Why Six Months of Savings is the New Black

Category: Manage Finances

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a comprehensive support package for people in the crisis, but the reality is in 5 months’ time that support will be withdrawn, and people will be expected to be back to normal.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

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Authors

Vanessa Stoykov

Vanessa has been passionate about writing and storytelling since her days of hiding under the doona with her torch to read after bedtime.
Kathy Skantzos

Kathy is a yoga-loving world traveller who also happens to moonlight as a business journalist and writer. She was the finance editor of news.com.au and the Managing Editor of CEO Magazine (Asia) before joining Vanessa and the evo squad.
Shayne Sommer

Shayne is second dan black belt in karate, and a budding romance writer with a difference. Why? Because she writes romance stories that always have a money lesson.
Antoinette Colbran

Specialising in stories for 50+ women, Antoinette draws from her own experiences to help other women avoid the pitfalls and see the benefits of understanding their money situation.
Michael Crooks

Michael Crooks is a more than 20 year writer and documentary maker who has worked with Time Inc and the BBC, who wants to expose the truth from real victims of financial crime to help others avoid their mistakes.
Kim Payne

Kim Payne has spent the past three decades as a speaker, trainer, business coach, and consultant in financial services. She has worked with and transformed hundreds of brilliant, educated, high achievers who are chronically under-living.
Rebecca Pritchard

Rebecca Pritchard is on a mission to help men and women achieve equality when growing a family.
Antony Perring

Ant is a writer, designer and business builder with a love of food, design and good living. He writes on food and money in an easy to do way.
Julie Hyde

Julie Hyde is a leader of leaders. A disruptor and a powerful people enabler who empowers leaders to make big things happen.
Joshua Pennell

As a Dad to four kids and a business owner, Josh is passionate about family and finances and is known as The Family Finance Guy.
Sid Lal

Sid is a serial entrepreneur who set up his first business when he was still in University. Since 2009 he has been heading Bruce Clay, first in India & more recently in Australia.
Lou Johnson

Lou Johnson believes in the power of sharing stories to build empathy, understanding and connection. Growing up surrounded by books and storytelling, alongside her drive to make a difference led her to a highly successful career in book publishing.
David Rae

Dave is a CERTIFIED FINANCIAL PLANNER® professional and has been a financial adviser since 2003. He works with a range of clients and has a strong focus on ethical and sustainable investing.
Natallia Smith

Natallia specializes in assisting pre-retiree single women—whether they are never married, widowed, separated, or divorced—understanding deeply the importance of financial stability during life's pivotal moments such as separation, divorce, retirement, and the loss of a loved one.
Mark Hoy

With over 15 years of experience in financial services, Mark established Wollemi Wealth Management in 2013. His business is built almost entirely on referrals and word of mouth — a testament to the trust, integrity, and long-term relationships he forms with his clients.
Derek Gascoigne

Derek Gascoigne is the State Manager for UniSuper Advice in Victoria and Tasmania. Derek has been with UniSuper for over 15 years, and his career in superannuation and financial services spans 27 years and counting.
Annika Bradley

Annika Bradley is Head of Advice Strategy, Research & Technical at UniSuper. She brings over 20 years of experience across investments and wealth management in both the public and private sectors.
Wayne Leggett

Wayne has been a recipient of numerous industry awards and was one of the first to qualify as a Certified Financial Planner (CFP). He has been heavily involved in industry affairs at the highest level, including serving as national president of the Association of Financial Advisers (now FAAA).
Conrad Francis

Conrad Francis is the Founding Director of Inspired Money, a Perth-based financial coaching and financial planning, mortgage broking and money coaching firm he established in 2011.
Andrew Beks

Andrew Beks is a Chartered Accountant and the founder of Simplified Business and Accounting.