Households earning more than $100,000 still struggling

Friday, 25 September 2015

A new survey by insurance firm Sovereign shows New Zealanders may be struggling to pay their bills more often than realised.

The latest Wellbeing Index from Sovereign, conducted by AUT University's Human Potential Centre, found higher incomes are associated with better levels of wellbeing.

But it is the ability to cope on an income that is critical and even some of the wealthiest households are feeling the pinch.

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The survey found 59 per cent of households earning up to $30,000 a year were finding it very difficult or difficult to cope on their incomes.

That shows more stress than the New Zealand General Social Survey (NZGSS) released earlier this year by Statistics NZ, which found just 24.6 per cent of the lowest income earners said they did not have enough money.

Another 35.7 per cent told that survey they had just enough.

But Sovereign's research shows stress for higher income households, too.

Just under 8 per cent of households earning more than $100,000 were finding it very difficult or difficult to get by on their current incomes.

Among households earning between $70,000 and $90,000 just under 20 per cent said it was hard going.

That number is less than the NZGSS statistics, which showed almost a quarter of those earning a household income of more than $100,000 were earning not enough or just enough, and a third in the $70,000 to $100,000 bracket.

AUT professor Grant Schofield said: 'Of course income still plays an important role in determining overall wellbeing; however the research is showing effective money management, whether you are earning a little or a lot, can influence high levels of wellbeing'.

Those who were living comfortably on whatever their level of income were 11.8 times more likely to report the top levels of wellbeing in the survey.

Overall, 67.3 per cent of people said their income was adequate.

Financial adviser Liz Koh said she had dealt with clients with a household income of $200,000 who were having trouble.

'They spend more on food than the average wage. I say 'do you think you could cut back on your food bill to save a bit more' and they say they couldn't possibly do that.

'It's that distinction between needs and wants that is a very personal one.'

Some people on higher incomes would get into a mindset where they felt they deserved certain things such as a nice car and house and a holiday every year, Koh said.

'If they don't get it they feel deprived. It is a psychological thing.'

'My approach is if you know you have a certain amount of income you make the choices on how you want to use that.

'If you want to spend a whole pile on a house don't complain that you haven't got much to cover everything else. Take ownership, this is my income, how do I want to allocate it?'

High earners were also less likely to carefully monitor where their money went, she said.

Young couples, aged up to 34, had the highest level of adequate income, followed by retirees.

Wellbeing was highest among retirees, adults without children and adults with older children.

Young singles had the lowest wellbeing although they were the most likely to report adequate income, followed by solo parents.

Auckland, Wellington and Canterbury households reported median income of $60,000 to $70,000 and all reported similar rates of comfort.

Northland, Bay of Plenty, Gisborne and Southland were less likely to report adequate income.