av-aussie 2Over half of Australians lived in middle-income households

This demographic includes families earning between $42,000 and $125,000.

Australia’s middle class – the avearage – includes teachers, firefighters, and plumbers, but also engineers, construction managers, and chefs — workers from all over the economy. The middle class provides and consumes the bulk of services that keep society afloat, driving economic growth and investment with each purchase they make.

But when it comes to money, the Australian middle class faces a range of unique challenges. Wages have stagnated for a fair while, and rising costs of essentials like housing and healthcare have put a squeeze on the average budget. Most middle-class families don’t have nearly enough saved to pay for university or to retire at age 65.

But, are all of our money issues the result of economic issues? Not quite!


Just like every other group of earners in Australia, we don’t always make the smartest decisions with our money. If we hope to build a financially viable future, it’s up to us to make the best decisions we can, no matter what’s happening with the economy at large. 

Here are eight money mistakes the middle class needs to stop making to turn things around:


1. Accumulating too much debt

According to a recent study, 65% of credit card users carry a balance. In other words, most Australians are okay carrying credit card debt from month to month and paying interest on it – some out of sheer necessity, but some by choice.

For those trying to get ahead financially, this can be a costly mistake. Indeed, the average credit card interest rate is now over 15%!

Everyone is better off if they avoid ‘Bad debt’ like the plague. You don’t derive a single benefit from carrying credit card debt – only added costs, debt, and stress.

2. Not having a Financial Buffer

Nearly half (46%) of us would struggle to cover a $400 emergency. The figure is skewed by the fact that 81% of people making $100,000 or more said they could easily cover the cost, while only 34% of those making $40,000 or less could.

Still, our lack of emergency savings is a problem. When you don’t have the cash to cover emergencies — which will inevitably occur — it’s far easier to let your finances spin out of control or get caught in a cycle of debt.

Many financial advisers suggest keeping an emergency fund stocked with three to six months’ worth of expenses, but nearly any amount you can stash away will help. With some cash stored “out of sight and out of mind,” you’ll have a buffer should you face surprise health issues, home or car repair costs, or other expenses you couldn’t predict. This could be done as advnce payments on your mortgage in redraw or theough an offset account even.

3. Not giving your retirement a raise when you get one

Retiring on time requires patience and persistence, along with the discipline to invest regularly for up to 40 years. But if you hope to grow your nest egg, it’s important to boost your retirement contributions as your income grows. If you don’t, it can take a lot longer to build up enough cash to retire.

If you save $500 per month and get a 4% raise, for example, you should boost your savings plan proportionately and increase your savinsg to $520. By saving a percentage of your income every year (instead of a specified dollar amount), your retirement contributions will increase automatically as your earnings grow. IF you still have a mortgage then these savings could be directed to paying it off quicker; and once this is done you could start some extra voluntary contribution to your Super fund or invest in shares or property.

4. Relying entirely on employer paid Super

The convenience of relying on your employer-sponsored super contributions can’t be understated, but using only this one strategy for retirement may not be enough. Not only could you come up short by the time you reach retirement, but there are definite risks in relying onle on one strategy and putting all your eggs in one basket.

One way around this is to invest enough in shares and/ore property inside or outside your super. 

5. Delaying retirement savings

A frequent mistake is to delay saving for retirement while focusing on other financial priorities of life

For many of us, it’s far too easy to believe you’ll start saving for retirement after you pay off your Hecs debt, buy a house, or fund your children’s education. While these are all worthy goals, life happens, and it’s easy to put retirement savings on the back burner until it’s too late.

If you’re middle-income earner especially, you need time for your retirement funds to grow. We recommend saving for retirement as early as possible to put the magic of compound interest on your side.

“A small amount saved consistently takes advantage of compound interest and can have a significant impact at retirement,” 

6. Forgetting to update your Will & life insurance policy

Do you really want to leave your life insurance proceeds to your ex-wife? How about gifting her your Super balance? This is the type of thing that happens when you don’t update beneficiaries and you pass away.

Marriage, divorce, or any changes in your family situation are reasons to revisit your beneficiaries – whose name is on the form will receive the asset.

This happens more often than people realize: No one thinks they’ll die young, yet it happens all the time. And when these documents aren’t updated, huge sums of money can wind up in the wrong hands.

7. Spending too much on depreciating assets

The average car payment in Australia is $506 per month and 68 months long! That represents a huge chunk of cash for Australians who are already struggling to save. But the worst part is that these payments are mostly “sunk costs.”

The fact cars depreciate rapidly makes them a poor way to spend an extra $500 each month

This is one of the common money drains and comes from the this need of impressing others with our vehicles, but that often means overspending by thousands of dollars each year.

Most would be better off driving older cars and investing their extra cash instead – but where is the fun i that right?