When nothing is ‘normal’, take control with a financial plan
COVID-19 threw a spanner in the works for most Kiwis. Job losses, less income, no revenue for businesses, and still bills to pay and mouths to feed. But when nothing seems normal, financial planning lets you take control.
About a third of Kiwis had poor financial health before COVID. Younger people, females and those with inconsistent/ on call employment suffer more, with higher debt and a struggle to get the bills paid each month. 37% of Kiwis have no savings to fall back on, and often run short of money to pay for food and other basic living expenses. Most of these people, more than a third of NZ’s population, couldn’t survive for a month if their income dropped by a third. It’s a scary thought, especially if you’re on call or doing contract work.
And then, COVID hit. While some people could work from home, a large proportion of Kiwis lost their only source of income, and for many businesses and employees, things will take a long time to return to normal. But in the midst of uncertainty and chaos, you can create a financial plan, and take control back of your life.
Manage your short term finances
If things are tight, take a long, hard look at your lifestyle. It’s time to do a budget for this scenario—after all, no-one ever planned their finances around a world-wide pandemic. It’s worth taking a step back and assessing where you are financially as we recover from COVID.
Think about what expenses you need, and which you can cut back on. Kids only watching Netflix? Cancel Sky (there’s no sport on anyway). Insurance costs mounting? Call your insurer and chat to them about the options as there are many ways you can save money. Driving less, and looking like you could be permanently working from home? Think about cutting back to one car.
Be realistic, because cancelling insurance leaves you open to huge risks. Cancelling Sky TV doesn’t have the same negative effects, so you just need to be logical about where you trim your budget. Identify what’s really important to you. Likewise, don’t cut things that bring you joy; living a miserable life is not fun and is unsustainable.
Check to see if you’re eligible for government assistance. While a percentage of wages were covered during the pandemic, there could be more financial aid packages out there. Self-employed people are entitled to government assistance, and there are other forms of support:
- Wage subsidy extension
- Income relief payment
- Leave support scheme
- Wage subsidy
Start planning ahead
Once you have the short term planned and know you can get through the immediate pandemic, it’s time to look ahead. If a lockdown happens again, either this year or many years in the future, are you prepared? And if you want to be more financially secure, what does that look like to you?
An emergency savings fund
An emergency fund is something we should all have. While it can be difficult to save, it could mean the difference between surviving and thriving in hard times. In NZ, it’s recommended you have three months’ worth of wages stashed away for a rainy day. Most people don’t have those levels of funds easily available, so it needs to accrue over a long period. Start a small but achievable savings plan.
Some experts recommend that you should be saving 20% of your income. For many Kiwi families, that’s unsustainable. Choose an amount that you can stick to. Whether it’s $10 a week or something more, as long as you are contributing regularly, it will build up. $10 a week is $520 a year. Is that enough to support your family for a month or more?
Take a look at your post-COVID mortgage
If you own your own home, it could be worth refinancing your mortgage. At present, NZ has the lowest interest rates it has had for a long time. If you’re on a fixed term mortgage, it’s time to take a look and see if it’s worth breaking your agreement. Will any penalties be covered by the savings you make in interest? Also if you’re on a floating rate, consider fixing it for a period. If you’re unsure, your bank manager or financial advisor can help you run the figures.
Got spare cash?
Some people are secure in their finances and have the ability to benefit from a crisis such as Corona. House prices have dropped and the share market is weak – is this a good time for you to invest? You should be buying in doom and selling in boom in order to succeed financially. So many people panicked and changed their KiwiSaver plan when the share market dropped. This simply locked in their losses and lessened their chance of quick recovery.
Speak to a financial planner about the right time to upgrade your home or invest in the stock market.
Get professional help
There are a range of organisations who are available to help you with your finances. Budget advice is a nationwide group of people who can help you to manage your money. There is a free financial helpline through WINZ that offers advice to those struggling financially. There is also a comprehensive resource in NZ’s National Strategy for Financial Capability, which aims to help Kiwis become debt free and save for the future.
If you need personalised, holistic and professional advice about money, call Sam Kodi. A skilled financial advisor, he looks at your finances and can help you make effective financial decisions using his experience and financial knowledge. He can help you achieve your financial goals, whether it’s an emergency fund, paying off your mortgage, investing in rental properties, or that six month European holiday you’ve always dreamed of.