The COVID-19 pandemic is affecting everyone in different ways, but for women who were already underemployed before the crisis – with 10% of all Australian women of working age being underemployed – the current situation is making life much harder. This is compounded by other factors such as a looming economic downturn, as well as the casualisation of the workforce, which is having a detrimental impact on women in particular. Casual workers are more likely to be underpaid, go without benefits, and be treated as a commodity rather than a valued member of the team.
With all that’s going on it can be easy to get bogged down in the complexity of work and finances. Focusing on simplicity is the best way to take control of your future. Highly respected and successful people, such as former Australian Prime Minister Julia Gillard and Apple’s Steve Jobs, define simplicity as the key to success. With that in mind, we’re tackling how to take control of your financial future with some simple tips.
Tip #1: Focus on your essentials first
Having a simple budget just means you focus on the essentials first. This allows you to know where you can spend – or, to put it another way, it gives you permission to spend – rather than worrying about hitting targets or meeting complex detailed savings goals.
Women report having better budgeting habits than men. But if you’ve never had a budget before, or if you’re using the current downtime to get back into the swing of things, start by writing down a list of your essentials. Here are some.
Food and groceries
Utility bills (gas, electricity, water, internet)
Car registration and public transport fees
School and childcare fees
Your necessities should always be paid first, including paying yourself a certain amount for saving. (If you can manage it, that saving amount should be about 10% of your pay.)
If it makes your life simpler, set up an automatic transfer so that each payday the money goes directly into a separate ‘essentials’ account. That means you won’t have to think about transferring what you need when the bills arrive – you’ll have your essentials account on which to draw.
Tip #2: Pay down debt
Next, you’ll want to pay down any debts you have, such as credit card repayments and personal loans.
What’s left in your everyday account can then go toward your ‘wants’ – maybe a gym membership, subscription services like Netflix and Spotify, dinners out – or, depending on expert advice, you could top up your superannuation.
Tip #3: Set simple short-term and long-term goals
Your budget is not just a bunch of numbers representing what you can’t afford right now. Instead, managing your money so you know what you have represents you taking control of your money. A budget allows you to understand what you can afford to spend now and what you will be able to do in the future.
Did you know that 86% of Australians don’t know what their monthly expenses are? That’s because it’s easy to fall off the budgeting bandwagon and slip into bad habits. So, to make sticking to your budget simple, create goals or achievements. The trick is to mix up your short and long-term goals. Hitting your short-term goals keeps you motivated because as you strive toward your long-term goals there will be moments you feel discouraged. Amassing short term achievements encourages you to keep going. Here are some examples of what your short and long-term goals could look like:
- Save for an emergency fund – review your achievement every month. You will feel satisfied.
- Pay off your credit card in full and when it’s done congratulate yourself. This is a major achievement, especially if you have credit card debt.
- Improve your credit score – by always paying your bills on time and never missing a credit card payment.
- Try living frugally for one month to help identify your wants and your needs. Then, put any leftover funds into your savings, emergency fund or toward any debt you might have.
- Look at where you have budget leaks and plug them. Do you buy too much takeaway or go out to lunch when you could be bringing food from home? Are you shopping online a little too much lately? Can you cut unnecessary items from your grocery shop or save money on your utility bills or internet/mobile? Any cash you save can go into your savings, but don’t forget to reward yourself in a couple of months’ time – it might be a special dinner out or even a weekend away.
- Save for a more comfortable retirement. It helps to find your ‘magic’ number (use an online super calculator for this) and then work backwards to figure out how much you should be saving. The Association of Superannuation Funds Australia defines the annual living costs for a comfortable retirement as $62,269 for a couple and $44,146 for singles. Get expert advice on this from a financial advisor or accountant.
- Save enough for a home deposit: think 10–20% of the deposit plus purchasing costs.
- Set up a savings fund for your children’s education.
- Save for a major overseas trip or to do extra study. We certainly have time on our side during the current pandemic, especially as younger workers and women are the hardest hit by COVID-19 in terms of losing work, so online study could be the perfect way to upskill.
Tip #4: Plan for the unexpected
No one could have predicted COVID-19. It’s a difficult health and economic period right now, and we know many of us are financially impacted by the coronavirus and the accompanying economic downturn.
Considering that one in five Australians don’t have any savings to fall back on, having an emergency fund is not only highly recommended by financial experts but a proven necessity. An emergency fund can be used for unexpected expenses – such as car repairs or medical bills – or to cover costs if you were to suddenly lose your main source of income. The recommendation is to have enough set aside to cover three months of bills and living expenses.
Setting aside an emergency fund is step one when planning for the unexpected, but there are other safety nets you might consider putting in place: income protection insurance might be one. Income protection insures you in the event you or your partner can no longer work due to serious illness or injury.
Get started with a simple budget planner
Reducing your monthly expenses wherever possible may mean cutting out unnecessary subscriptions, calling your electricity provider and asking for a better deal, or doing one big shop every week rather than multiple – more expensive – grocery runs every day. If a change to your spending patterns helps you stick to your budget, then it’s good money management.
Ready to make your financial life less complicated? Write down all your expenses so you can get a firm picture of how you should be budgeting. Use a simple budget planner to get you started. Once you have your outgoing figures, subtract them from your income.
The perfect time to start budgeting was yesterday. The next-best time is right now. Embrace simplicity and aim to hit your financial goals with an uncomplicated budget. You can find more tips on budgeting and planning for the future right here at Ruby Connection.
The information above is general in nature. Always seek professional assistance to ensure that your decisions are appropriate to your personal circumstances and objectives.