Financial security is a goal that many of us strive to achieve. And while there are a number of factors that affect the likelihood of achieving this goal, there is no universal standard for assessing how vulnerable a person or a household is to financial hardship or economic instability.

The current system for measuring household income, which has largely been adopted as a measurement for household financial stability, has also been criticised for several reasons.

To begin with, it does not account for assets, which can be critical in a scenario where unexpected expenses arise. Additionally, it does not account for the critical role that expenses like education and larger families play in the economic security of households.

It is for this reason that researchers and economists now believe that the metrics and models currently used may no longer represent the different facets of a household's financial well-being.

Some financial well-being calculators only account for the income of each household instead of examining the other factors that determine the 'actual' financial conditions of individuals. Credit: freepik/suriyawutsuriya.

Thankfully, there's a simple and easy-to-use financial calculator that can do just that and provide a nuanced, relative sense-check of whether Australians are, in fact, doing okay.

The 'Financial Wellbeing Calculator', which was designed by an Australian National University (ANU) associate professor, Ben Phillips, to help the public, is a simple and effective aid for gauging the level of risk that an individual and their family are facing when it comes to their finances.

[Note: Feel free to open and use the calculator via this link as you read along so you can have a better understanding of how it functions]

It is designed after a variety of different models and tools that have been developed around the world over the past few decades.

To find out whether or not you are at high risk of financial stress, all you have to do is answer 14 hypothetical questions about your household finances.

The first question is the most straightforward one of them all – what is your household's weekly disposable income?

In the tab, you may enter 100 if your weekly take-home pay minus your expenses is $100. If it is $1,100, enter 1100 (without a comma).

For the second question, you must state the overall net worth of your household.

This means that you should mention the worth of your household's savings, superannuation balances, automobiles, boats, jewellery, etc., together with the value of your home and/or any investment properties, less the debts your family has for items like mortgages, credit card debt, and other loans.

A rough estimate is sufficient here; don't worry about getting decimals correct, the calculator will still give you a decent estimate of your household's financial situation.

And keep in mind that it's not just about the 'hard numbers' like the total amount of your household's net worth that is being measured by the calculator — it also examines the more minuscule details like your household's personal debt, your age and the age of your partner, if you have one, your health, and everyone in the house's employment status, to name a few.

After inputting the rest of your relevant details, simply click the 'calculate' button and the calculator will do the rest.

Once the calculation is done, the calculator will provide you with a summary that highlights your 'actual financial wellbeing rank' with a number between 1 and 100 — a lower number denotes a higher amount of financial stress, whilst a higher number denotes a lower level of stress.

Working-age welfare recipients in Australia are most likely to experience financial stress; in particular, those receiving JobSeeker, Disability Support, or Parenting Payments. Credit: Household Financial Stress and Financial Wellbeing in Australia, report for Uniting Care Australia, CSRM Research Note 2/22, 2022.

You may also see a 'financial stress' indicator in the calculator in the section labelled 'your probability of stress'.

Financial stress gauges how difficult it is for individuals to cover their costs and have some money left over so that, in the event of an emergency, they are able to cover the cost from their weekly income or savings.

The stress indicator will provide you with a number between 0 and 1, which represents the likelihood that you may be under financial hardship.

To illustrate, if the result is 0.653, there is a 65.3% chance you could be dealing (or likely to deal) with some sort of financial difficulty.

Key Takeaways

• Income is not the only factor that determines financial well-being.
• Other factors, such as housing costs and tenure, wealth, disability, gender and age, labour force status, education status, where one lives, and household size and family type, can also play a role.
• The calculator can help you to understand your financial well-being and compare it to other households in Australia.
• The calculator can help you to understand your risk of financial stress.

It's important to remember that there is no universal or complete model for calculating someone's level of 'financial vulnerability'. But with the right information, these sorts of tools can help put people's personal finances into context and put them on the right path to getting ahead.

What did you find after using the calculator? And how do you think Australia could do more to truly level the playing field when it comes to poverty? Share your thoughts and ideas in the comments below!

 

[Ricci]

I ran the numbers and agree with the level of stress it came up with for me.

 

[Farsideb]

I ran the test and totally disagree. It would depend on how much of your assets were cash or non cash And it doesn’t differentiate. If your assets were $2m it makes a big difference if your hard assets are worth $2m with nothing in the bank compared to $1m in hard assets and $1m cash and super.

 

[Singomate]

Financial security is a goal that many of us strive to achieve. And while there are a number of factors that affect the likelihood of achieving this goal, there is no universal standard for assessing how vulnerable a person or a household is to financial hardship or economic instability.

The current system for measuring household income, which has largely been adopted as a measurement for household financial stability, has also been criticised for several reasons.

To begin with, it does not account for assets, which can be critical in a scenario where unexpected expenses arise. Additionally, it does not account for the critical role that expenses like education and larger families play in the economic security of households.

