that home ownership ranks as a top three financial aspiration for over two-thirds of the cohort.

Savings are Golden.

Another trend to come out of the research was that Aussies are focusing on saving, with 3 in 10 admitting that one of the key financial goals to have changed in the last 10 years is a greater emphasis on saving. This is equal to those who admitted home ownership is more important to them now.

The data found that parents were more likely to prioritise saving for the future, home ownership, and their children’s education. Aussie parents stated that since having children their priorities have changed, with saving for the future more important than home ownership and saving for children’s education coming in at third.

Despite the cost-of-living crisis, we can all still pursue our financial aspirations by taking a few simple steps to improve their financial position.

Engage with a financial adviser to prepare a realistic and measurable plan to achieve your aspirations that includes short, medium, and long-term goals. Your goals may be purchasing a home, income in retirement or a combination of the two.

Secondly, with the support of your adviser, take control of your expenses by creating a supportable budget, cutting back on extravagant spending and paying down any high interest debt on credit cards.

Subsequent to this, save and invest for the long-term by setting aside a portion of your income for an emergency buffer and your financial aspirations. We suggest having 6 months of salary set aside in an emergency buffer. This buffer will help in case life takes a turn for the crueller outcome, such as losing your job, disability, or another calamitous situation.