How to fix the leaks in your budget during this crisis – MoneyMag Share

Full article below written by Helen Baker and shared in MoneyMag April 2, 2020.

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Full Article Here:

We are hardwired for security. Right now, with the COVID-19 crisis changing life as we know it daily, it’s hard to feel secure.

Even more so if you’re one of the many who has suddenly found yourself out of work due to forced closures. How on earth do you stay afloat – financially and mentally?

I’m a financial adviser, not a psychologist, the years in this business have shown me that mindset is critical and that we are our best asset: without health, we have no wealth.

Get perspective

First up, remember that this situation is not forever. It too will pass.

Adopt a ‘C’ mindset

We need clarity, control, certainty and confidence. With a better understanding of what our ‘now’ and ‘future’ look like, we gain certainty—and with certainty comes confidence.

We can achieve, we can tackle and overcome difficult situations. We can do whatever we believe in.

Shore up the foundations

Financial security involves more than a bank balance. Your financial foundations revolve around five inter-related areas: spending and investment plan, emergency fund, insurance, superannuation and estate planning. Right now, addressing cash management aspects are critical.

The reality is we have to spend some money to live. Whether work has dried up significantly or stopped altogether, you need to look at what can provide income and how to reduce costs of living to preserve what you have.

Get financial assistance

The Australian government has put in some extraordinary support payments to help those suddenly jobless or work-affected due to the coronavirus situation. Put pride aside and accept help if you’re eligible.

While some businesses and industries are shut down, others – such as healthcare, supermarkets, logistics, and telecommunications – are hiring casuals.

I’ve been a big fan of superannuation as the forced savings we need for our future. That nest egg has always been available in dire circumstances – when in severe financial hardship, or due to a terminal medical condition for example.

The government is allowing sole traders whose business has been hit, along with jobseekers, early access to superannuation of up to $10,000 this financial year, and a further $10,000 in 2020-2021, tax-free. It may be the lifeline you need now.

Reduce your debt

Try to get rid of existing debt while you can. Pay down or consolidate debt as soon as possible, particularly on credit cards as they typically incur the highest interest rates.

While banks are letting homeowners impacted by the coronavirus crisis defer mortgage repayments for up to six months, providing some breathing space, there’s been no firm directive for landlords but you can ask for leniency. Rental assistance is also available through Centrelink.

Track your spending

If you ordinarily have little to no money left over after each pay, track your spending over a month and analyse where the money is going and where non-essential spending cuts can be made.

To do this, separate your spending into bills (housing, transportation, food, utilities and insurance), debt payments, entertainment subscriptions, and personal spending. Make use of online budgeting tools or track your spending on paper.

Fix the leaks

Shut down memberships and subscriptions to services you don’t use. They may seem small fry – just a few dollars a week each – but when you have a lot of them and you don’t use them for months, they add up.

Insurance, I stress, is not in the same category as these unused subscriptions. It can be tempting to let these policies go but I suggest unwise.

Look after yourself

When we’re hit with a whammy beyond our control, it can feel like the end of the world. It isn’t. Believe me. This is a time to look after yourself by getting good sleep, eating well, and exercising.  Take time to breathe deep, to slow down: it’s good for you!

Pick up that craft UFO (unfinished object) you’ve hidden in the cupboard or that book you left on the shelf.  Study something new online, whether for fun or to develop your professional skills. And pick up the phone to a friend every day.

It’s often not until major life events occur or something goes wrong that we get the wake-up call and realise a financial back-up plan is needed. If you’ve been living for the now until now, it’s time to chart your course for the future.

Article Written By Helen Baker April 2, 2020

https://www.moneymag.com.au/coronavirus-debt-budget