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How to cope with the financial impacts of having less

05 May 2020

Right now, what we all have in common is the fact that our lives have been irreversibly changed by a pandemic. First and foremost, it’s a human tragedy. Following that, the impacts of the economic fallout of the coronavirus situation on our lives are being felt now. Applications for JobSeeker and JobKeeper payments to the government have soared and Westpac has seen an increase in customers seeking assistance with their finances both personally and if they have a business. Perhaps, you found yourself looking for financial support or working with the government to provide it for your employees. We are all affected in different ways.

The effect of the coronavirus on the local and global economy, including on employment, cannot be underestimated. The IMF has noted Australia’s growth (GDP) will suffer this year but rebound in 2021. However, it forecasts our jobless rate by the close of this year and throughout 2021 will likely remain poor.

Indeed Hiring Lab – Australia, a team of economists who provide insights on global labour markets, analysed ABS figures and noted in December of 2019 these three points in relation to Australia’s labour market

  1. Australian employment growth has slowed and is no longer sufficient to bring the unemployment rate down. 
  2. Wage growth has softened to 2.2% and remains below its average over the past decade in every industry except healthcare.
  3. Australia still has a youth unemployment problem, with young men struggling to find work and young women wanting more hours.

It seems the pandemic will only exacerbate the numbers, which, if point 3 is anything to go by, will not be a positive outcome for young people and women.

We’ve seen in the media and experienced how businesses and households have been deeply impacted by the lockdown measures needed to control the virus’ spread and the devastation wrought by successive waves of infection. Many of us are anxious and confused about where to start looking for support if we need it or think we may need it.

Mel Brown

Financial advisor Melissa Browne (above) believes all of us need to be mindful about our finances.

“This crisis is going to be a marathon, not a sprint,” Melissa says. “You need to think long-term and speak to your bank, your landlord, your health insurance provider, the ATO. In fact, contact everyone and see how they can help you financially now and into the future.”

Melissa lists 3 areas to focus on to prepare for the marathon ahead: income, expenses and assets.

Protect your income

“Understand your eligibility for the Federal Government’s various stimulus package measures. No matter how comfortable or uncomfortable you feel about applying, if you’re eligible you should apply,” says Melissa. “My message to all is that right now you need to protect the money coming in. Yes, be aware of how seeking assistance makes you feel but apply if you’re eligible.”

Reduce your expenses

“The way we lived before this health crisis is not the way we will live going forward. There was a lot of mindless spending going on in the past and now we need to be super-aware of what we are spending our money on and be very strategic,” says Melissa.

“Go through three months of expenses and look at what it covered. Cut out what isn’t essential. I’ll stress again, talk to your bank, landlord, various official providers, like utilities, phone, internet about making reductions. Do your research and reduce your expenses now. If your income hasn’t been radically affected, you could choose to spend more with small businesses you want to help survive COVID-19 or donate money to charitable causes. There’s also a little thing called building an emergency fund – usually about three months’ worth of living expenses. Emergency funds are a way of future proofing your income.”

Protect your assets

“Just because we can, doesn’t mean we should. For example, just because you can freeze your mortgage repayments, doesn’t mean you should if you can still afford to make your monthly repayments. The same with superannuation drawdown.

“You could go and grab $10,000 out of your super this year and the same next, but for most of us we absolutely should not be doing that unless it is the last resort. Do not apply just to keep your lifestyle going.

“In fact, I’m talking to people about applying social distancing to their super because it is a long-term investment. If you can, do try and keep saving for that house deposit so you’re ready for that opportunity to buy in the future.”

How I coped with job loss – stories from women

Architect Ana Marre was three months into a new design job when her life was turned upside down by COVID-19. Recently separated from her husband, Ana and her two children were starting a new life. They’d rented a home. Her children were settling into new schools and she into work after 18 months in Dubai.

Within 48 hours everything changed.

“All projects were put on hold and then we were all let go. It was only a small firm, but I think the owner just panicked. She let everyone go, closed the office and started working from home. It happened so quickly, and it was terrible. I was given two weeks’ notice and that was it,” Ana explains.

Ana immediately looked at ways to save and chose to break her lease on the house and move into one of the two investment apartments she owns.

“I couldn’t keep paying rent for the house, and because we don’t know how long this is going to go on for, I decided I had to move somewhere cheaper and keep my savings for as long as I could,” says Ana.

“Thankfully, the two-bedroom apartment I’m now living in became vacant but unfortunately the tenants in our other apartment can no longer afford to pay their rent because they have lost their jobs. I’ve been hit from every angle.”

Ana says she has applied for JobSeeker and has spoken to her bank about COVID-19 mortgage relief. She is also working hard at trying to see the upside to her current situation. “It’s an opportunity to be with my kids. My youngest was recently diagnosed with dyslexia. My plan is to focus on him and give him all the support I can. I know this is only temporary, and I do want to work again, so I just hope that this time with my children will be a positive outcome from this.”

How my business is coping

Occupational therapist Renee Gibbs says her clinical practice, which works with children who have severe injuries and disabilities, experienced an immediate 40 percent decrease in income once it became clear governments would be implementing and enforcing strict COVID-19 social distancing rules.

“We have to be so careful because we are going in and out of houses of very vulnerable children,” says Renee, who adds that she recently had to self-isolate for two weeks so she could care for a newborn baby with a severe brain injury.

“We have a team of seven and my business partner and I looked at our finances and knew we could not last beyond this July. We spoke to our team and immediately cut back on hours. We were quickly up and running on Zoom but unfortunately, it’s not appropriate for all our clients.

“Not being mathematicians, we did spend a lot of time looking at the government stimulus packages and how that looked within our business model,” adds Renee.

“We are very grateful that we will be able to keep most of our team on board due to JobKeeper,” she finishes.

Applying for financial assistance

Melissa says she’s had conversations with women who have been working part-time or full-time who are now receiving benefits that equal more than their previous pay and they feel guilty about it. Her advice is they shouldn’t.

“I’ve also spoken to women who are now at Centrelink for the first time in their lives and feel deeply ashamed about it. Put the money aside and build a buffer. Remember, these are stimulus measures. The government wants you to protect yourself financially so you can be part of the path to recovery and spend money later.”

Melissa points out: “For business owners it’s also really important that you’re still engaging and talking to your customers during this time. Let them know to come back. Let them know that you’re still here, so when this is over, they’re ready to come back and support you.”

The information on these pages does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it and always seek professional expert advice. 

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