It’s almost inevitable that living through a global pandemic has changed the way you think about money.
Whether you’ve realised more than ever the importance of leaving some money aside for a rainy day, had to learn how to survive when the economy is down or even just want to save for your first big, post-COVID holiday, it’s likely your financial positions and goals have altered.
The data says so too, with AMP reporting that 42% of employed Australians believe COVID had a negative impact on their financial health.
The Australian Institute of Family Studies also found that Australian’s had a higher level of caution regarding spending, even among those who hadn’t seen a change to their income and among those financially affected by COVID, more than 70% were concerned about their financial future.
There’s never been a more apt time to think a bit more seriously about your money so here are five financial lessons to learn from COVID-19, as well as some quick tips for those still in it.
1. It’s time to create a new budget
Even if you already had a budget in place, the financial landscape has undoubtedly changed and it’s time to put together a new budget to match it.
Assistant vice president at Trustco Bank, Lauren Maxwell, tells CNBC of her best advice for making a post-COVID budget.
“In order to create a post-COVID budget for your household, the first step is to identify total monthly income. Many households experienced a fluctuation of their monthly income during the pandemic, due to stimulus payments and/or layoffs.”
Ms Maxwell also recommends free budget apps to help you keep track of your expenses. Some good apps include Pocketbook, MoneyBrilliant and Goodbudget.
Remember to adapt for new changes in your spending as you create a new budget. If you’re working home now that can save you on expenses such as childcare and petrol. Alternatively, you might not have been on any holidays in the past year and want to put some extra cash towards that. Of course your income may have also changed or you may still be receiving some government support.
Map out your new expenses and no longer relevant expenses and make a budget fitting for your new financial position.
2. Have a contingency plan
Probably the clearest takeaway from COVID is to have a contingency plan. This is essentially preparing yourself for negative financial events. KMT Partners recommends asking questions such as “What happens if I lose 25% of my income,” “What do I do if my expenses go up,” and “What if I get seriously sick,” and coming up with action plans for these circumstances.
An emergency fund is also a critical part of contingency planning. While the idea of an emergency fund is nothing new, COVID probably taught us that you might need a bit more in there than you think. Depending on your financial circumstances, you should generally aim for about three to six months’ worth of living expenses in your emergency fund.
3. Diversify your sources of income
This lessons packs in a couple of takeaways.
First of all, COVID was a reminder that even those who seem to have 100% job security can have their employment status crippled at any time. The lesson to take away from this is try and diversify your sources of income.
This could be done through increasing your investment portfolio and generating an income stream via investments. Alternatively, it could be done through beginning freelance work or working on other side hustles to ensure that if the worst case strikes and you lose your primary source of income, there will still be at least some money coming in from other sources.
Within the landscape of investing, the pandemic was also a not-so-gentle reminder of how easily industries and pursuantly, stocks, can crash. If you have high risk investments in play, consider diversifying them to hedge your bets if things come crashing down again.
4. Frugal friendship – You don’t need to splash cash
A more wholesome lesson the pandemic has taught us is that we don’t always need a bottomless brunch or a cocktail hour to catch up with loved ones. Living through times where the only way to see loved ones outside of home was outdoor exercise or eventually household visits in small groups, taught us that our accustomed ways of meeting at a cafe or nice restaurant can be easily adapted.
This isn’t to say never go out, but you can save yourself plenty of money by making some of your post-COVID catch ups cheaper, with options like walking the dog, doing a quick bushwalk or home-cooking for each other.
5. Stock back up on your super
In April 2020 the government made it possible for Australian’s to gain early access to their super for up to $10,000 if they were experiencing financial hardship, nearly 10% of Australian’s took up this option. This means plenty of Australian’s have a big COVID sized hole in their super that needs patching up.
Most Australians were already predicted to retire without enough super, so whether or not you dipped into your super to get you through COVID, it’s worth putting aside a bit extra each month to ensure you retire with what you need.
If you’re still in COVID ….
COVID is far from finished, plenty of Australian’s are still in lockdown or at least still feeling the effects of it. Especially those in Sydney may have a tough couple of months ahead of them, so here are some quick tips for personal finance during COVID.
Free financial counselling
There is plenty of free financial counselling available in Australia to help you through the pandemic. You can call The National Debt Helpline on 1800 007 077 and the Small Business Support Line on 1800 413 828.
Since the June outbreak banks are once again lending a hand to those experiencing financial hardship, Mozo has a comprehensive list of how your bank can help you out.
Ease up on Afterpay
In a time already stricken with uncertainty, putting your money into ‘buy now, pay later’ services such as Afterpay has never been riskier. For the time being it’s best to only spend what you can afford right now.
Look into other income sources
If you’ve got the spare time to monetise a hobby, do some food delivery on the side, rent out your car, safely play the stocks or anything else, now is the time to go for it. If you’re used to commuting an hour to and from work each day, then working from home gives you an extra 10 hours a week for you to cook up some extra cash for yourself on the side.