How to restart your financial life during a COVID pandemic

2021-01-04
Do not wait until the conditions are perfect to begin. Beginning makes the conditions perfect. Do not wait until the conditions are perfect to begin. Beginning makes the conditions perfect.

Now that 2020 is behind us, it's time to check in on the emotional and financial damage suffered by the millions of Australians affected by COVID-19.

Job losses for some, reduced work hours for others, still others forced into early retirement - ready or not - many small businesses surviving one month at a time and families trying to make sense of lockdowns and restrictions - it’s safe to say there will be many COVID-19 flow on effects yet unseen.

We’ll all need to work through in some way.

Jump Ahead

How we all survived a Pandemic - so far

Whether you've successfully avoided contracting COVID-19 or whether your life has been touched by the loss of family and friends - often overseas - to COVID-19, chances are you’re also sharing in the financial and emotional stress of millions of Australians over the last 12 months.

  • Many Australians have racked up extra credit card bills to help make ends meet, while others have been able to take this time to prioritize their debt, consolidate debts and focus on reducing their cost of living.
  • Many pre-retirees have been forced into an Early Retirement — whether they’re ready or not.
  • Some investment property owners have COVID-19 affect tenants with newly unstable incomes and the new legal right not to be evicted for non-payment of rent during the COVID19 pandemic.
  • Many small business owners working hard to stay afloat are feeling strangled by their numbers and the uncertainty around.
  • JobKeeper Payment eligibility uncertainty and the looming specter of the government clawback of COVID-19 JobKeeper Payment entitlements paid to date.
  • Many investors in superannuation and shares have discovered (amid the volatility of the markets) they’re not as risk tolerant as they once thought they were.
  • And sadly, some people have found themselves and their relationships strained beyond what is tolerable, with some looking to exit their current relationship as soon as they can exit this pandemic.

We’re all in this together; so where to from here?

Don't ignore the effect of stress on your decision making ability

Whether it's procrastinating or avoiding difficult conversations all together stress affects us all, but particularly stress-events outside our control that directly affect our sense of future security.

Relationship stressors

Relationships Australia states, the quality of life and financial stress (mortgage stress in particular) is the number one cause of major relational friction.

  • When money is tight, arguments about how much money is earned and how it should be spent can be hard to avoid. This is not to say that money rules a marriage but a honest acknowledgement that a lack of financial resources can strain a relationship to a breaking point.
  • For most people, money is a daily currency we all use to show affection, provide support and make our contribution towards sharing in the life and love of our family and friends.

Average financial cost of connecting with friends and family?

  • Coffee with a friend average cost is $20
  • Movies with a mate average cost is$55
  • Simple lunch with a partner, be prepared to average $60
  • Taking the kids and family to a movie or dinner averages about $120

Positive Steps you can take now to better manage stress

As we all begin to come to grips with the longer term effect of the coronavirus on our own financial futures, there are steps you can take today to help return a sense of greater control over your financial future.

Even the smallest steps towards taking more control over our surroundings help us manage stress better.

  • Maintaining regular social contact with friends and relatives by phone or internet video chat.
  • Regularly checking in with friends via SMS just to say ‘G’day’.
  • Take time away from continually reading or watching the news media (remember the news channels construct their stories to shock, anger and annoy their audience to create a fear-based addiction around ‘needing to know what's next,’ so they can use their audience numbers as price justification for their advertising rates).
  • Eating better at meal times (and not in between), exercising more, reading a book about being a better parent, better lover, better pet owner, better DIY’er or homeschooler - these are the types of proactive choices that can help increase a sense of greater personal control over our lives.

Talk about Financial Stress

Many people in financial stress often suffer in silence feeling isolated and even ashamed of not knowing where to start, or who to go to for useful advice. When financially stressed, many just bunker down keeping a low profile secretly hoping something or someone will come along and rescue them.

  • For many people, they never had money conversations with their parents
  • The National Debt Hotline (a free confidential and independent telephone support service for all Australians experiencing money stress) says ‘When you’re struggling financially, it can be hard to know which debts to prioritize. But if you can prioritize, it will help you get back in control’.

Talking face-to-face with a trusted friend or a financial professional can help relieve the stress but can also put some things in greater perspective.

Do a DIY Financial Checkup

Every year (regardless of a pandemic) I encourage my clients, friends and supporters to develop the habit of doing a quick DIY financial checkup.

It starts with answering these three simple questions:

  1. How much money is coming into your home each month?
  2. How much is going out?
  3. Where and why is it going?

Once you’ve answered these questions (in honest detail) the next step is to look at your bigger picture.

