Disaster a step away

Australians don’t have much of a financial buffer if things go seriously awry, writes

AVERAGE Aussies are teetering on the brink of financial disaster as costs of living rise, yet they refuse to adjust lifestyle expectations, worrying new research has found.

A Comparethemarket. com.au survey of 1000 adults revealed 57 per cent of households could only cut spending back by $500 a month if they found themselves in financial distress. Alarmingly, 25 per cent could only save $200 a month.

A strong majority (70 per cent) of households reported expenses of up to $3000 a month, meaning many are on extremely thin ice.

Comparethemarket.com.au spokeswoman Abigail Koch was surprised by how little people could save.

“People have a certain expectation for quality of life and are spending on a broader array of things than in the past,” Ms Koch said. “Cutting back seems harder to do.”

Families should build a buffer of savings now, Ms Koch said, before interest rates rise and cause a further squeeze on the hip pocket. “People should prepare for rates to go up with a savings pot worth 90 days of income,” she said.

“It’s springtime, so why not consider a financial spring clean? A phone call to an energy retailer or using comparison sites might get a better deal; and if you’ve been paying a mortgage off for a few years there are probably better options out there for you.”

Financial distress may be closer than many think with 29 per cent reporting knowing someone who could not work for at least three months due to illness or injury suffered outside of work.

If facing that scenario, most respondents (87 per cent) would eat out less, 76 per cent would cut holidays and 73 per cent slash spending on clothes. Even petrol (40 per cent) and childcare (33 per cent) were on the chopping block.

Ms Koch said income protection insurance was another option, especially for single income households.

“It would be another expense but something that will protect you,” she said. Sunshine Coast resident Mark Landells, 56, chose income protection insurance after he started his own consultancy firm, Capital Talent. “Life is unpredictable and it’s important to make sure your family is protected if something should happen,” Mr Landells said.