Investors name 5 biggest barriers to financial goals
Report finds income is not keeping up with living costs
3 min
Australian investors say housing costs, goods inflation and slow wage growth are the main barriers to achieving their financial goals, according to a survey. Their biggest goals in order of importance are retiring and living off their investments, supplementing their work income with investment income, funding holidays and travel, cutting back on their hours of work and buying a home.
Online trading platform Stake surveyed more than 2,000 Australian investors for a comprehensive report about their ambitions this year. The report concluded that the biggest barriers to financial goals reflected a broader problem, being that salary and wages are not keeping up with rises in the cost of living, including property prices and weekly rents.
Australians say the biggest barriers to achieving their financial goals are as follows.
Housing costs
Saving a deposit is one of the biggest hurdles for first home buyers today, with most workers unable to save fast enough to keep up with rising home values. The median Australian home price rose by $59,000 over FY24 while rents increased by 7.3 percent over the same period. CoreLogic data shows rents have risen by almost 40 percent over the past five years. Stake CEO, Jon Howie said: “In Australia, over the past 30 years, house prices have risen by an average of 8 percent per annum, compared to around 3 percent for wages …”.
Goods inflation
Since the pandemic, rising inflation has significantly increased the cost of goods and services. At its peak, inflation hit 7.8 percent per annum in the December quarter of 2022, according to the Australian Bureau of Statistics (ABS). By that time, the cost of petrol had risen 13.2 percent over the year and fruit and vegetables were up 12.6 percent. Higher interest rates are now working to bring the rate of inflation down. But this only means the cost of goods and services is rising at a slower pace. For example, petrol prices rose by another 7.7 percent in FY24. Services inflation is higher, with insurance up 14 percent over FY24 and electricity up 6 percent (although without government rebates it would have been 14.6 percent higher).
Slow wage growth
This week the ABS published an updated Wage Price Index report, which found wages rose by 0.8 percent over the June quarter while inflation rose by 1 percent. Over FY24, wages rose by 4.1 percent and inflation rose by 3.8 percent. Once again, higher interest rates are bringing the rate of inflation down now. However, when inflation was at its peak of 7.8 percent in December 2022, wage growth was well below this at 3.3 percent.
Costs of supporting a family
ABS data documenting how inflation is affecting various household types found employee households, which include working families, are worst affected. The ABS Living Cost Index for employee households rose by 6.2 percent in FY24 compared to the overall inflation rate of 3.8 percent. A recent report from KPMG found rising living costs were impacting family formation. KPMG urban economist Terry Rawnsley said: “With the current rise in living expenses applying pressure on household finances, many Australians have decided to delay starting or expanding their families.”
Unfair tax system
While the Stake report did not specify which taxes survey respondents felt were unfair, there is ongoing debate in the community about tax breaks given to property investors. Negative gearing is very common among Australian landlords, with rental income not typically enough to cover holding costs, including interest on an investment loan. Landlords are able to deduct this loss against other taxable income, such as their salaries. Investors also pay tax on only 50 percent of their capital gains when they sell an asset if they have held the asset for more than 12 months.
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For self-employed Australians, navigating the mortgage market can be complex—especially when income documentation doesn’t fit the standard mould. In this guide, Stephen Andrianakos, Director of Red Door Financial Group, outlines eight flexible loan structures designed to support business owners, freelancers, and entrepreneurs.
1. Full-Doc Loan
A full-doc loan is the most straightforward and competitive option for self-employed borrowers with up-to-date tax returns and financials. Lenders assess two years of tax returns, assessment notices, and business financials. This type of loan offers high borrowing capacity, access to features like offset accounts and redraw facilities, and fixed and variable rate choices.
2. Low-Doc Loan
Low-doc loans are designed for borrowers who can’t provide the usual financial documentation, such as those in start-up mode or recently expanded businesses. Instead of full tax returns, lenders accept alternatives like profit and loss statements or accountant’s declarations. While rates may be slightly higher, these loans make finance accessible where banks might otherwise decline.
3. Standard Variable Rate Loan
A standard variable loan moves with the market and offers flexibility in repayments, extra contributions, and redraw options. It’s ideal for borrowers who want to manage repayments actively or pay off their loans faster when income permits. With access to over 40 lenders, brokers can help match borrowers with a variable product suited to their financial strategy.
4. Fixed Rate Loan
A fixed-rate loan offers repayment certainty over a set term—typically one to five years. It’s popular with borrowers seeking predictability, especially in volatile rate environments. While fixed loans offer fewer flexible features, their stability can be valuable for budgeting and cash flow planning.
5. Split Loan
A split loan combines fixed and variable portions, giving borrowers the security of a fixed rate on part of the loan and the flexibility of a variable rate on the other. This structure benefits self-employed clients with irregular income, allowing them to lock in part of their repayment while keeping some funds accessible.
6. Construction Loan
Construction loans release funds in stages aligned with the building process, from the initial slab to completion. These loans suit clients building a new home or undertaking major renovations. Most lenders offer interest-only repayments during construction, switching to principal-and-interest after the build. Managing timelines and approvals is key to a smooth experience.
7. Interest-Only Loan
Interest-only loans allow borrowers to pay just the interest portion of the loan for a set period, preserving cash flow. This structure is often used during growth phases in business or for investment purposes. After the interest-only period, the loan typically converts to principal-and-interest repayments.
8. Offset Home Loan
An offset home loan links your savings account to your mortgage, reducing the interest charged on the loan. For self-employed borrowers with fluctuating income, it’s a valuable tool for managing cash flow while still reducing interest and accelerating loan repayment. The funds remain accessible, offering both flexibility and efficiency.
Red Door Financial Group is a Melbourne-based brokerage firm that offers personalised financial solutions for residential, commercial, and business lending.
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