Debt Free Living and Limited Funds for Retirement

By: Rosemary Johnston- Thursday, April 18, 2013

The latest quarterly St George – Melbourne Institute Survey of Household Financial Conditions was released on April 1st and shows some interesting facts about the financial management skills of Australians.

  • Over 60% are paying 0-10% of their after tax salaries to service debt.
  • Over 40% are living debt free
  • Over 45% own their homes outright, ownership increased from 40.2 to 45.9%
Given 60% have no debt including many who own their own home they must have learnt to live below their means to be able to afford to pay down their debt.  This is great news.  However what are they doing with their money now?  How are they using it to creating wealth for the next part of their lives – their retirement?  Most of them expecting to live a similar life style without personal effort and seem to have the blinkers on about their reality.
  • The preferred savings vehicle was money in the bank up from 83.6 to 87%.
  • The preferred reason to save was a holiday.
  • Those holding shares rose from 33.4% to 37.3%
  • Those considering investing in real estate was down from 53.4 to 51%
They know how to save as that is how they paid off their home loan.  In this next chapter of their lives how they use their money will be critical to their success.  Savings in the bank are safe but produce low returns that require them to have more funds deposited than most can save in a life time.  Putting money into shares is higher risk and usually generates higher returns, however without leveraging through borrowing most won’t succeed.  Property is familiar and they are comfortable to borrow.  This is their preferred investment and yet many are still retiring without the necessary funds.
Current property services are vary widely from spruikers with a focus on their own interests to professionals with education working in the client’s best interests.  We need a strong and regulated professional property investment advice sector they can trust to enable them to succeed.