2020 hasn’t been smooth sailing especially for those who have lost their jobs or have suffered a pay cut. Australian financial adviser Helen Baker, shares her best budgeting tips for those feeling the financial wrath of COVID-19.
Recently my husband lost his job due to Coronavirus. While technically he is still employed, he has been stood down indefinitely – and he works for an airline, so things aren’t exactly looking rosy. More worrying is that while we’re technically a dual-income family, his income covers most of our family expenses while I reinvest everything I earn into growing my business.
While we are fortunate enough to have an emergency fund, we don’t know how long things are going to continue as they are. This situation has forced us to look at what we are spending our money on and be a lot more deliberate about our financial decisions.
This is the step by step approach we have taken. I hope it can help you too.
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Know your numbers
If you don’t already have a budget, now is the time to start. My first step was to get clear on the numbers. Work out what your new reduced income will be and then go through all your expenses to work out where you can cut or reduce. If you don’t already have a budget, start by going through your last few months transaction history and work out exactly what you regularly spend money on.
In our case, we are living off Job Keeper payments and have worked out a monthly amount that we can draw down from our savings to meet some of the shortfall for the next six months or so.
Focus on the essentials
I freely admit that before COVID-19 I thought everything on my budget was essential – but as it turns out there were a lot of areas where we could cut down. Our personal discretionary budgets have been cut in half now. You might decide to get rid of yours entirely until this crisis is over, but work out what you can afford personally.
Once you’ve cut from your discretionary budget, work out where you may be able to save on your fixed expenses. We have reduced our mortgage repayments to the minimum amount, but if you qualify you may be able to ask the bank for a “repayment holiday”. If you’re a renter, you may be able to negotiate a short-term rent reduction with your landlord. And many states are giving vouchers to help those in hardship cover their gas and electricity bills.
If you haven’t got an emergency fund yet and you’ve got savings from the changes you’ve made, now is the time to be flowing that into an emergency fund. I can’t tell you how glad I am that we were prepared enough to have savings to draw down on during this time.
Normally I don’t aim for frugality. I like my little luxuries and during normal times I manage to balance that with saving and spending responsibly. But at the moment the reality is that our family is having to make sacrifices. It’s disappointing not to be able to spend on things I enjoy and it’s hard that we’re not going to be achieving the financial goals we set for ourselves this year.
But I also recognise that it’s not forever. I think understanding that this is temporary and knowing that we’re choosing to make these changes to ensure our financial security makes it easier. I hope it can for you too.
Finally, neither my husband nor I are sitting around hoping that things will improve on their own. I am still putting everything I can into growing my business and my husband is exploring other options to earn income. I’m also recognising that this is a great opportunity for us to reassess our priorities and question the value of some of the things we previously spent (maybe even wasted) money on.
So, ask yourself what you can learn from this time and think about how you can get creative to earn more money. Now is not the time to be proud – try new things, ask for help and remember, you’ve got everything you need within you to find a way through this difficult.
Helen Baker is a financial adviser, who is also the founder of On Your Own Two Feet, a website dedicated to helping women gain financial independence.
More essential coronavirus reading:
Read up on what the government lockdown means for you, understand why Aussie doctors are up arms, be aware of the ‘hidden symptom’ of COVID-19 carriers, prepare yourself for the long-term mental health effects of the pandemic, get your sweat on at home with these free online workouts before reviving your over-washed hands with this DIY balm, and then console yourself with these unexpected joys.