Frugal and proud of it: how 'loud budgeting' became cool

Young Australians are embracing global ‘cash conscious’ trends popularised via social media to proudly cut back on increasingly expensive non-essential items, not only to cope with the cost-of-living crisis but also to prioritise saving and reduce debt while interest rates are high. A consumer sentiment survey conducted by National Australia Bank (NAB) revealed a 24 percent annual increase in the number of NAB Reward Saver accounts opened by Gen Z customers and an average 5.3 percent growth in their account balances over the past 12 months.

On average, NAB says their Gen Z customers are saving $450 per month by cutting back on spending, with 56 percent putting spare dollars into high interest savings accounts or mortgage offset accounts. Young people are saving an average of $124 per month by not eating at restaurants, $96 per month by not using food delivery services and $73 per month by skipping coffees, snacks and café lunches. They are also saving an average of $70 per month on petrol by using their cars less frequently, $64 per month by foregoing entertainment and $30 per month by quitting streaming services.

NAB Personal Banking executive Paul Riley said: “In 2024, being ‘cash conscious’ is officially cool … ‘Loud budgeting’ is all about unapologetically prioritising your own financial goals, setting smart boundaries on spending, and feeling comfortable to talk about it openly and authentically. Rather than going out for an expensive dinner with friends, younger Australians are confidently opting to stay in and choose to put that amount into a high interest savings account or pay down debt.

“The other hot budgeting trend is ‘no or low spending months’ which involve giving up alcohol, takeaway food or shopping for clothes or beauty for the month, not booking holidays, food prepping or bringing your lunch to work or finally asking mates to repay cash you’re owed,” Mr Riley said.

Maya McIntyre, 23, is putting an extra $250 into a high interest savings account each month.

“I’m definitely making some changes to what I’m spending money on and I’ve cut back on things like streaming subscriptions, I’m eating out less and I’m choosing cheaper or free things to do with friends rather than expensive meals and pub visits,” Ms McIntyre said. “Most of my friends are making some changes to the way we think about our finances and some of us are definitely more open to saying ‘no’ to things if we feel like we want to save money instead.”

Since mid-2023, NAB has seen a 62 percent increase in the number of customers using its personalised spending feature available on the NAB app and internet banking. This automatically categorises transaction data to help customers easily identify where their money is going. Categories include subscriptions, memberships, gym and health, insurance and supermarket spending.

Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

Frugal and proud of it: how ‘loud budgeting’ became cool

Australians under 30 are enthusiastically adopting ‘cash-conscious’ behaviour to grow their savings while interest rates are high

New research suggests spending 40 percent of household income on loan repayments is the new normal