It doesn’t matter how many financial books or advisers you get help from, nobody can ever identify exactly what really matters to you and what you should and shouldn’t spend your money on. Budgeting is a difficult task and making sure you consider your values is very important, because ultimately the very reason we earn money is to be able to afford the things we enjoy.
Those conscious decisions to spend or not to spend aren’t always fail-safe, but making a budget and trying to stick to it can prove useful. Most financial advice will ask you to section your money off into different pots for the specific goals you are trying to achieve, without considering what is really important to you personally.
A good budget example might suggest putting aside 30% of your monthly income towards housing, but if your property is the most important thing to you then this may seem too low when you are willing to spend more. Alternatively if your home is simply a place to rest your head and you prefer being out with friends or travelling, 30% might seem far too high because that money could be better spend elsewhere in the world.
The purpose of this post was to give you an idea of how other Australians save money to potentially help you understand areas in which you could improve your efforts. Saving does require an element of sensible thinking and budgets are designed to sustain your lifestyle, not simply throwing money everything you like once you've laid your eyes on them. Therefore, you need to consider your values first and budget around those so you are saving money inline with the way you want to live your life.
The financial crisis of 2007/08 appeared to knock some sense back into us, because now more Australians are saving more money than they were back in the 1980s. Between 1970 to 2000, the Australian population’s rate of saving money gradually decreased due to falling interest rates, greater availability of credit cards and stable economic conditions. Statistics show that by the time we reached 2003, Australians on average weren’t even saving enough for a chocolate ‘Freddo Frog’.
Now that rates have climbed back to around 12% of disposable income, the rate at which different age groups save is a more detailed story of that percentage. Suncorp found that the younger generation aged between 25-34 were considered above average savers putting aside as much as $533 per month. A discussion paper from the Reserve Bank went into more detail and revealed that there was actually a dip in savings from the 35-45 year age group. This was put down to the fact that they are more likely to have higher costs associated with mortgages and raising children.
Wealth in practice is also deemed as providing more opportunity to save each month, however in reality, older generations who own their own homes tend to spend more money due to the fact that they may feel a sense of financial freedom. Owning their own home may cause them to believe that there is less of a reason to save for a financial emergency e.g. job loss.
Across the board however, the savings gap between the rich and poor is more extreme than ever when separated by income. The top 20% of the wealthiest households save roughly 25% of their income each month, compared with the bottom 20% of households that spend negative 26%.
So the point to take away from this post is simply this...saving is important. Don't ignore it, plan accordingly and you'll be very happy you did once that situation arises where extra income is needed - because you just never know when that will be!