Did you know that around 5.9 million Australians live pay-to-pay?
A study by Deloitte surveyed over 14,000 Millennials and Gen Zs (born 1983 – 2003) between November 2021 and January 2022 worldwide. The results showed that over 30% did not feel financially secure, and 47% of Millennials and 46% of Gen Zs lived pay to pay.
All said the cost of living was their number one concern – ahead of climate change and unemployment and mental health.
You might assume that the issue is that these people are earning lower wages, but this isn’t always the case.
Jodi
Every now and then, Jodi borrowed $100 from her parents. She always paid it back, but her situation was not uncommon.
Jodi earned a good salary as an I.T. specialist. But pay-day didn’t always align with the due dates on her bills. This resulted in the occasional week when she needed a little extra to tide her over. She didn’t have a lavish lifestyle but did enjoy a monthly facial and getting her nails done. She also had two streaming subscriptions and a gym membership on monthly payment plans.
Aaron
Physiotherapist Aaron had a cashflow issue. He loved technology and couldn’t resist getting a new gadget, even if he didn’t need it. He also had an active social life involving weekends away, dining out, theatre and concerts. Consequently, Aaron’s credit card was maxed-out and he had lost track of his buy-now-pay-later (BNPL) plans.
After making his minimum monthly repayments, Aaron was forced to live on credit until next payday.
Then unexpectedly his old car died and needed replacing. It was a wakeup call when the finance company rejected Aaron’s loan application. Aaron felt trapped with no way to break the pay-to-pay cycle. The worry kept him up at night and began affecting his work.
What did they do?
According to Beyond Blue, financial worries impact our physical and mental wellbeing, potentially leading to further financial stress.
Jodi’s parents helped her to go over her finances, identify areas for savings and develop a realistic budget. They suggested Jodi cancel one streaming subscription, saving $15 per month ($180 pa), and reduce her monthly facial to bimonthly, saving $140 every two months ($840 pa). The money was placed into a savings account that Jodi could access if necessary, and within the first year, she’d accrued nearly $1,000. Jodi hadn’t needed to borrow from her parents during this time either. Now, she plans to use her savings on studies that will qualify her for a work promotion.
Aaron’s situation was slightly different. As debt was his main concern, he sought some help from a licensed professional financial adviser, who suggested he sell his unused gadgets online. This alone raked in enough to pay off his PNBL plans. His adviser then developed a debt-reduction strategy: if Aaron sacrificed three nights out per week and the occasional weekend away, he’d be debt free within three years – one year if he never left the house! The pair agreed that meeting half-way would be best, so Aaron’s adviser recommended a weekly spending budget which would see Aaron debt-free in 18 months – but only if he curb his passion for gadgets.
The simplicity of internet shopping, despite good intentions, means it’s easy to rack up debt without realising it. Any wonder nearly 6 million Australians live from pay-to-pay!
