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Buying a home, early retirement: Aussies forced to rethink their financial dreams

Interest rate hikes are the biggest stressor for many Aussies.

Jonathan Ng and his daughter. Australian money. Cost of living.
Jonathan Ng has been looking for ways to save around the home, as interest rates and the cost of living rises. (Source: Supplied/Getty)

Aussies are being forced to put their financial dreams - like buying a home and retiring early - on the backburner, as the rising cost of living stretches their budgets.

A new survey by fund manager Betashares found 86 per cent of Aussies were making sacrifices to their financial goals, with Millennials and Gen Xers the most likely to rethink their aspirations.

The higher cost of living was the number one financial stressor for Aussies, followed by unplanned expenses, mortgage or other debts, and rising house prices.

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Sydney dad Jonathan Ng said rising interest rates were the biggest pressure point for his family at the moment. He’s been looking for ways to save around the home, including by switching energy providers, refinancing his home loan and eating out less.

“I’ve saved a decent amount but, overall, compared to the interest rate increase, it pales in comparison. It feels like chicken feed,” Ng told Yahoo Finance.

Ng said he was lucky to purchase his property at a good time, but he is worried about how his seven-year-old daughter will afford it in the future.

Ng, who is the co-founder of a private equity investment platform, said he recently set up a self-managed super fund (SMSF) and was investing in private equity, which he said were riskier assets but had higher returns.

“I feel like I need to take that extra risk to achieve those financial goals and fund a property for my daughter,” he said.

Rising interest rates are also Liz Michelle’s biggest financial concern right now. The Sydney mum is currently on a low fixed-rate mortgage, but this is about to end.

“I’m really concerned. Next month my repayments are going to jump up quite a bit more,” Michelle told Yahoo Finance.

The early-childhood teacher and blogger has been doing a full audit of her expenses and cutting back where she can. She’s also been forced to rethink her emergency fund and has tripled the amount she thinks she now needs.

“At one point, I was comfortable with a $12,000 emergency fund. That has changed and I want to get it to $30,000 or $50,000 so I feel comfortable,” she said.

Michelle is also interested in the FIRE movement (financial freedom, retire early) but doesn’t know how feasible that will be in the current climate.

Betashares director Kirsty Lamont said it was concerning that the rising cost of living was having such a big impact on people’s day-to-day finances, as well as their long-term dreams.

“For some, that might mean things like rethinking the timeframes for their financial goals or perhaps the amount of money that they can invest,” Lamont said.

“But for others, it’s a lot more alarming, with three in 10 Australians saying everything has changed and those financial dreams are not unattainable.”

Lamont said it was important people didn’t give up on their goals completely and to take steps to progress towards them, even if it took longer than before.

This could include creating a realistic and measurable plan for your short-, medium- and long-term loans, creating a sustainable budget, and saving and investing for the long-term.

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