Taking care of your money during COVID-19
From investing to super to what to do if you’ve lost your job, these tips from a few finance ladies will help you take care of your money during the global coronavirus pandemic.
In the space of a few weeks we’ve all had to throw out the rule book and accept that 2020 ain’t going to be anything like what we had planned. As we continue to adjust to the ‘new normal’, many of us are now navigating the broader impacts of COVID-19 including what it means for our finances However, before you pull all your money out of the bank and start hoarding cash under your mattress, there are plenty of things you can do to care of your money even during a global pandemic like COVID-19. Whether you’ve lost your job, work for yourself, have a mortgage or are navigating the rental market, here is our guidance and advice for ladies no matter what situation you find yourself in. So, let’s dive in and be sure to look out for each other while we do it.
TIPS FOR TAKING CARE OF YOUR… INCOME
Help! I’ve lost my job. What support can I get?
Depending on your type of employment, different levels of protection exist to safeguard your job now and into the future. For permanent full-time and part-time workers, your employer might have temporarily stood you down or made you permanently redundant due to slowdowns in trade. It's important to clarify your current employment situation, the terms of payments and notice periods with your employer because it will determine what kind of support you can access.
Regardless of which category you fall into, the Australian Government has increased the levels of financial support available to those without work as a result of COVID-19. The Coronavirus Supplement provides an additional payment of $550 per fortnight to new and existing income support recipients (available from April 27, 2020 for a six month period). As well as this, the Government has introduced the JobKeeper Payment, which is a new wage subsidy available to employees who have been stood down or retrenched since March 1st 2020 as a result of the Coronavirus. This payment of $1,500 a fortnight is paid to employers to keep their employees on the books, and is available for full-time and part-time workers, sole traders, not-for-profits and casuals who have worked for the same employer for the last 12 months. In most cases, employees will receive a notification from their employer that they will be receiving this payment (and won’t need to apply or do anything further).
To find out more about JobSeeker payments visit here.
Help! I work for myself. What support can I get?
For those ladies working for themselves, the Government has introduced a range of new measures to support you during this difficult time. These include:
Access to the JobKeeper Payment of $1,500 per fortnight for up to six months
An increase to the instant asset write-off
The Backing Business Investment, a new incentive to support business investment and economic growth
A new Coronavirus supplement to increase and accelerate income support + more
To explore the full range of support options available to sole traders, visit the Australian Government website here.
I’ve still got my job, but not sure for how long. What can I do?
With so much uncertainty floating around, it’s totally normal to feel anxious, even if you still have your job. So, here are a few strategies to help regain a sense of control during this challenging time:
Chat with your employer about what’s going on to try and get a clearer picture of what the next six months is likely to look like for you and for the business.
If you’ve been toying with the idea for a while, now could be a good time to kick start a side hustle or find an alternative source of income (making sure you leave enough time and space to take care of yourself during this time too, of course).
If you’re looking to learn something new or up-skill, there are tonnes of online self development tools, short courses and workshops you can access (many of which are being offered at discounted rates). Do you research and find a course that interests you - General Assembly, Open Universities and edX are good places to start.
Start putting some of your income into an emergency fund or investment (more on that later).
Income Protection: what is it and does it cover you during a pandemic?
In our capitalist society, for better or worse, your ability to earn is one of your biggest assets. So we wanted to discuss Income Protection, a type of insurance that you might currently have (or might be curious to learn more about especially since our employment seems quite precarious right now).
What is it?
It is insurance that covers you if you are sick or injured and unable to work. It generally covers you for 75% of your income (before-tax). You can get and pay for this cover yourself through an insurance provider, or you can access this insurance via your superannuation fund too.
Does Income Protection cover you for pandemics?
As a general rule, pandemics aren’t excluded from your insurance cover, however they might not necessarily be included if you have default cover through your super fund. While most large insurance companies are covering those who contract COVID-19, it’s best to get in touch with your provider to see what specific details relate to your policy. And, if you’re thinking of taking out Income Protection insurance, it’s good to know that waiting periods generally apply. Like all things, do your research, and reach out to your financial adviser (or Jess!) if you need help figuring it out.
TIPS FOR TAKING CARE OF YOUR… BUDGETS + SAVINGS
Revisit your budget
No matter what your situation looks like, now is a good time to drill down on how you’re spending your money and where you can make a few changes, if necessary. If you have the time (and mental space) to reflect on how you’re managing your cash, here are a few places to start.
Savings and ‘emergency funds’ (they are different!)
What is an emergency fund?
