Much of the media coverage of the coronavirus pandemic is focusing on the potential health impacts. The potential financial impacts are likely to be severe as well, including:
a slowdown in the economy,
drops in income, and
straining household budgets.
However, just like you can take physical health precautions, now is the time to contact us to discuss steps you can take to protect your financial health from the impacts of the coronavirus. Here are some suggestions.
1. Prepare (or review) your household budget
If you don’t already have a household budget that itemises all your income sources as well as all your expenses, now is the perfect time to do one. If you already have one in place, now is also the ideal time to review it.
Your budget should have a column for your income and a column for your expenses. Split your expenses column into two sections: essential and non-essential expenses. Essential expenses are all the things you need to live, such as food, accommodation and utility services like electricity.
Non-essential expenses, on the other hand, are things that you can do without, like entertainment.
2. Eliminate (or minimise) any unnecessary expenditure
You should immediately aim to eliminate or minimise any unnecessary (non-essential) expenditure. This will ensure you don’t waste any money you already have or that you earn.
3. Reduce your home/car loan repayments
If you have been paying more than the minimum repayment on your home/car loan, consider only paying the minimum payment required as per your loan contract.
You could also talk to your lender about reducing your home/car loan repayments before you miss any payments. You may be able to take advantage of the recent announcements by the big banks to pause/defer your loan repayments for up to 6 months.
It’s important to understand that late or missed repayments negatively affect your credit rating. If you develop a bad credit rating, you may find it harder to get finance in the future.
4. Review discretionary investment and super contributions
The share market is being heavily impacted by the global coronavirus panic at the moment, and this will affect super fund returns.
Under certain circumstances, superannuation funds may be accessible. Please contact us if you feel this might apply to you.
You should also contact us to discuss if it is prudent to temporarily cease any discretionary investment or super contributions if you’re currently making them.
5. Review your existing investment strategies
Now is not the time to panic. However reviewing your investment strategies is a sensible financial strategy, and it’s especially important during times of uncertainty. Please seek professional advice to ensure that your investment strategy is appropriate for both your current circumstances and your future needs.
6. Check if you’re eligible for any government assistance
If you’re running a business or you’re currently receiving a government benefit, you’re likely to be eligible for financial assistance under the economic stimulus package recently announced by Prime Minister Scott Morrison in response to the coronavirus outbreak.
7. Be wary of scammers
Unfortunately, scammers tend to target vulnerable people to exploit financially during times of uncertainty. Be wary of anyone looking to sell you anything that you’re not familiar with at the moment.
8. Prepare (or review) your Will
We don’t wish to be macabre. Preparing a Will and reviewing it when circumstances change is a sensible financial strategy for anyone, regardless of the outbreak of the coronavirus.
If you don’t currently have a Will, you should take the time to prepare one. If you already have one in place, review it to ensure that any wealth you have will be distributed the way you want.
Power of attorney is an important part of any estate plan. It will ensure your financial affairs remain in order if you are unable to sign important documents. With the coronavirus affecting the elderly more than any other age group, this could become a very important document.
The bottom line
Unfortunately, no one has a crystal ball to accurately predict the full impacts of the coronavirus. However, it’s important to take steps to protect your financial health (as well as your physical health) during these uncertain times.
Please contact us if you have any concerns about your financial health. We’ll take the time to understand your specific situation and needs before providing you with the best possible advice.