How COVID-19 is changing approaches to personal finances

Published on: May 5th, 2020

As the COVID-19 crisis continues to unfold, we are all facing changes to the way we live and work, and, for many, this is flowing on to how they approach their finances. Providing advice and managing funds for over 3,000 Australian families, we have seen a range of responses. I wanted to share some of the trends we are seeing, and lessons learnt along the way, as we all weather this storm together.

Values and goals are changing

One of the interesting trends we are seeing is that many people are revisiting their goals, values and objectives, not just in relation to their finances but in their lives more generally. What seemed very important just three short months ago may no longer have a place at all, as we all experience a very different way of life. And while some will return to their previous way of life, other’s values will be forever changed, and this will affect where and how they spend their time and their money.

For many, this experience has highlighted the need to have access to funds to cover basic expenses, because, if COVID-19 has taught us anything, it’s that we really don’t know what is around the corner.  If you are in a position to put a little extra away right now, then it’s a good idea, but if funds are tight, it doesn’t mean you can’t start thinking about the future and make some small changes to start cutting non-essentials from the budget.

Household budgets are tightening

As belts tighten for many families across the country, it’s important to make sure you are cutting the right costs first. One mistake we’ve seen is people deciding to reduce insurance cover in a bid to cut household costs, but you may be putting yourself at unnecessary risk. If you think your insurance premiums are too high or don’t provide the cover you need, it can be worth talking to an insurance expert who can make sure you have the right cover and may even save you money.

The first step to saving is to know where your money is going. While always important, it’s even more critical to take a detailed look at your outgoings as we navigate uncertain times. When we do this with our clients, we often find that they are surprised at how much they can save with a few small tweaks to the budget.

A simple tip to cut costs is to talk to your suppliers, from your telco to your utility company and even your home loan lender, you can often get better deals simply by asking. No one wants to pay more for electricity than they need to, so it can be worth spending a little time on hold to save money. It’s a good idea to research competitor’s deals before you call. That way, you can make sure your suppliers are meeting the market with their offer and, if not, consider switching.

Attitudes towards debt are shifting

We are also seeing more and more people realising the importance of minimising debt, because during uncertainty, you don’t need the additional burden, and, if you can’t pay, the interest can put you further and further behind. If you are in the fortunate position that you have the same income with less to spend it on right now, make paying off debt your number one priority.

Government support being considered  

If you haven’t taken a close look at the government stimulus packages on offer, they are worth exploring. Many people don’t realise that they are eligible, and it can be worth making use of these, as we simply don’t know what will happen next. If you are eligible to release money from your superannuation, you can read more about how and if you should use it here.

Protection for the future top of mind

The ever-changing situation has many more Australians thinking about income protection and even life insurances. With income affected for millions across the country, even if you haven’t been impacted, it’s hard not to reflect on what income loss would mean for you and your family.

Ditto with estate planning. More people are thinking about health and the realities of their own mortality. If you haven’t got your will and estate plans in order, it’s never too early to do so, but the reality is that one day it will be too late.

If you are considering your options when it comes to income protection and life insurance, it’s worth looking beyond the cover in your superannuation.

Superannuation and investment options being explored

If you are in the fortunate position to have extra cash to hand, it’s a great time to be looking at your investment options, but it’s important to buy quality shares and take a long-term approach. You can read our tips for investing during COVID-19 here.

For some of us, this crisis has made us take more notice of what is happening with our superannuation. It’s important to remember that this is your money, and you can play a role in protecting and growing it.

If you think back to 2008 and the GFC, you might recall people calling this a once-in-a-generation event, yet twelve years later we are seeing another downturn on a similar scale. These events can and will happen multiple times in your life, so it’s best to get the structure right.

At Apt, we work with our clients to structure their super to weather financial storms, and if you get this right, you can put yourself in a position to take advantage of market changes. While it’s not a good idea to switch your super to cash right now as you simply risk locking in losses, there are some things you can think about as we move towards recovery.  You can read our tips here.

More seeking expert advice

For many of us, COVID-19 has exposed financial vulnerabilities we may not have been aware of before, and we are seeing a rise in the number of Australians considering financial advice. The right adviser will make sure you have, or work towards, building a safety net that means you can weather financial storms, whether they be personal or, as in this case, global.  Recent results from CoreData research show that advised Australians have a significantly stronger safety net than those who don’t get financial advice and this is critical right now.

Financial planning is not just about saving for retirement, it’s about structuring your personal finances in a way that helps you live for today while planning for tomorrow and protects you and your family from life’s uncertainties. Get in touch with Apt Wealth Partners today to find out how you can benefit from a personal finance coach who can protect and grow your finances.

For the latest COVID-19 financial updates visit: Apt Wealth COVID-19 Hub

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.