A very popular piece of financial advice is to make sure you have saved an ‘emergency fund’ of around 3-6 months of living expenses that you can use as a financial safety net in an ‘emergency’ such as, we dunno, a global pandemic…! Emergency funds are also designed to cover things like:
Unexpectedly losing your job
Suddenly becoming the sole earner in your household
Your car breaking down
Needing some pricey dental work
In contrast, things like saving for a holiday or upgrading your car aren’t ‘emergencies’. In fact, these big ticket items are what a savings account is for.
TIP: If you’ve got an emergency fund (and you’re finding cash flow is a bit tight at the moment), now is the time to use it or top it up for some potentially tough times down the road
*A note on emergency funds → obviously, if you didn’t already have an emergency fund and you’ve lost your job due to COVID-19, this advice is a bit unhelpful and you’ll be having to look at other ways to get by during this time. That said, we hope in that annoying silver lining kind of way that this reminds every lady about the importance of an emergency fund, and that even a few bucks a week squirrelled away adds up over time.
Are all savings accounts created equal?
In short, no. And in today’s financial climate it’s more important than ever to do your research to make sure your money is working hard for you. Because rates are so low, our savings accounts will also be taking a hit in terms of returning interest. Alternatively, you could look into a term deposit account, which means you lock away an amount of money for an agreed length of time (the ‘term’) and you can’t access the money until the term is up. In return, you’ll get a guaranteed interest rate, so you’ll know exactly how much money you’ll have at the end of your term. Just know that if you need to access the money before the end of the term, you could be looking at a penalty fee. So, make sure you won’t need this money before locking it away.
TIP: Shop around for the best deal on a savings account and, don’t forget the neo banks (a.k.a. completely digital banks that don’t have physical branches).
Understanding your costs
Get clear on what your ‘fixed’ costs are (those that you know are coming in regularly and generally cost the same each time, such as your rent, mortgage repayments, insurance, school fees etc.) and then understand your ‘variable’ costs (those that you have some level of control over, such as food, eating out, online shopping etc.).
TIP: Set up separate accounts for both types of costs and add cash to them weekly or fortnightly from your income. This will ensure that you always have enough money for bills (even big annual payments like car rego), as you’ll have put away money each week to put towards it. Plus, some providers offer discounts for making payments annually instead of monthly, so check to see if you can score yourself a better deal. By separating your spending account from your bills, savings and emergency accounts, you’ll be able to see exactly how much cash you have left to spend for the week at any given moment.
Pay yourself first!
Most people try to save whatever they have left at the end of their pay cycle, but have you ever noticed that when you have a big goal in mind (like saving for a holiday), it becomes easier to make sacrifices to keep your day-to-day spending in check? This is because these goals are important to us and we can see a clear reward for our efforts.
TIP: To keep you on track with your savings, set up automated transfers into your emergency and savings fund as soon as you get paid and treat it like any other regular bill you pay. You could even try using another bank for these funds if you need them to be a little more ‘out of sight, out of mind’.
TIPS FOR TAKING CARE OF YOUR… MORTGAGE
I have a mortgage. What can I do to reduce my costs?
Possibly one of the only silver linings to all of this *CRAPOLA* is that, right now, mortgage rates are the absolute lowest they’ve ever been. Ever. So, how can you make the most of low mortgage rates?
Check your rate (and if it sucks, get it changed)
If you have a variable rate mortgage, find out what your rate is currently. To be competitive (i.e. in line with current rates) it should start with a ‘2’. If your rate is less than impressive, give your bank a call, tell them you’d like it reduced, and see what they come back with. Better yet, if you can’t be bothered to do any of this, find yourself a good mortgage broker (like Chandel!) and they will do it all for you...for free!
Switch to a cheaper loan product
If after you’ve negotiated you’re still unhappy with your rate, it could be the right time to look at refinancing your loan to a different bank or switching to a cheaper loan product at your current one. If your loan has a variable rate this will be relatively painless, but if you currently have a fixed rate loan, you’ll be looking at a fee for breaking your fixed period early. These ‘break cost’ fees can be anywhere from a couple of hundred dollars to a couple of thousand dollars, so it’s important to make sure that if you do break a fixed rate, you’re still going to be ahead financially. If this sounds like it’d be right for you, we’d really recommend speaking with a mortgage broker you trust, just to make absolutely sure that you’ll be doing yourself a favour not making things worse.
Is now the right time to fix my rate?
Over the last few weeks, we’ve seen incredibly low fixed rates being advertised by the banks, which can be pretty darn enticing. And while a fixed rate isn't necessarily right for everyone, taking advantage of these rates could be a good way for you to reduce your costs right now. However, there is a lot more to a home loan than just the interest rate, so, if you are considering a fixed rate, we’d really recommend speaking with a mortgage broker that you trust, to make sure you’re doing it for the right reasons. Here’s a bit more info on variable vs. fixed rates.
