Our most recent Consumer Pulse survey reveals financial worries are a significant pressure point for many Australians.
Do you agree with this sentiment, or is your experience different?
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Why is the concern over debt declining? Are we becoming too used to a large debt load?
It concerns me that perhaps we are so used to the large debts we have that we as a nation are not dealing with the actual problems and are just going âglassy eyedâ.
The survey points out that job security is very important as a concern, as well as that 1 in 4 households are debt stressed (financially in trouble). This must be a disconnect with their debt level. We are in serious trouble but not enough are seeing the reason behind that trouble.
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We tend to complain about the growing cost of living as a major cause of stress. It is true that this problem is widely perceived as very serious but the facts do not support it. This article is two years old but the trend has not changed much in that time.
A better reason is that the growth of wages has stagnated in the last 5 years or so; the pressure is still there but the tension between money available and money required is coming from a different direction.
A recent article from The Conversation shows a worry trend in wealth distribution and also in the willingness to consider it. Another official Australian report has been doctored to gloss over rising inequality. All your aggregate indicators can look OK, income per household or per breadwinner but when you look at who is getting the lift as the economy grows the facile analogy that âthe rising tide lifts all boatsâ is seen as a lie, you get lifted quicker the higher you are.
But low benefits do no harm and encourage the unemployed to seek work and the rich need tax cuts. Yup.
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I wonder if it is also a reflection of an environment where interest rates are decliningâŠresulting in a perception that servicing any debt is easier!
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Perhaps for those with mortgages, but the high interest rates on credit cards, where many get into trouble, are not declining and bear no obvious relationship with the âofficial market ratesâ we hear about on the news.
Personally, financial stress is ongoing, having been unemployed since last year (and not on the dole), and my wife being down to a day of work every week or 2 due to the drought and her line of employment in a plant nursery/gardener. No one wants to buy plants when they are not allowed to keep them alive under level 4 water restrictions!
However, we are very careful with our spending and aim to pay off the credit card each month.
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@phb Possibility is high, I would think, that low interest rates have lulled some, perhaps many, into a belief that the debt loads will be easy to manage because of the current interest rates and the likely further rate drops and they have no vision that includes rising interest rates.
@gordon If a mortgagor has a Line of Credit (LOC) or a CC linked to their mortgage they may well feel the lack of impact on their spending until interest rates eventually rise. What they may do at the moment is use that LOC to fund their expenses and this impacts the degree to which their principle decreases over time. An example would be someone who directs their entire income through their mortgage and then draws the needed lifestyle/household costs out of the mortgage through their LOC, if they draw only the smallest possible amount then their payments may actually pay the loan off faster as interest costs are generally worked out a daily balance so the longer they can leave funds until needing to draw the better the outcome. If they have their CC linked (it acts like a LOC until the LOC is fully used and then it reverts to the Cards normal Credit limit) and use that during the month they only pay interest at the mortgage rate. Another way is to have a CC and a LOC so that they put all their expenses on the CC and once a month draw the payment out of their LOC to pay the CC off.
Risks are that they draw down their LOC to the point they have no credit left to draw against or to pay a CC off completely and so increase the CC debt as well as the mortgage. Another perhaps overlooked problem is that Interest rates will rise and then they will have interest payments that may exceed the amount of payments they deposit. But as these are future events for most the impact may be overlooked as to the future pain it may cause.
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There is also the issue of what it is that people expect their money to do for them. When I was in work I expected a lot more than I do now that I am only on a government pension. That said, I cope reasonably well and donât feel stressed.
I donât expect a lot of my income, I donât travel, donât drink, havenât smoked for 11 years, and I have brunches with friends which are only monthly, if that. I sometimes wish I could do more, but it is what it is, and I have adapted.
I have an app called Chronicle (Mac and iOS only, sorry Windows/Linux/Android users) which has helped me to stay on the straight and narrow since I stopped work late in 2011. It tells me that my electricity bills are much the same as they were back then (in fact, my winter quarter bill is less than the 2011 winter, by $65), and changing from my previous mortgage provider (a building society) to a bank which has no fees attached to the transaction accounts I have, has saved a little money each month.
For those interested
https://chronicleapp.com/
The app is not a finance app as such, youâre not going to be reconciling bank statements and adding in expenses as you spend money. What you will have is a way of predicting how much you need to pay what needs paying, and when those expenses come due. And its been scarily accurate. When I was a windows user (prior to 2003) I used an app called Simply Budgets to the same end, except it also predicted where you might have shortfalls, so you could prepare in advance. I donât even know where thats at, these days, Chronicle does the job for me.
Its early-ish and I have rambled again.
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