Almost half of Australians are living from pay to pay.
These figures from a recent Finder survey of 1,780 Australians reveal 46% – the equivalent of more than 5.9 million working Aussies – are unprepared to cope with a job loss, admitting they couldn’t survive financially for more than a month if they suddenly lost their job or could no longer work.
A startling 2.1 million are living day to day, predicting they could only make ends meet for a mere seven days or less should they be laid off or not be able to continue working.
Just 37% of Australian workers could live off their savings for four months or more if they lost their job tomorrow.
Sophie Walsh, personal finance specialist at Finder, said the figures paint a troubling reality.
“Millions of households are struggling to make it to pay day every month. That’s a very stressful way to live, knowing any unexpected expense could pull the rug from under you.”
Walsh said many Australians were struggling with rising everyday living expenses and paying for bills such as their rent or mortgage, energy and even groceries.
“We know many Aussies are putting a large amount of their pay towards essential living costs, which doesn’t leave a lot of wiggle room for an unexpected financial emergency.
“If you suddenly could no longer work or lose your job, the bills will keep rolling in so it’s a good idea to mitigate the risk of something going wrong by making a conscious effort to pay down any debt you might have and put aside what you can each month into an emergency savings fund.”
Walsh said income protection insurance could be valuable for Australians who are reliant on their income.
“It keeps up to 85% of your income coming in if you get injured or fall ill and are forced to stop working,” she said.
“This is arguably one of the most important types of insurance because without it, you may not be able to afford all the necessities of life.”
You need a financial buffer
Do you have money stashed away for a rainy day?
MoneySmart’s Australian Spending Habits report recently found one in five Australians saved no money in the previous six months, and that’s been at a consistent level for the past few years
However, rather than simply maintaining a predetermined amount of money for a rainy day, Ms Higgins encouraged people to get in the habit of setting aside a portion of each pay cheque.
A good rule of thumb is to place 10 per cent of your take-home pay into a separate account, she said.
“In the event of an emergency, people tend to turn to credit and pay-day lenders to cover any shortfall. We don’t want people relying on pay-day lenders when they’re in need.”
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.