September 19, 2019 by Dymphna

Why almost 50% of Aussies can’t save a thing

This stat is terrifying… but it’s not what you think it is.

I read a statistic the other day that was truly frightening:

40% of Australians are living pay cheque to pay cheque. That’s what ME banks Survey of Financial Comfort reckons.

Really? Two in five Australians just aren’t saving a thing? They’re spending everything they earn? They’re living hand to mouth?

That’s horrifying.

What’s the game-plan here?

What happens if they get hit by some kind of emergency? What happens if one of them loses a job? What happens if the economy stalls and ends up in recession? (I know it hasn’t happened in living memory, but recessions still happen. That bogey-man still exists.)

What will they have to fall back on?

It’s a bit scary, but before we hit the panic button, I need to point out that this isn’t what you think it is.

This isn’t about how poor Australians have become.

I reckon that this is about how few of them have a system for managing their money.

Because I see this all the time. I had students a little while back – they were both doctors. He was a specialist. They earnt over a half a million a year.

And they were living pay cheque to pay cheque.

They obviously worked very hard to burn through that kind of income, but they were doing it. Fancy cars, rent on a fancy house, a boat in the harbour.

But the point is, they didn’t have a system for managing their money. Before it had come in it had been spent. Before any could be tucked away for ‘savings’, it had been blown on a long list of expenses, all clamouring for their share of the pie.

This is just what happens. It’s like that law in physics: nature abhors a vacuum. Idle cash doesn’t stay idle for long.

If you don’t consciously choose where your money goes, you’ll just find that your money goes… somewhere… all of its own accord.

This happens to everyone.

And I reckon that this “40% of Australians living pay cheque to pay cheque” is spread right across the social spectrum. I reckon it includes lawyers and doctors as much as it includes tradies and café workers.

So how do you stop this happening to you?

A system.

The solution is a system – a system that manages your cashflow.

And the key function of this system is that it puts money aside for saving and investment FIRST. It’s quarantined from your day-to-day expenses, and comes out of your take-home pay BEFORE you start spending money on anything else.

You then have to balance your budget on what’s left.

That is, you don’t save what’s left after spending.

You spend what’s left after saving.

This is what Warren Buffet calls the “Pay Yourself First Principle,” and it’s the key to every successful wealth creation strategy out there.

Saving after spending just doesn’t work.

Just ask this 40% of the population.