Why healthy money habits matter more than income 💸
Written by Glen James
Host of the Retire Right & money money money (formerly my millennial money) podcasts & author of The Quick-Start Guide to Investing.
You may not know this about me, but I used to be a financial adviser—and let me tell you, I saw it all!
One thing that always surprised me was how often high-income earners struggled with debt and saving. You'd think having a higher income would make it easier to manage, but that false sense of security often leads to overspending and bad habits. Many would come into my office, a bit embarrassed, realising they weren't as prepared for retirement as they thought.
The lottery curse: why the majority of winners go bankrupt
Let’s look at an extreme example. The majority of lottery winners go bankrupt within five years of their big win. How wild is that? Not only do they blow through their winnings, but they also end up bankrupt—meaning they can no longer meet their liabilities or pay their bills. It’s hard to imagine, right? But it seems that winning the lottery doesn’t come with financial wisdom. Some people make, well, interesting choices with their newfound fortune.
But generally these winners have one common mistake: they act rich. But not the real, sustainable kind of rich—I'm talking about the kind of wealth we see in movies or on Instagram. And that, my friends, is not reality. If you manage money poorly with a little bit of money, you’ll likely behave the same way when you have a lot of money.
Let’s talk about what it really means to be “rich,” because if you’re serious about building a life not limited by money, aiming to act rich should never be the goal. That may sound counterintuitive, but let’s break it down.
Those lottery winners? They’re limited by money.
Not just any money—the money they didn’t earn.
They’re limited by a lack of systems and structure in their lives.
They’re limited by poor planning and a lack of vision for their future.
They’re driven by a desire to spend, not to build and maintain wealth.
If you want real financial freedom, it's about creating a solid foundation with planning, structure, and a long-term vision—not chasing the illusion of wealth.
When we’re strategic about building wealth—and more importantly, about building our life—we make decisions that are measured and thoughtful. This means that if a significant amount of money suddenly comes into our life, it flows straight into our plan.
Whether it’s an inheritance or some other unexpected windfall, it shouldn’t drastically change the course of our life. If anything, the best move would be to do nothing with that money for 6 to 12 months—except for maybe paying down debt.
I’m writing this not just after reading about lottery winners, overnight celebrities, or trust-fund kids blowing through their fortunes, but from my own experience. I recently came into some money—let’s call it an inheritance-sized sum—and you know what I did with it? Nothing.
I’m clear on my purpose for investing in my business, career, property, and equities. Because I have a solid plan in place, I don’t feel the need to rush out and buy a new car or spend it on things that give me temporary satisfaction.
When you’ve built a life with a solid financial foundation, sudden wealth doesn’t define you or dictate your actions. Instead, it becomes another tool to help you continue building and maintaining that life.
Focus on maintaining solid financial habits
My clients who had modest incomes but strong, consistent money habits were almost always set up well for retirement—regardless of when they planned to stop working.
It’s so easy to compare ourselves to others, but when it comes to your money, what really matters is what works for you. Forget how much you're making; focus on building solid financial habits. I'd much rather see you consistently contribute to super, manage your spending, and invest wisely outside of super, than stress over trying to match someone else’s financial journey.
Let me share a secret: a good retirement savings plan is actually… pretty boring! When we asked those planning to retire before 60 what their strategy is, their answers were simple but powerful:
Sharon: ‘Pay off all debts.’
Eliminating consumer debt is key—those high-interest debts can linger and hurt your financial freedom. And if you can pay off your mortgage, or get close, that’s a huge win!
Michelle: ‘I’ve been tracking my spending.’
Knowing where your money is going each month gives you clarity on your financial situation now, and how it might look in retirement. No head-in-the-sand here—awareness is power.
Breanna: ‘We max out our pre-tax super contributions.’
I love this! People say superannuation is a scam—absolutely not. It’s your money, and the more you can tuck away, the better. By maximising your contributions, you're setting yourself up for long-term growth. Out of sight, out of mind, and working for you well into retirement.
Jenny: ‘Make sure you have enough income outside super until preservation age.’
Jenny’s spot on. If you want to retire early, you need to think about income-generating assets outside of super—whether that's shares, property, or another strategy.
Beyond what the community had to share, here are my top principles for maintaining healthy money habits:
Create a budget (or spending plan) and stick to it
Regularly tracking your income and expenses helps you stay in control of your finances and make informed decisions about spending and saving.Pay yourself first
Prioritise saving by automatically transferring a portion of your income into savings or investment accounts before spending on other things.Spend less than you earn
Cut unnecessary expenses and focus on needs instead of wants. This builds financial resilience and frees up money for savings or investments.Build an emergency fund
Set aside 3-6 months' worth of living expenses in a readily accessible account. This financial buffer helps protect you from unexpected events like job loss or medical emergencies.Pay off high-interest debt first
Tackle credit card debt, personal loans, or any high-interest liabilities as a priority to minimise the amount you lose to interest and reduce financial stress.Invest for the long term
Regularly contribute to superannuation, shares, or other investments. Compounding interest can significantly grow your wealth over time, so start as early as possible.Track and adjust financial goals
Set clear, realistic financial goals, and review them regularly. Adjust your savings, investments, or spending to stay on track as circumstances or priorities change.Avoid impulse purchases
Pause before making big or unplanned purchases. Giving yourself time to think through a purchase helps reduce unnecessary spending and keeps your financial goals in focus.Continue learning about money
Stay informed by reading books, listening to podcasts, or taking courses on personal finance, investing, and wealth-building strategies. The more education you have the less fear you’ll face and the more confident you will feel making decisions.Work with professionals where it counts
Professionals in the personal finance and tax planning space are incredibly qualified, and can help bring clarity and guidance to some of the trickier decisions we face. Staying on top of your income tax returns, your will and other estate plannings documents is key to protecting your assets and are well worth the time and investment.
The takeaway? You don't need a massive income to secure a great retirement. Healthy financial habits—whether you’re earning a little or a lot—are what truly set you up for success. So, focus on your own financial journey, not someone else’s. Stick to your habits, and you’ll reach your goals.
Community question
Joe asks: Is the income you receive from superannuation taken into consideration for the Medicare levy?
Glen: No, once you're over the age of 60 and start drawing from an account-based pension in your superannuation, that income is completely tax-free. This means it doesn't need to be reported on your tax return, and therefore it's not factored into the calculation for the Medicare levy or the Medicare levy surcharge. Whether you take out $1,000 a week or a larger lump sum, it's treated the same way—tax-free. So, if your income is primarily coming from your superannuation, it won't trigger the Medicare levy.
However, if you have other sources of taxable income—like shares, rental properties, or interest on savings—those would still be counted in your taxable income and could make you liable for the Medicare levy and potentially the surcharge if you don't have private health insurance. It’s also worth noting that senior tax offsets and other benefits might apply based on your age and income level, which could reduce or eliminate your Medicare levy liability on certain incomes. But overall, your super pension is a separate pot that doesn't attract any Medicare levy.
