Managing your financial health during the COVID-19 pandemic

The COVID-19 pandemic has certainly disrupted our daily lives, forcing us to close entire industries and change our behaviour overnight.

With the lockdown directly affecting jobs and the economy, many people’s thoughts quickly turned to their finances.

Whether or not your income has been affected, now is a good time to get your finances in order.

Create a spending plan

The first step to good financial health is understanding your spending. That’s where a spending plan, or budget, comes in.

Start by identifying how much you need or want to spend in different areas of your life, like household expenses, leisure, travel and savings.

Then automate your cash flow by setting up multiple bank accounts to match the different categories.

Automating your cash flow allows you to understand exactly what’s coming in, where it’s going and what you’re going to save every month.

If you already have a spending plan in place, review it now and check that your expenses actually match what’s in your plan.

Make use of savings 

Gym memberships, haircuts, travel, takeaway coffee and lunches – the list of expenses we’ve been asked to put ‘on hold’ is almost endless.

With social distancing measures limiting our discretionary spending, many people will find a little more cash than usual building up in their accounts.

While there’s not much we can do about the lockdown, it does create an opportunity to re-evaluate your spending habits.

So if you have to go without your daily flat white, think about ways you can redirect those savings to improve your financial health. Below are three areas to consider.

Build up your cash reserves 

If there’s one thing the pandemic has shown us, it’s the importance of having an emergency fund to protect against the unexpected.

If you don’t have one already, set up a high-interest account or use an offset account to reduce the interest on your mortgage if you have one.

You should aim to build up enough cash in your emergency account to cover six months of living expenses, including housing, to protect you in the event you lose your job, fall ill or can’t work.

Ideally the funds will be in cash, so that they’re easily accessible and aren’t subject to market fluctuations.

Pay down debt

We’re pretty big on debt in Australia, using it to fund everything from housing to cars to travel.

But falling behind on your loan repayments, or struggling to juggle debt and living expenses, can lead to serious financial stress.

So take anything extra you’re saving and use it to pay off your credit card, personal, home or car loan.

Every little bit counts, as it helps reduce the interest you’ll pay on the balance going forward.

Supercharge your super

Once you’ve built up your cash reserves, and have your debt situation under control, you can look at putting any extra savings towards investments, like superannuation.

For those nearing retirement, or reliant on superannuation income, the recent market fluctuations can feel worrying.

But now is not the time for sudden changes, or you could be undoing years of hard work.

Switching to cash can feel safe, but taking this course of action is almost certainly locking in the losses.

Remember that markets are forward looking and will generally recover before the economy does.

While the COVID-19 pandemic won’t be with us forever, good financial management will.

By taking a few simple actions now, you can help protect your way of life far into the future.

 

Source: FPA Money and Life

 

 

Discover the benefits of a privately owned Licensee.

DOMINIC BENTLEY

CWP Wealth

“I have been with Capstone for over three years and have found them refreshing to deal with. They help you become the best version of your business. I can wholeheartedly commend Capstone to any planner.”

PAUL BRONSON

Bronson Financial Services

“At a time of industry upheaval, the support of Capstone has been a godsend. Everything they promised they delivered.If you are looking for a new licensee you cannot beat the Capstone service offering."

JASON DUDENAS

Canyon Financial Planning

“Capstone Financial Planning should be at the top of your list for a Licensee. Grant and his amazing team give a down to earth and personalised approach to supporting practices.”

MORGAN COLLINS

Lane Financial

“Capstone have some of the highest quality individuals in their team and it’s a pleasure to benefit from their insight and assistance. We really can’t recommend them enough to anyone considering a licensee.”

HELEN STEVENSON

Strategic Retirement Solutions

“I recommend Capstone to any adviser seeking to 'go out on their own'. They are a fabulous licensee!”

BOB CHEN

Everalls Wealth Management

“With Capstone I can operate my business free from conflict. They have no in-house products, a flexible APL, and an extensive list of SMA solutions. I recommend Capstone highly.”

JEANETTE SCHRAM

Nett Assets

“I can highly recommend Capstone for planners seeking an independent licensee that’s not in your face but provide quality support services. Their service and support is second to none and has allowed us to concentrate on providing our clients with a premium level of service.”

BEN DREW

Paradigm Principle

“Having been with Capstone for a number of years, one thing that really stands out is their willingness to help and can do attitude. These are qualities we really appreciate.”

JOEL BONES

IEC Advisory

“The team at Capstone are all genuinely really good people. They are remarkable with their service culture. They really do care what you think, and they are genuine about our joint success into the longer term.”

BEN MARSHALL

Benchmark Financial Planning

“During times of change, it has been reassuring to be with a licensee that regularly engages with advisers and takes feedback seriously.”

FIND A CAPSTONE ADVISER

PROUDLY ASSOCIATED WITH