Can I access a loan repayment pause?
It’s important to remember that all banks in Australia have a financial hardship team and they are available to help you when adversity strikes. In fact, they can help come up with a temporary solution to support you through a period of financial difficulty. There are a bunch of options you can consider, such as a ‘repayment pause’ or even an extension of your loan term. Some banks are offering a six month pause on repayments, or a three month pause with a review, and then a possible extension of another three months. And remember: applying for financial hardship assistance does not affect your credit rating as it is a confidential arrangement between you and your bank. Know though that you will still accrue interest even if you pause your loan, but that might be better than having to scramble to make ends meet during this difficult time.
Use your offset account (if you have one)
Ladies, this is just a good tip to follow generally (regardless of whether we’re living through a 1-in-100-year-event or not). If you have an offset account (a.k.a. a transaction account linked to your home loan), it’s wise to keep as much of your money as possible in there, as it helps to reduce the amount of interest you’ll pay on your loan. More on the benefits of using your offset account here.
Should I make extra repayments if I can?
When rates are low, like right now, this is the best time to be smashing down that home loan. So, if you are fortunate enough to still be in a stable financial position (and we know that a lot of you aren’t) now might be a great time to be making some extra repayments on your home loan.
TIPS FOR TAKING CARE OF YOUR…DEBTS + LIABILITIES
I’m currently renting. What are my options?
If your income has been negatively affected during this time, then you’re understandably feeling anxious about how you’ll continue paying rent. Sending big love to you lady, that really sucks. You might have heard Prime Minister Scott Morrison mention that the government wants a six-month halt on evictions for Australians facing financial distress in response to COVID-19. When it comes to residential tenancies, however, it's up to each state and territory to create specific laws (meaning the rules are different depending on where you live).
The NSW Government has announced $440 million in relief for renters and landlords and has implemented a six-month ‘Evictions Moratorium’ (where tenants are unable to meet rental payments due to financial hardship suffered from COVID-19). To keep up to date with the latest developments, check out Tenants.org’s live FAQs page here.
So, what should renters do if you’ve been financially impacted by the Coronavirus?
Be proactive and transparent about the financial difficulties you might be facing with your landlord or rental agent.
Look up what is available in your state or territory on a weekly basis.
Get anything you agree to in writing (such as a rental reduction or pause).
Be cautious about agreeing to rental deferrals (where you have to pay back the rent later) as this may cause you significant financial hardship in the future.
I have a credit card and/or other liabilities. What are my options?
People often don’t realise but, pandemic or not, you can always reach out to your credit provider if you’re experiencing financial difficulty. In fact, they are legally obliged to work out a payment plan that is manageable for you. Whether you’re managing credit card debt, personal loans or tax debts, there are options available to you, so just ask.
What about my bills?
Similarly, if you’re worried about paying your bills at this time, you can also speak to your providers about getting some leniency here to ensure you reach an agreed payment plan you can afford. (If you hear of some providers offering support, let us know - we’d love to give them a shout out!)
TIPS FOR TAKING CARE OF YOUR… SUPERANNUATION
Help! I’m worried about my super.
What to do if you’re younger:
Selling your investments because you are concerned about further losses is a normal reaction, but that doesn't mean it's the right thing to do, especially if you’ve got many working years ahead of you. With so much time up your sleeve, try your best to be patient and remember that markets will recover (even if they’re experiencing some serious turbulence at the moment).
What to do if you’re older:
We really feel for you, ladies. Economic turmoil so close to retirement is incredibly stressful. In terms of your super, it depends exactly how long you have until retirement and whether or not you have most of your super in low-risk investments like bonds or cash. Best thing to do would be to seek specialised financial advice if you are close to retirement age before making any big decisions about your portfolio.
Should I be putting extra funds into my super?
Adding extra money to super could be a fantastic way to bolster your retirement savings. There are a few things you want to consider before doing so during a pandemic:
Do I have a good emergency savings buffer? If no, start here first.
Do I want to use before-tax money (concessional contribution) or after-tax money (non-concessional contribution)?
TIP: Make sure you factor in that there are contribution caps (and also bring forward rules) on super, that can limit how much you can contribute before being hit with extra tax. So, do your research and get across these thresholds before you start.
Want to find out more? MoneySmart has a super optimiser calculator to help you work out which contribution type could be right for you.
Should I stop putting extra funds into my super?
If you are at risk of going over your contribution cap for the financial year or you are now without any disposable income to contribute, adding extra money to super right now might not be the best thing to do.
