It’s likely that you or someone you know has been impacted financially by COVID-19; losing hours, taking a pay cut or even losing their job. For many, this has acted as a wake-up call. Even if you haven’t experienced changes to your income, it’s an opportunity to think about what would happen if you did. How long could you maintain your lifestyle?
Current circumstances have reduced temptations when it comes to spending your money, and if you still have your income, you’ve probably saved a little more than usual. If you’re enjoying the feeling of having a little more money saved, you’re one of the many who are realising that frugal is the new cool.
As restrictions start to lift, it’s a good time to look at your habits when it comes to money, and make some changes that could see you reach your life goals – whether that be the trip of a lifetime, a house deposit or a cash buffer between you and the world.
Breakfast or travel?
It seems like a long time ago now, but there was a time when smashed avocado was blamed for millennials not owning their own homes. And while it was certainly a big stretch, with the breakfast out for a couple in Sydney costing around $50, there are some savings to be made. It won’t get you a house in the inner city, but $50 a week is $2600 a year which could get you more than poached eggs.
Things like café breakfasts and nights at the pub have been off the table during COVID-19, and this leaves many with the opportunity to see how much they were costing. It’s a good time to take a closer look at your spending pre-COVID-19 and understand where your money was going. It’s one of the first steps Apt do with our clients, and it can often lead to opportunities to save that will have minimal impact on lifestyle. A good place to start is with our tips for healthy financial habits here.
If you’ve done without it for a good two or three months, do you really need to go back to the same level of spending to be happy?
What makes you happy?
Your spending habits should reflect what is important to you. When reviewing where your money has gone, think about how it made you happy. It may sound a little Marie Kondo, but if it doesn’t actually make you happy, it’s time to reduce or cut it out altogether.
Many of us hate the word budget and associate it with ‘missing out’, but the reality is that setting one can make life better. The right budget should be about living for today while planning for tomorrow. Your financial goals shouldn’t be at the cost of your lifestyle today; if they are, they’ll likely be unattainable.
Start with small goals
If you haven’t been as good at saving as you’d like in the past, start with small financial goals so that you can see some progress quickly.
If you have personal debt, like credit cards, focus on that first. Debt is mentally taxing, and it can feel like you’ll never get ahead, but paying off your debt is proof that you can save that amount of money. Once the debt is gone, you can put the same amount towards other goals.
Look to build a cash buffer. If you don’t have debt, or it is minimal, think about building an emergency fund. This should be equal to at least a few months of your living expenses (ideally six). It will give you some security, because as we’ve seen lately, nothing is certain.
If buying a home is on your radar, it’s a good time to talk to a mortgage broker. A broker can help you assess your financial position, how much you will need, and how a lender will view your savings history. With the market tipped to fall in many areas, it may be a good time for first home buyers in the coming months, so it pays to be on the front foot.
Maximise your super withdrawal
If you have withdrawn super under the government stimulus package, it might seem like putting it back as soon as possible is the best strategy, but it’s not always the case. Returning the funds to super can be tax effective, but if you have long-term financial goals, like buying a house, the money may be better used by investing it in other ways.
Get a personal finance coach
If you’re ready to change your financial habits, reach your goals and live for today while planning for tomorrow, a personal finance coach can help you get wherever you want to go.
A financial adviser is not there to curb your fun; they are an expert in your corner who can help you get the best out of life, and that’s different for everyone. We’ve helped many younger clients to achieve a range of goals, from buying a home to paying for a wedding, travelling the world or even getting started with investing.
Contact Apt today to arrange a free chat and find out what a personal finance coach could do for you.
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.
