How do you compare against the Joneses?

There’s something in human nature that sees us innately curious about how we compare to other people. It’s no different with money matters. It’s just not very polite to directly ask people how much they earn, how much they have in super or what’s owing on their home loan. These sorts of questions can be real conversation killers, almost guaranteeing a fairly empty social calendar for months ahead.

Happily, there is plenty of data that lets us see how the ‘average’ Aussie (if there is such a person) is faring financially. Remember though, it’s not a contest. Benchmarking yourself against average figures may be interesting, but building wealth, climbing the career ladder and managing debt are all very personal processes. That said, let’s satisfy our inner curiosity to see how the Joneses are doing on the money front.

How your pay cheque compares

For the first time, May 2021 saw the average salary in Australia top $90,000. According to the Australian Bureau of Statistics (ABS)[1], the average weekly pay cheque is now $1,737 for full-time workers. But that’s not the full picture.

If you’re male, you’re likely to earn around $1,837 each week, or about $95,500 annually. For a woman, the average is $1,575, or $82,000 annually.

There are also big differences in pay depending on the industry you work in. The ABS says the mining sector tops the earnings leaderboard, with workers pocketing an average annual income of $139,000.  That’s followed by information media and telecommunications ($109,000), and the finance industry ($107,000).

At the other end of the spectrum, workers in hospitality and retail pocket the lowest incomes, earning an average of less than $68,000 annually.

It’s worth stressing, these are averages. If you’re just starting out in your career, chances are you could earn less. Separate ABS data shows our employment income tends to peak between the ages of 45 and 54[2].

If you’re keen to give your income an uptick, it could be time to have a chat with the boss about your next pay review. Take a look at the salary surveys published by the big recruitment firms to see how your salary compares based on your role, location and experience. Or consider picking up extra skills through further study or training to boost your pay prospects.

Average savings – one in three have less than $5,000

Household savings have skyrocketed during the pandemic, and ME’s latest Household Financial Comfort Report shows on average, savers are tucking away a record $960 per month[3]. But not everyone is enjoying a fatter savings account.

ME found over one in five of us have a whopping $100,000 tucked away in savings accounts, term deposits or home loan offset accounts.  It may be very reassuring to have that sort of money in the bank, but you’re not going to earn much of a return. If you’re happy to take on a bit more risk, it may be worth looking at other options such as exchange traded funds, and put at least part of your honeypot of cash to work earning a higher return.

On the flipside, over one in three people have less than $5,000 in savings. In fact, ME says close to one in ten Aussies don’t even have $100 in the bank. If you’re struggling to save, try a ‘pay yourself first’ strategy. Just work out how much you can save each pay day (any amount is good), then arrange to have it automatically transferred to a separate savings account.

Retirement nest eggs – how do you fare?

The latest figures from super body APRA, shown in the table below, confirm that average super balances vary between age and also gender, with women, on average, having less in super than men.

There are plenty of ways to grow your super, and potentially save on tax today. You may be able to claim a tax deduction for personal super contributions – up to $27,500 annually, though this total does include your employer’s contributions.

Debt – home loans are creeping up

On the other side of the ledger, the average mortgage balance across all home owners is $117,500[6]. But this includes people who are in the final years or months of what may have been a 25-year loan.  It’s a very different story if you’ve recently purchased a home. As property values soar, we’re taking on bigger mortgages. In fact, home loans account for the vast majority of household debt in Australia.

As a guide to how much housing debt has increased, ten years ago, the average new mortgage was worth about $356,000. Today, the average new home loan is worth $565,000 – if you’re buying in NSW, that average skyrockets to $731,570.

The scale of this debt highlights the need to look at ways to pay off the balance sooner – especially while interest rates are at record lows. It’s also important to review your mortgage every couple of years to check if you could get a better deal elsewhere. Lenders are saving their cheapest rates for new customers, and consumer watchdog – the ACCC, says home owners who’ve had the same mortgage for 10 years could save 1.04% on their loan rate just by switching to a new loan and lender[7].

How much is the average Aussie worth?

Great news on the wealth front – especially if you’re a home owner. Australian households hit a record high for wealth (assets minus debts) at the end of June 2021. Our collective wealth has reached $13,434 billion, which works out to a new high of $522,032 per person[9].

Not surprisingly though, household wealth can vary dramatically depending on income. As the table below shows, households on the lowest annual income of  $38,532 have average net wealth of $622,900. That’s just one-third of the wealth of households on the highest incomes. But it’s nothing to sneeze at, and it does go to show that it’s possible to build wealth even on a modest income.

As I mentioned earlier, it’s always interesting to see how we compare to others. But in reality there’s plenty we don’t see. The neighbours who regularly get a new car or take expensive holidays may appear to have it all, but behind the scenes they could also have a mountain of debt.

That’s why the important thing is how you manage your finances to make the most of your money. Budgeting, saving and investing, can all help you forge ahead financially over time.

Effie Zahos is an independent Director of InvestSMART, money commentator at Canstar.com.au and Channel 9 Today Show.