Australian household debt has tripled over the last 25 years, growing at an annual rate of 10.3%. Household debt now equates to over $2 trillion.[i]
These levels of debt mean the average household would need 18 months of income dedicated to paying off debt to get their debt levels to zero compared with household debt that required less than six months of income in 1990.[ii]
In addition to high levels of household debt, Australians also rack up high credit card debt reaching up to $50.7 billion during peak periods such as Christmas, representing an average credit card bill of $3,120.[iii]
It’s not just high credit card debt that we need to worry about, it’s the longer term trend of Australian’s living with higher levels of debt that is most concerning.
While Australians may now be more comfortable living with higher levels of debt, there needs to be a balance with preparing for the unexpected and planning to be able to live the lifestyle of your choice in retirement.
If you are not prepared, the loss of a job, illness or injury, or even the breakdown of a relationship could result in a situation where you start living beyond your means and face the further escalation of debt. It is important to consider the consequences of adversity and it is sensible to implement appropriate protection strategies to help safeguard your financial position.
On a positive note, Australians are increasing their savings, however half of these savings are held in superannuation funds.[iv] Higher household debt levels may see people using their superannuation to pay debts in retirement, which could have serious impacts on sustaining their current or chosen standard of living in their retirement years.
Alongside the increase in household debt, Government net debt relative to revenue is sitting at $226 billion [v]. This is a significant increase from 15.2% to 54.4% in just over five years[vi] . Government reductions to spending on health, aged care and the pension means it has never been more important for people to plan for how they will fund their retirement.
Seeking expert financial advice now could make an enormous difference to your future. Everyone’s circumstances are different, so it’s important that your financial planner understands your personal financial goals, whether that includes freedom from debt, access to cash for discretionary spending, growing and protecting your wealth, or planning for retirement.
For assistance with wealth management, investment strategies and protection for you and your family from the unexpected, please call us today on (07) 3720 1299 or email firstname.lastname@example.org
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[i] BankWest Curtin Economics Centre – Household Savings and Debt in Australia Report – June 2015 (page iv & 12)
[ii] BankWest Curtin Economics Centre – Household Savings and Debt in Australia Report – June 2015 (page 12)
[iii] Reserve Bank of Australia - Australian Credit and Debit Card Statistics Report December 2015 http://www.creditcardfinder.com.au/credit-card-statistics
[iv] BankWest Curtin Economics Centre – Household Savings and Debt in Australia Report – June 2015 (page 14)
[v] BankWest Curtin Economics Centre – Household Savings and Debt in Australia Report – June 2015 (page 7)
[vi] BankWest Curtin Economics Centre – Household Savings and Debt in Australia Report – June 2015 (page 7)