Back to Research Insights >> Live In vs Live On: Understanding the 2 types of money

There are 2 types of money. Money you live in and money you live on.

We live in our homes, cars and clothes. Everything else is money that is there to live on. Most Australian household wealth is lived in.


When asked about their highest financial goals, most people will say something related to financial freedom and independence. Said another way, we aspire to someday be able to stop work and maintain our lifestyles. In general terms, it’s described as retirement but it’s a higher-level concept than that.

We have a finite amount of time before we stop working. In that time, we must do two things.

We need to create enough wealth to live in, which means buying and paying off a home. But at the same time, we need to build enough wealth for the future to live on.

Most Australians believe they need to pay off their home first before they then start investing. Unfortunately, there isn’t enough time to do it that way. The two strategies need to be executed hand in hand. The sooner we start both strategies, the higher the chance of success.


The average Australian household net wealth is just over $900,000 and the average value of a home is about $700,000. Said another way, the average household lives in 77% of its wealth. This doesn’t leave much to live on. We are a nation that lives in most of our wealth.

The numbers change from city to city with some having more valuable homes than others, but the shape of the problem doesn’t change. It still represents most of a household’s wealth. Expensive homes don’t generate income. Money you live in, you cannot live on.

Where does income come from? Well, for most people, it comes from only one of two sources. Either from our work where we trade our time for money, or it comes from capital that we have accumulated, that is invested and generates an income. There really isn’t a third source, not counting the government pension.

Unfortunately, most Australian households are not on track for enough money to live on in retirement but are also not doing enough to ensure they have enough to live on when they get there.


There are only two ways to build up enough money to live on, you either save it or you grow it.

Most either don’t earn enough to save the required amount or if they do, they don’t have enough time for a saving strategy to work, or both. The primary solution to creating enough wealth to live on, is to grow it. To borrow responsibly and buy an asset that grows in value and creates new capital that you can live on in the future.

Using the existing live in wealth, the equity in our homes, as the springboard to leverage into new investments is the primary solution for most Australians.

The Gap

Today’s average 65-year-old couple has about $350,000 in super. Clearly, this is nowhere near enough for what lies ahead. This leaves most Australians with a large retirement Gap, which is the difference between what they need to retire comfortably and what they have or are on track for. For most, The Gap is too big to fill up with savings (super) alone.

A growth strategy is required: a strategy that involves borrowing and buying something that will increase in value and create capital growth. Property is the only practical growth strategy for most Australians.

Investing in researched, well-located properties and holding them long term is the primary wealth solution for most Australians to bridge The Gap.


You can also download our eBook on the subject The Gap

One comment on “Live In vs Live On: Understanding the 2 types of money

  1. People tend to spend what they have access to. The key is to steer their ‘excess’ before it becomes their ‘access’. Steering their ‘excess’ towards wealth building assets such as property is a conversation that all Finance Professionals should be having with their clients today.

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