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The pandemic has impacted the way we have lived our lives for most of 2020 and we now live in a new sense of normal. With predictions that coronavirus will still be circulating into 2021, the financial and mental implications are of great concern as families and individuals are continuing to be impacted.
With daily headlines and news updates highlighting the pandemic, it seems as a society we have become somewhat numb to the information we are being provided. When seeking information about the facts and support, we’re all feeling a little drowned by the masses.
In this article, we hope to deliver proactive steps to minimise financial stress now and into the future.
Are you looking towards the future however aren’t sure how to finance it? Talk to us today about how to structure a financial plan that starts with your dreams and goals.
How to manage your finances to minimise financial stress
Like any kind of stress, financial stress can range from mild (which may be caused by something like forgetting to pay a bill) to the extreme (where it starts to take over other areas of your life and essentially cripple of overall wellbeing). In many cases, once we strip back to the cause of financial stress it comes down three areas these include the following:
Not having a clear picture of your current financial position
It is common for people to only pay attention to their current account balance and the amount of the expenses they have owing. By taking the time to look at your entire financial picture you will be able to gain clarity around exactly how much you have to come in and when and how much you have coming out. The simplest way to achieve this is by creating a budget.
Having a clear picture of your finances is a fundamental step in our advice process and should be applied no matter what your current financial position is.
Having a lack of control is a huge contributor to stress. You can gain control by managing your expenses better and controlling how much you spend on non-essentials each week.
When creating your budget, you may have identified you do not currently have enough income to cover your expenses and that is where your stress is stemming from. Asses each expense you included in your budget. Can you reduce any of these? Can you cancel anything?
On top of managing your expenses taking some time to understand and review any of your investments or assets may help you gain more control over the options you have available to you, perhaps you have a redraw balance on your home loan.
The hardest part of creating change in most cases is taking the first step and being willing to create that change. Creating financial change can often mean making short term sacrifices in order to achieve long term goals.
For some, finding ways to reduce expenses can all seem too overwhelming and you simply may not know where to start. Thankfully during this period all major banks and providers are doing their bit to support their customers. If you explain your situation, many of the banks will be willing to offer you either a discount, deferral period or extension on payments during this period.
You may consider contacting:
phone and internet providers
energy providers
Insurance providers
banks to discuss an interest freeze on credit cards, personal loans, or home loans
Steps to reduce the risk of financial stress in the future
No matter what your current financial position is there are ways you can proactively minimise the risk of financial stress in your life. For those currently facing financial hardship, these are steps that you should apply once you have financially recovered from this period.
Create an emergency fund
Creating an emergency fund gradually over-time will ensure that when the unexpected things in life pop up, you have money available when you really need it. It’s recommended to try to save 3 months’ worth of expenses into your emergency fund. An easy way to build this is by adding 10% of your income into an emergency account.
Reviewing your personal insurance
We have all just witnessed the unexpected occur; being adequately insured is an important step in creating financial security. Based on your situation you should consider personal insurance and income protection so if something were to happen, you and your family are taken care of financially.
Creating multiple income streams
We are currently seeing unemployment rates rise over 10%. Both jobs and companies you thought would last a lifetime may have come to an end, putting you out of a job and in a comprising financial position. A second income stream however great or small can be a great way to add more financial security to your household and gives you peace of mind that you have something to fall back on if you ever need it. You could consider:
Building an investment portfolio that provides you with dividends
Taking up a side hustle could be selling a product online or at the market
There are currently government benefits available for those financial impacted by the Coronavirus pandemic. These benefits are designed to not only support households but also boost the economy.
You can find our latest update on benefits available here.
When to seek help
During these circumstances, it is normal to feel a level of fear or uncertainty and the level to which you feel these will be different to everyone. It’s important to remember any emotion is valid and shouldn’t be ignored, especially if you are stopping yourself from seeking help because you believe there are people in a worse position than you are.
For some, you may find that you want (and need) support taking the first step. For others, you may only require help when taking the final step. The most important thing you can do is seek help before you have pushed yourself to a state where you are overwhelmed.
During this period there are extra free support services available to help you.
The National Debt Helpline provides free advice and a step by step guide on how to manage your finances. They will be able to connect you with the right providers and guide you through the process
Beyond Blue can help manage the financial stress that comes with job loss, fear or uncertainty during this period. They will be able to connect you with free counsellors, financial advice and service providers who can help you manage both your financial and mental stress.
If you have a financial adviser, they will be able to review your entire financial position on your behalf. If you don’t currently have an adviser and would like to discuss your financial situation please don’t hesitate to get in touch with us.
The most important thing you can do during times of financial stress is to be proactive about improving your situation and not letting it have a snowball effect on your health and wellbeing. There are so many extra resources and professionals available during this period who will be able to help you get back on track and access the support, advice and benefits available to you.
If you would like to discuss your options with one of our advisers, you can book a complimentary initial consultation here.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
