Month: April 2020

By now the lockdown has really taken hold and we are all starting to understand what it really means living with social distancing and essential services only for up to six months at least.

It’s tough, and our way of life has been challenged in every way. Our kids are with us full time, our workplaces are home, or even harder, our workplaces are no longer working. No matter what financial position you are in at the moment, there are stresses and changes around money that are starting to make themselves obvious. Rents, mortgages and school fees were due on the 1st of the month, and the pressure is now on for survival – with nobody knowing how long this change in income will last.

For those with savings, life is infinitely easier than those who lived week to week. And the reality of our situation is that around 50% of Australia has less than $1000 in savings. Which means the government stimulus packages are the most critical thing for a large portion of Australia at the moment.

If you do have a level of savings to see this through, but you still want to tighten the belt (which is the thing to do in this environment) there is one thing that you can do right now that will change the way you come out of this COVID19 era and spend in the future.

It’s simple. Observe and reflect.

What do I mean by that? Over the month of April, the first full month of lockdown, observe what you are spending money on every day. And I do mean log into your internet banking daily, and note what goes on there – both credit cards and transaction accounts.

We all have more time, and making a 5-minute moment to check out your balances for the day will help you come to a big conclusion. What is essential that you must keep paying for, both now and in the future?

What are the things that come up that you can live without? Memberships? Subscriptions?

And what are the things you are saving money on, like eating out or take away, that you can live without when this is all over.

If you think about these three very important but distinct things, you can, over the coming months, paint a picture for you and your family, of what life will be like on the other side. Will you be eating out less? Walking rather than going to the gym? Spending less on fuel and working from home more? There will be dozens of ways you can see you are saving money. Some of those are surely sustainable even when this pandemic is over and we have a vaccine.

While there is no sugar coating how hard it can be to change our lives and our living/ working habits, there is an opportunity to change our habits and views on money, that can be of benefit to us and those around us, if we become conscious of it now.

And that is a silver lining.

Until next time,

Vanessa

There are many things we are all having to relearn during this pandemic.

While it was certainly challenging to begin with, it seems as time rolls on, and Australia seems to be successfully combating the spread of COVID19, more people are learning very positive lessons about life, business, and money from this environment. Here are three that I see as key lessons that have appeared very early on, as the world is gripped with the lockdown.

Number 1: Cash is king

Whether as a business or an individual, the big lesson is that it is crucial to have cash at hand. The liquidity cash gives needs to weather storms for both everyday life and business. The bigger reserves you have, the more confident you can be about your future, and take the time to look for opportunities to pivot and regain ground once social distancing measures are over. At least six months of savings to cover expenses is a necessity in the new world order.

Number 2: Debt can take you down

When things are going well, as they have been in our economy for well over 20 years, it is easy to see debt, with low-interest rates, as a key part of building wealth and getting what you want.

Many investment property holders have been left in a difficult position as a consequence of the pandemic, with their income slowing or stopping, but their debt still needing to be serviced. While not all debt is bad, the lesson from the pandemic is to keep light – the lighter the financial load you have to carry, the easier it is to survive.

Number 3: We can all live with less

While at first, it was almost maddening to slow down and not go on holidays, work trips and shows/concerts and theatre, it has now become obvious that not only can we survive without spending and doing as much, we can also save money and spend on what’s necessary, not just what is nice to have.

While I am not suggesting a life with no experiences, it is clear that we can all look at consuming less – which helps both our financials and the planet as a whole.

There is no denying this environment has held many challenges, there have also been some good and valuable lessons, which we should take with us into the future, to be better off in the long run.

Until next time,

Vanessa

As the dust settles on the shock of COVID-19, and the social isolation rules start to relax a little, it is time to reflect on what we have learned from going through this experience.

While there have been outcomes good and bad, with much stress and rush to change, one of the biggest things to become obvious is that individuals or companies that did not have adequate savings have suffered the most by far. While it has affected everyone, the people who have been thrust into the most difficult situations are the ones that have immediately lost their livelihoods and their security. We have been incredibly lucky that Australia has been able to deliver a comprehensive support package for people in the crisis, but the reality is in 5 months’ time that support will be withdrawn, and people will be expected to be back to normal.

While thousands of Australians have lost their jobs, even more of us have been forced to work from home, and also have our kids at home for homeschooling. The pressure this puts on the family unit is only made worse with the pressure of mounting financial doom – and there has been a scramble in both small businesses and individuals to try to understand how long they can last, with the cash they have.

It seems the pandemic has caught so many of us off guard. But what it has also done is give us a tide line for our money – a rule of thumb that most people can aim toward over time to make sure if anything ever happens again, they are secure.

The government support package lasts six months in total – and it appears that six months is a rule of thumb for the time needed to pivot, take stock, and head in a new direction. Which is why six months’ worth of savings is a mental must to feel secure in a world that is changing faster than ever before.

The first step toward getting this six months is to understand how much you need on a six-month average. I say this because you cannot think it is just a replacement for your monthly salary. Do you put things on credit card? Do you forgo savings to spend thinking you will catch up next month? Do you have big bills that come in quarterly? Like electricity? If so then you need to average out all costs over a six month period, to truly understand what covering your life or business for six months looks like.

Of course, saving is always a choice, and some of us don’t have the luxury of paying for anything beyond essentials. But for many of us, we have lived beyond on our means and been caught in an unexpected turn of events. I imagine the task of saving and building security will be more important than holidays and material goods in the next few years, due to COVID19.

Once you have your six months of savings, you can start thinking about other things. But there is no point distracting your financial goals if you don’t have your emergency savings in place. In times like this, cash is king.

So take stock of your own financial life before things return to the new normal. Understand what you need, and set yourself a goal. Because what you are really doing is buying yourself peace of mind. And you deserve it.

Until next time,

Vanessa