Yahoo Finance New 'HI-FI' trend exposes why $100,000 pay not enough for Aussies to live on
High-income earners aren't immune to the cost-of-living crisis. But is lifestyle coming into play as their wages are eaten up?
A high annual pay may mean you are financially secure. But it doesn't mean you are financially sensible.
In Australia, an emerging group of high-income earners are finding themselves in a precarious financial situation. These individuals, known as HIFIs (high-income, financially insecure), earn well above average but are experiencing significant financial stress and insecurity.
Recent research by Finder reveals that a third (33 per cent) of Australians earning more than $100,000 annually are living pay day to pay day, with less than a month's salary saved.
This is a lower percentage than those earning $50,000-$100,000, 57 per cent of whom are in this category.
The fact that one third of high income earners are in this position, however, is a surprise. Worryingly, 8 per cent of these high-earners have no savings at all, leaving them vulnerable in case of emergencies.
Are you earning six-figures and still not coping? Contact yahoo.finance.au@yahooinc.com
Lavish lifestyle or cost of living? Why $100k+ wage doesn't cut it
This financial strain among high-income earners can be attributed to several potential factors, including a lavish lifestyle and the rising cost of living.
Lifestyle creep, where discretionary spending increases as income rises, may be particularly prevalent among younger Australians.
The pressure to maintain a certain lifestyle, driven by either TikTok and Instagram influencers or a high experience threshold, leads to higher spending on luxury items and experiences.
This research indicates that many Australians define wealth not just by their bank balance but by their ability to keep up with their peers.
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This mindset, combined with significant debts such as student loans and surging credit card balances, has left many high earners between a financial rock and a hard place.
Despite these financial challenges, spending among high-income Australians remains robust.
A report by Pymnts found that a similar proportion - 36 per cent - of urban American millennials earning over $200,000 per year live pay day to pay day, yet still allocate 28 per cent of their budget to recreation, personal care, and everyday expenses.
This suggests that while financial pressure is mounting, the desire for luxury and high-quality goods remains strong.
Retailers are adapting to this trend by offering more affordable luxury options.
Even discount stores are tapping into this market, with chains like Aldi introducing clones of higher-end products to attract financially insecure high earners.
Payment technologies such as buy-now, pay-later and credit cards are also contributing to increased spending.
Despite two million fewer credit cards in circulation today compared to 2019, Australians spent an all-time high of $35.6 billion on cards in March 2024.
These services make it easier for consumers to purchase expensive items without immediately feeling the financial impact, further fuelling lifestyle creep.
As the financial landscape continues to evolve, it is crucial for high-income Australians to manage their finances carefully.
As we are approaching tax time, maximising your tax return to bolster savings or pay down debt may be one way to give yourself an edge.
The Stage 3 tax cuts, set to take effect on 1 July, will provide additional disposable income for many Australians.
While HIFIs are facing significant financial challenges, there are opportunities for all of us to improve our financial situation through careful spending and savings strategies.
As the cost of living crisis continues to bite, it is more important than ever to plan carefully and make the most of your resources.
