Do you earn $125k? Your ‘financial wellness’ may depend on it
A new survey shows that those who earn $ 125,000 or more per year have significantly higher “financial well-being”.
The report, commissioned by Your Financial Wellness (YFW) with support from Teachers Mutual Bank, used the YFW index to identify and study factors that affect financial wellbeing in Australia.
Financial wellbeing was linked to income, but average index scores improved only modestly when income went below $ 125,000 per year.
Once the $ 125,000 limit was exceeded, the averages rose significantly.
For example, the average wellness score for household incomes less than $ 50,000 per year was 5.3; $ 50,000- $ 80,000 was 5.8; $ 80,000- $ 125,000 was 6.2; and for more than $ 125,000, it jumped to 7.2.
The self-employed had better financial well-being than their full-time and part-time counterparts, with the report suggesting that being in control of one’s destiny improves scores.
Women also reported lower financial wellbeing on average than men, at 6.1 compared to 6.9.
Homeownership is the “key” to unlocking financial wellbeing
According to the report, a YFW index of 6.4 (out of 10) represented average financial wellbeing, with the average home-owned score at 7.9, the highest average score of any of the variables analyzed.
Scores less than five indicated a “significant” level of financial stress, and those who rent a home had an average financial health of 5.1.
The proportion of homeowners was only 6%, the proportion of stressed tenants was 48%.
People looking to buy their first home had an average index of 6.7, with the report finding that this likely reflected optimism about buying with the safety net of a deposit.
The index fell slightly after buying a home, most likely due to the pressures brought on by mortgage repayments.
Source: YFW, Teachers Mutual Bank.
Steve James, CEO of Teachers Mutual Bank, said the first home buyers looking to enter the market need to prepare accordingly.
“While a grant like the First Home Loan Deposit Scheme (FHLDS) can be of great help in reducing the cost of mortgage insurance for lenders, it’s important to remember the other additional costs involved in buying a home and business Moving involves such things as moving fees, electricity, gas and internet access, home and home insurance, “said James.
“Besides, your first home won’t be your home forever. It can be helpful to think about the potential resale value it has in the future.
“Consider things like travel distances, proximity to transportation, retail stores, and schools that can be of value if you want to sell the property along the way.”
Would you like to feel “good” financially? repaying debts; to repay debts
The report found that the ability to pay off debt is also one of the most important factors in financial well-being.
About 88% of the 3,000 respondents said they had some form of debt and 30% had concerns about repayment.
Of those who struggled to repay their debts, 78% were financially stressed and had a YFW score of only 3.6, while 47% of those who just managed to repay their debts were stressed and had an index of 4, 1.
Forty percent of respondents also said they had less than a month’s salary in savings, with financial health improving significantly when more money was saved.
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