Turn back the clock two months ago and no one would have guessed that the world today would be in the middle of a viral pandemic. With many businesses closed, event cancellations and strict travel restrictions in place, the economy is taking a huge hit, and everyone is feeling the blow.
Now more than ever, budgeting is crucial in navigating through this crisis, especially if you have been affected by loss or a reduction in income. Budgeting during this time can be challenging to do, but these following steps might help minimise the impact of COVID-19 on your finances.
1. Have a clear idea of your income status
With a reduced income, or maybe even no income at all, you need to have a clear understanding of your positive and negative cash flow. Remember to include your rent, bills, and other financial commitments you have so that you can work out how much there is left to spend and save. If you’re still working but feel your job may be at risk, you should plan for the worst-case scenario and budget your finances accordingly.
2. Find out if you are eligible for income support
The Australian government has recently announced a $130 billion stimulus package designed for employers to help retain employees even if they’re not in operation. Before you head off to Centrelink to apply, contact your employer beforehand and ask if you are entitled to the JobKeeper Payment plan. It will also be helpful to refer to the guidelines here.
If you are eligible for payments from the government, you should factor these into your income when setting a monthly budget. You can also use these payments to pay bills that are due urgently. Any remaining amount should be stored as savings or in an emergency fund.
3. Determine what your essential expenses are
There are several things that you may need to keep paying for throughout this pandemic season. These could be but are not limited to:
- Groceries
- Utility bills
- Rent
- Home loan repayments
- Insurance
Most loan providers are offering temporary solutions in response to COVID-19, some are even allowing to defer repayments for up to six months (please make sure to read and understand all the terms and conditions). If you have not done so, it would be good to get in touch with your lender to see what your options are. This is the same for some utility providers. One thing to note: unless your income is at risk or you have lost your job altogether, hitting pause on your payments may not be the most financially sound option to take.
4. Prepare an emergency fund
No one knows just how long this pandemic will drag on, but we know for sure it won’t end anytime soon. If you haven’t started already, building an emergency fund will help in the event you need money for an urgent expense, like hospital bills. A good target is to be able to cover at least three months’ worth of expenses. However, with the unusual times we are in, it is better to set aside more, also taking into consideration the time for life to return to normal post-COVID-19.
5. Determine how to cover the shortfalls, if any
For some of us, the total expenses may outweigh that of our income even after taking government assistance and benefits into consideration. If that is the case, then you’ll have to figure out how to cover the arrears. You could consider working a casual job like food delivery or helping at your local grocer. However, before you apply, we strongly encourage that you check if this will affect your eligibility to receive government payments. You could use your emergency savings to cover these expenses, otherwise you could also consider selling items you no longer need.
This is a difficult time for many but making wise financial decisions can help get you through the pandemic and relieve some of the financial strain, hopefully without any long-term impact. Cut unnecessary spending and save where possible so you can be ready for the unexpected.
FutureNow Finance provides financial advice and solutions so you can achieve your goals sooner. We understand the terrible impact that COVID-19 may have had on you and your family. There is support and help available for you and we encourage you to reach out. Contact us today if you’d like to discuss your options. Call 1300 013 730 or email hello@futurenowfinance.com.au.