It is for this reason that researchers and economists now believe that the metrics and models currently used may no longer represent the different facets of a household's financial well-being.

Some financial well-being calculators only account for the income of each household instead of examining the other factors that determine the 'actual' financial conditions of individuals. Credit: freepik/suriyawutsuriya.

Thankfully, there's a simple and easy-to-use financial calculator that can do just that and provide a nuanced, relative sense-check of whether Australians are, in fact, doing okay.

The 'Financial Wellbeing Calculator', which was designed by an Australian National University (ANU) associate professor, Ben Phillips, to help the public, is a simple and effective aid for gauging the level of risk that an individual and their family are facing when it comes to their finances.

[Note: Feel free to open and use the calculator via this link as you read along so you can have a better understanding of how it functions]

It is designed after a variety of different models and tools that have been developed around the world over the past few decades.

To find out whether or not you are at high risk of financial stress, all you have to do is answer 14 hypothetical questions about your household finances.

The first question is the most straightforward one of them all – what is your household's weekly disposable income?

In the tab, you may enter 100 if your weekly take-home pay minus your expenses is $100. If it is $1,100, enter 1100 (without a comma).

For the second question, you must state the overall net worth of your household.

This means that you should mention the worth of your household's savings, superannuation balances, automobiles, boats, jewellery, etc., together with the value of your home and/or any investment properties, less the debts your family has for items like mortgages, credit card debt, and other loans.

A rough estimate is sufficient here; don't worry about getting decimals correct, the calculator will still give you a decent estimate of your household's financial situation.

And keep in mind that it's not just about the 'hard numbers' like the total amount of your household's net worth that is being measured by the calculator — it also examines the more minuscule details like your household's personal debt, your age and the age of your partner, if you have one, your health, and everyone in the house's employment status, to name a few.

After inputting the rest of your relevant details, simply click the 'calculate' button and the calculator will do the rest.

Once the calculation is done, the calculator will provide you with a summary that highlights your 'actual financial wellbeing rank' with a number between 1 and 100 — a lower number denotes a higher amount of financial stress, whilst a higher number denotes a lower level of stress.

Working-age welfare recipients in Australia are most likely to experience financial stress; in particular, those receiving JobSeeker, Disability Support, or Parenting Payments. Credit: Household Financial Stress and Financial Wellbeing in Australia, report for Uniting Care Australia, CSRM Research Note 2/22, 2022.

You may also see a 'financial stress' indicator in the calculator in the section labelled 'your probability of stress'.

Financial stress gauges how difficult it is for individuals to cover their costs and have some money left over so that, in the event of an emergency, they are able to cover the cost from their weekly income or savings.

The stress indicator will provide you with a number between 0 and 1, which represents the likelihood that you may be under financial hardship.

To illustrate, if the result is 0.653, there is a 65.3% chance you could be dealing (or likely to deal) with some sort of financial difficulty.

Key Takeaways

• Income is not the only factor that determines financial well-being.
• Other factors, such as housing costs and tenure, wealth, disability, gender and age, labour force status, education status, where one lives, and household size and family type, can also play a role.
• The calculator can help you to understand your financial well-being and compare it to other households in Australia.
• The calculator can help you to understand your risk of financial stress.

It's important to remember that there is no universal or complete model for calculating someone's level of 'financial vulnerability'. But with the right information, these sorts of tools can help put people's personal finances into context and put them on the right path to getting ahead.

What did you find after using the calculator? And how do you think Australia could do more to truly level the playing field when it comes to poverty? Share your thoughts and ideas in the comments below!

IT'S an absolute waste of time if you one of the many pensioners that has no home or savings to fall back on to start with there are currently more than 2.5 million people below the poverty line. I find it a bit rich when people tell me to start with $5000 dollars please we struggle to eat, pay rent to greedy landlords. To be able to walk along the sand and sit in the park and watch the kids play,and people walk their dogs is one of my forms of entertainment free but for how long soon will not be able to afford power,sad but it's reality

 

[annvic]

IT'S an absolute waste of time if you one of the many pensioners that has no home or savings to fall back on to start with there are currently more than 2.5 million people below the poverty line. I find it a bit rich when people tell me to start with $5000 dollars please we struggle to eat, pay rent to greedy landlords. To be able to walk along the sand and sit in the park and watch the kids play,and people walk their dogs is one of my forms of entertainment free but for how long soon will not be able to afford power,sad but it's reality

Not all pensioners have assets! Some pensioners were executives with $5 m in their super , houses and properties worth $10m etc etc. so this is a waste of time for the rest of simple blue collar workers who in their lifetime earned enough to survive (pay rent, food and provide for children, medical etc) with nothing left over.

 

[annvic]

I dont need to take the risk test. I live for the pension every fortnight. what comes in one minute and the next goes out to recurring monthly bills. nothing is left behind. My risk - 100%. IN and then out. In and then out.