If COVID-19 and the threat of a recession in Australia, has gotten your attention and made you take a hard look at how you’re handling (or not handling) money & your financial future, now is the time to take action and do something about it.
Whether you have been made redundant, or earning a reduced salary, collecting JobKeeper/JobSeeker, or just trying to make smart decisions for the future, answering the following 5 simple questions can help you make informed and considered decisions that will impact you in the short and long term.
As always – your Bentleys team are here to guide you through the tough time. The following questions and links will help you to get started.
1. What are my financial goals?
You need to know where you are going in the short, medium and long term. A goals based approach helps you answer questions like:
What am I trying to achieve? How will I define success?
These answers will be unique to you based on your personal circumstances. A good financial goal is specific, measurable, achievable, realistic and time bound.
These can be broken down into smaller, more manageable steps which will help achieve these goals.
I want to get rid of my credit card debt of $1,200 in 12 months. I have a savings ability of $200 per week whilst ever I am gainfully employed.
2. Does my current income cover basic living expenses?
Complete a household budget now!!
Break down spending to reflect which component is a need and which is a want. Needs are non-negotiable, for example rent/mortgage, food etc. Things like gym memberships, new clothes, eating out etc are all wants, which are “nice to have”. If you are in the midst of a crisis these should be the first things to go.
If you’re having trouble repaying an essential bill, such as your mortgage, speak to your lender/provider to negotiate more favourable terms that are manageable and sustainable.
3. Do I have at least 3 months’ worth of expenses in savings?
If no then start to build your emergency fund!
By completing a budget you can identify how much you need to cover all your essential expenses like housing and food. Any surplus funds should be allocated to a savings account that you can tap into when an emergency arises.
With over 104,000 jobs lost in WA due to the Coronavirus, this emergency fund will give you a much softer landing if the unexpected happens.
4. What about my credit card debt?
Look at whether you can minimise the interest you are paying. For example you could transfer the amount owing to a new credit card offering 0% interest.
Remember this 0% interest rate offer will only last for a fixed period (e.g. 12-24 months) and can attract costs such as account fees and balance transfer fees. You need to then ensure you have a plan in place to service this debt within the given time frame before the interest reverts back to the nominal rate of interest. This could however reduce repayments to give you a financial breather to get through tough times.
5. If I am impacted by COVID-19, what financial support is available to me?
The government has introduced a range of different support measures that will assist Australians through this time. This covers areas such as unemployment, underemployment, small business support, housing grants, benefits for older Australians and early release of superannuation.
It is tax time and unsurprisingly all of us taxpayers are more eager than ever to maximise their 2020 returns: Find out more here Maximise your 2020 tax return. If you have been working from home during COVID find out what you can claim in your Tax return for FY20: Working from home – what deductions can you claim?
Make sure you keep up to date with all the stimulus available. Read more here on what is available: COVID-19: Stimulus measure summary.
If you feel that you require further assistance or help with financial goal setting, you should seek personal financial advice.
We will continue to update our COVID-19 resource hub with important developments, so please return soon.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.