Moneysoft analysis shows worth of financial coaching as personal debt reaches record levels

High-quality financial coaching and automated tracking software can help Australians almost halve their discretionary spending, according to an analysis of Moneysoft’s client database.

The ability to overhaul negative spending habits has never been more important as Australians’ total household debt recently reached a record 185 per cent of annual household disposable income.

However, 101 Moneysoft clients working with a financial adviser were able to reduce their average spending on irregular discretionary items such as entertainment, travel, hobbies and existing credit card repayments from $11,400 to $5,730 after 12 months. The most marked reduction in discretionary spending was in the 25-35 age bracket.


Source: Moneysoft analysis of 101 clients over first 12 months tracking their finances with Moneysoft and receiving coaching from their financial adviser.

“Reigning in bad debt is one of the biggest challenges that many people will face but this new data demonstrates that it can be done. However, average expenses were still fairly flat over the first six months, showing how important ongoing tracking software combined with regular advice from a financial planner can be in cementing good financial behaviour,” Moneysoft managing director and founder Peter Malekas said.

This represents a significant opportunity for financial planners to offer a new cashflow as a Service, given the size and transparency of the financial benefits that can be easily demonstrated to clients.

Most people attempt to budget, according to the corporate regulator’s Australian Financial Attitudes and Behaviour Tracker. However, many don’t go beyond writing down some notes or checking bank and credit card statements for unusual entries.

A good financial planner can provide holistic advice that breathes life into the budgeting process and helps keep clients saving to achieve their goals. The second diagram below shows this in action – clients redirected their new-found savings towards regular payments such as bills, mortgage payments, rent and other investments over the first 12 months.



Source: Moneysoft analysis of 101 clients over first 12 months tracking their finances with Moneysoft and receiving coaching from their financial adviser.

“Many Australians are either saving to buy a home or paying off a mortgage,” Malekas said.

“This often represents their largest investment and, with some banks already raising interest rates, now is a good time to do a financial health check.”

Official interest rates have been cut to historic lows in recent years, propelling a property boom in Sydney and Melbourne. However, the proportion of first home buyers fell to 4 per cent between 2011 and 2015 from about 5 per cent two decades ago, based on Treasury data.

Home ownership levels have also declined from 71 per cent to 67 cent between 1994 and 2012 according to the Australian Bureau of Statistics (ABS) as investors have increasingly dominated the market.

Making financial behaviour more visible provides people with a powerful tool to make incremental changes and see the real improvements that result. This can make a difference whether their goal is to get a foothold in the increasingly competitive property market, or to reduce their debt.