How to be financially smart

Regardless of the effects of COVID-19 on you and your family, the pandemic will likely continue to affect households across Australia for years to come. Having a plan in place, prioritising spending, and using resources efficiently will be the key to your financial stability.

The University of Melbourne completed a recent survey which found that 30% of those interviewed reported feeling financially stressed in terms of paying for essential goods and services. We know it’s tough out there and there are many Australians struggling.

We want to lend a hand, and the only way we know how, is offering our financial planning expertise. So, we have put together a range of tips for staying financial smart during COVID-19 and beyond.

Tips for staying smart

Build up your emergency fund

Times like these that really highlight the importance of having an emergency fund. An emergency fund is a stash of money set aside to help you weather the storm due to unforeseen circumstances, whether its unexpected car repair, job loss or global health pandemic.

If you haven’t started an emergency fund, the easiest way is to start small. Put a small amount aside each week or each pay period in a separate account from your regular day to day account. With the government proposed tax cuts, it’s recommended you put the extra dollars in your pay packet straight into your emergency fund. Also, if you receive a of lump sum whether that is a bonus or commission, or an income tax refund set aside as much of it as you can.

Inspect your Budget

During these times of uncertainty, many Australians have had their finances impacted. If you find yourself in this position, we recommend reviewing your monthly budget and look for ways where you can save money and cut back on non-essential items. To help you work through your budget check out our online budget planner.

Prioritise your expenses in your budget to housing, utilities, food, transport and communications and some clothing. Also, look at getting relief on your bills, by shopping around for utilities bills and asking your provider for further discounts, they can only say no. Ensure you make use of the governments Energy Made Easy tool, which helps you compare all your bills in the one place.

Review your financial goals

Unexpected events like COVID-19 can impact your financial goals. Ensure you talk with your family and consider your long-term goals to make well informed decisions. If you already have a financial advisor, now it’s the time to talk to them and review your financial plan. If not, it is the  perfect time to talk to a professional financial advisor to ensure your financial situation for now and the future.

Consider Refinancing your mortgage

With the mortgage rates at an all-time low, it’s a good opportunity to talk to your lender. Consider negotiating your interest rates. You could potentially save thousands annually by asking your bank for a better rate or even taking your business elsewhere if they can’t provide a competitive number.

If you’re not sure where to start and you want help refinancing your mortgage our lending specialists at Oracle Advisory Group can guide you through and get you the best rate.

Don’t focus on the market volatility

Volatility is an inevitable characteristic of financial markets. When stock markets start tumbling, daily infusion of bad news may sound like it will never end. It can spark anxiety, fuel uncertainty, and trigger rash decisions in even the most seasoned investors. While it is tempting to get emotional in a down market, we have a simple piece of advice: stay focused on the long term. The secret to weathering market downturns is keeping your emotions in check and staying focused on your longer-term goals.

Protect yourself from scams

During the pandemic there has been a rise in scams with over $5 million in reported losses since the outbreak of the coronavirus. Scams can come in many forms, the most common being phishing scams, which attempt to trick you into giving out personal information such as your bank account numbers, passwords and credit card numbers. We suggest checking out the ACCC Scam watch to help you better understand the types of scams out there to better prepare yourself. It’s important to stop and check, even when you are approached by what you think is a trusted organisation.

Inspect your Personal Insurances

Stay on top of your personal insurances and negotiate with your provider to get yourself the best deal. Increased market competition means most health funds are willing to negotiate with their clients. Some health funds have postponed any rate rises for 12 months in response to the COVID-19 pandemic.

Keep a close watch on your super

If you are feeling concerned about how the pandemic will affect your super balance, here are some tips to help you protect and grow your super;

Check your superannuation investment options

As super is a long-term investment, it’s important to check that your selected investment options are right for your age and stage of life. Taking on the wrong risk at the wrong time in your life can wear down your super. For example, if you’re just starting out and there is a long time until retirement, there’s time to ride out some of the ups and downs that come with higher risk levels. When you come closer to retirement it’s favourable to keep your risk as low as possible.

Switch to a low-cost superannuation provider

It’s vital to understand the fees and charges with your superannuation provider, as they eat up your super balance over time. Shop around and compare your super fund with other providers, but also remember to take into consideration factors like the super fund’s performance when deciding on super fund.

Avoid taking out super early if you can

Due to special circumstances of COVID-19, the Australian government has allowed early access to super. The cash injection of $10,000 or $20,000 might sound good to those that are struggling to pay for basic living expenses. However, it is important before accessing super to exhaust all other avenues first. Because accessing your super early will make big waves come retirement. For example, every $1,000 you have in super at the age of 30 will be worth around $4,500 by the you are 60. This gives you a clear understanding of what might be missing come your retirement income. To find out more about accessing your super early, go onto the Australian government site.

Make regular contributions

Another way to protect yourself is to grow your super balance is to consider making regular contributions. You can do this by salary sacrificing a set am amount a week. If that is not possible try making extra contributions wherever possible, such as tax return or a bonus.

It is vital to be well prepared to weather the economic disruption brought about by COVID-19. You can’t beat professional advice when it comes to keeping yourself financial smart for now and in the future.

It is worth investing your time and talking to a Financial Advisor, to review your financial situation and ensure you have the right strategies in place will enable you to keep safe and reach your financial goals.

Contact us or booking a free consultation

Important information Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.