Should I be accessing my super early because I can?
Although accessing $10,000 of your super this financial year (and a further $10,000 next year) has been introduced as a new measure to assist those impacted by COVID-19, there are a few important things to consider before you do:
Pulling some of your super out now will make a considerable difference to the amount you’re left with when it comes retirement because you’ve lost out on valuable compound interest.
Your super may have already taken a hit during the recent economic downturn, so withdrawing your funds now will mean you’re ‘locking in these losses’ (and not giving your balance the chance to recover and regain its value).
There are other options like speaking to your bank, pausing your home loan repayments, accessing government stimulus packages - accessing retirement savings is really a last resort. And if you’ve lost your job or your business has taken a hit financially, take a look to see if you’re eligible for the new JobSeeker or JobKeeper payments instead.
TIPS FOR TAKING CARE OF YOUR… INVESTMENTS
I’m currently invested, and I’m worried about the markets. What should I do?
Try to stay calm. We know this sounds a little condescending (especially in the middle of a global pandemic), but it’s really important that you don’t let your emotions take over. Remember: investing is all about playing the long game. So, before you sell everything and get out of the market entirely, read this!
Selling at the bottom of the market ‘locks in’ your losses, meaning it will take you longer to recoup these losses (or even break-even).
It's almost impossible to predict when markets will recover. Selling now could mean missing out on those few very good days that could make a massive impact to your long-term returns.
Markets are cyclical, meaning long-term investors need to expect periods of volatility and downtowns before we see corrections.
Don't throw out your investment strategy due to fear or uncertainty. Remember why you started investing in the first place and avoid deviating from your long-term plan.
TIP: Keep calm and stay invested.
Could this be the time to start investing?
If you have some extra money set aside for investing (and you’re sure you won’t be needing it in the near future for bills or rent or keeping yourself healthy) now could be a really great time for you to get started with investing. So, what should you consider before diving into the market?
DEFINE YOUR GOALS: What are you investing for? From enabling an early retirement to building passive income, it's important to align your investment strategy with clearly defined goals.
DETERMINE YOUR RISK PROFILE: All investment strategies come with a degree of risk. So, it’s about determining how much risk you are comfortable taking on and understanding the expected return.
MAP OUT THE COSTS: More often than not, there are unexpected costs that crop up when investing. Make sure to understand and accept the true cost of each investment across its lifespan.
UNDERSTAND THE INVESTMENT TIMEFRAME: Investing can be an emotional journey and when your investment strategy is influenced by your emotions, this is where you can make poor investment decisions. While you can’t control the markets, you can manage how you react to their swings. The expected timeframe of the investment should be considered when deciding what to invest in.
If you want more support trying to figure out if now is the right time to invest, get in touch with your financial adviser or get in touch with Jess at → hello@ladiestalkmoney.com.au
EXTRA TIPS & RESOURCES
Free childcare announcement
Thankfully, Australia's Childcare system will receive $1.6 billion in funding over the next three months to provide parents in need of daycare services to have FREE childcare during the coronavirus pandemic. To find out more about the Early Childhood Education and Care Relief Package, click here.
Support for those experiencing financial and domestic abuse
We know that women around the world are experiencing an increase in intimate partner and family violence as a result of COVID-19. Given that financial control is often one of the first signs that you or a loved one is in increasing danger, as a community dedicated to women’s financial futures, we want you to know that we see you and want to support you during this time. Here are some practical tools and resources for those experiencing financial and/or domestic abuse in isolation or lockdown. This article by Verve Super on how to spot the warning signs of abusive relationships, financial abuse and how to access support services (even while at home) is a great place to start. Verve has also put together this great COVID-19 Hub for women. And, as always, if you, or someone you know, would benefit from confidential support, crisis counselling or general assistance relating to domestic violence or financial abuse, here is a list of free, state-based and national support services:
1800 RESPECT: Free, confidential family violence and sexual assault counselling service. Phone: 1800 737 73
Family Relationship Advice Line: Information and advice on family relationship issues and parenting arrangements after separation. Phone: 1800 050 321.
Lifeline: Provides crisis support services. Phone: 131 114, 24 hours a day, 7 days a week.
National Debt Helpline: Free information and resources that can help if you’re struggling with debt. Phone: 1800 007 007.
We hope we’ve covered the stuff that will help you through this period lady, but as always, if you’ve got a question that hasn't been answered here, or you’ve got something you’d like to add, we would LOVE to hear from you → hello@ladiestalkmoney.com.au
Stay safe and look after each other.
Chandel + Jess
The finance info discussed in this article is general advice only. You should consider your personal circumstances or reach out if you’d like to discuss your individual needs.