Know your 7 Key numbers

As a minimum you need to know these 7 numbers.

  1. Know the in-your-hand total income coming into the house each month. (if you're paid weekly, multiply the amount by 4.3 for an average month's income).
  2. Know the total amount going out of the house each month.
    • What’s your needed monthly Mortgage repayment amount? or
    • What’s your needed monthly Rental payment amount?
  3. Know your monthly savings payment (whether you're increasing your mortgage repayment by a fixed amount, adding to your emergency fund or regularly adding an amount to an investment account, make sure you know your key numbers).
  4. Know your expected Quarterly Utilities and housing bills.
  5. Know your Protection costs (we use insurances to protect us from possible costs and events that would otherwise devastate us or our families, so this is part of our essential living costs).
  6. Know your Monthly Subscription costs (ie: Netflix, Spotify, mobile phone contract. (Subscription costs are the #1 reported surprise cost people complain about). Once a year, go through every subscription cost and make sure it's still giving you good value in exchange for what you're paying for it.
  7. Know your Food Budget.

Pro Tip: If itemised budgets and spending plans do your head in, you might like to learn about Percentage Based Budgeting instead. Be warned, it's kinda badass.

We can't control everything in our interconnect financial world.  Unquestionably the coronavirus pandemic has been beyond even our collective control. But at a local level - we can control how we react to changes; how we prepare and how, through many small steps, we can return to a feeling of more control over what we’re all working with today.

Make a goal this year to prioritize your debt

With home loan interest rates at a historically all time lows, now may be the best time to consolidate and pay down consumer debts, faster.

  • Many people are considering if they can get ahead by consolidating their personal debts (cutting up multiple credit cards) and refinancing with their mortgage.
  • Now while refinancing the home loan without a strategy is a recipe for disaster, reducing the overall cost of money by lowering interest rates and increasing repayments, might provide that sense of control you're looking for (and the one your future-retirement-self will thank you for).
  • Managing debts better and reducing their combined costs is one of those decisions we need to regularly review.

We don't know what's over the horizon (global pandemic anyone?) so getting control of debts, reducing our combined debt interest rates and increasing our debt repayments can not only increase our liquidity and build an instant emergency fund, it may help buffer us all from a more unexpected tomorrow.

If you're interested in looking at the potential savings available with a refinance and debt consolidation strategy, get in touch for a debt review.

Still more small steps you can take to get ahead

We can help you with all of these so get in touch with us for a chat.

Looking further over the horizon

The cost of the Australian government's JobKeeper stimulus package will ultimately have to be repaid by the government in their future budgets.

So new taxes on Family Homes, Superannuation and Investments perhaps direct inheritance taxes will all be up for public discussion in the coming years, so now is the time for us all to upgrade our own financial literacy and awareness and to learn how to model good financial behaviors to our kids.

It's time to stare down 2021

Being proactive puts you back in the driver's seat.
It might not address all your needs right now, but it can help you grow a new financial habit and perhaps reveal a more predictable pathway forward, through this mess we all face together.

Contact us today and see if we're the type of people you'd like to work with.

Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Westpac Businesses of Tomorrow National Awards. Drew writes for successful Small Business Owners and Entrepreneurs at Smallville, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

drew browne pic

Drew Browne

Sapience Founder & Director.
Simplifying Financial Complexity

Be the first to know!
Get our monthly 
Not-a-Newsletter

If you like it share it

Download our Free eGuide # 31 Good Money Habits

Download our latest Free eGuide

Download our Free eGuide # 7 Financial Decisions for Same-sex Newlyweds

Download our latest Free eGuide

Download our Free eGuide # 31 Families Lose a Parent Every Day

Download our Free eGuide # 31 Families Lose a Parent Every Day

Find us in The Better Business Book on Kindle

The Better Business Book Vol 3

Learn about Our Process

Every good decision follows a deliberate process and framework. This is how we approach our thinking.

Proress and strategy help make great fianncial decisions

11 Key risks every Australian should know

Know Your Risk

Know Your Risks

So what are the chances of...
Click to read more...

Want an easy way to upgrade your financial confidence, one month at a time?

Get our Not-a-Newsletter

Get our Not-A-Newsletter
Make your financial life a little easier
Get our Not-a-Newsletter

Our Connections

We're connected to every Life Insurance company in Australia

That means we really can give you the best available option

Why this should matter to you

  • AMP
  • AIA
  • BT
  • TAL
  • CommInsure
  • MLC
  • Zurich
  • One Path
  • Macquarie
  • Asteron
  • Clear View
  • NEOS