You’re not alone if you’ve been worrying about your finances. According to the wellbeing initiative Financial Mindfulness, 2.29 million Australians are today experiencing financial stress, which is more than eight times the number of people in pre-COVID times.
So, what has been bothering Australians? According to new study from the Financial Planning Association of Australia (FPA), concerns about job insecurity and the loss of super and savings are at the top of people’s minds.
According to FPA’s study of over 2,000 Australians, 11 percent are struggling to make ends meet as a result of unemployment or wage cutbacks from COVID-19, while 31% are tapping into savings to get by.
Many people have money regrets, with 70% wishing they had done things differently, such as saving more money for a rainy day, avoiding impulse purchases, and prioritising debt repayments. However, it is never too late to act now!
The COVID-19 pandemic has shown the importance of being ready for the unexpected. Understanding your current financial condition and short and long-term financial goals, or having a financial plan, allows you to better manage your resources, allowing you to live in the present while planning for the future.
Tips for putting together a sound financial plan
COVID-19 may have had a silver lining: it has taught healthy money habits in many people, such as saving more and spending less. Due to cancelled holidays and working from home, one in ten Australians stated they are in a better financial position than before.
While you may have developed excellent habits out of necessity, having a solid financial plan in place will help you stick to them in the long run. Here are some pointers to help you get started:
1. Distinguish between wants and necessities
If you’re on a limited budget, you can free up some cash by determining which expenses are necessary and which are optional:
Wants: These are costs that you can go without, such as eating out, streaming subscriptions, and gym memberships.
Rent or mortgage payments, other debt repayments, basic groceries, energy bills, transit expenditures, and personal savings are all examples of needs.
The goal is to spend as little money as possible on ‘wants’ and put that money towards ‘needs.’ Paying off debt and achieving your financial objectives will be a lot easier with this easy technique.
2. Reconsider your financial objectives
Many people’s financial objectives have been put on hold as a result of COVID-19. According to a recent survey, 60% of Australians have postponed an overseas trip, 29% have put off buying a car, and 22% have put off buying a home.
However, there is a silver lining to all of this: you now have the opportunity to recalibrate your financial goals. Perhaps you’ve depleted your retirement fund and want to concentrate on rebuilding your savings.
Whatever your objectives are, remember to keep the following in mind:
Big ambitions are like mountains in that they take a long time to achieve. Breaking down your goals into smaller, more doable steps might help you keep track of your progress and stay inspired. Attach timestamps to each step and determine what you need to accomplish at the end of each week or month in order to meet those smaller goals.
While objectives should be hard, it’s also crucial not to overextend yourself and set yourself up for failure right away. For example, if saving $500 a month is easy for you, try saving $1,000, but don’t go for something unreasonable like $10,000.
3. Establish an emergency savings account
COVID-19 has shown that unforeseen events might occur, causing all of your plans for the year to be disrupted. Having an emergency savings fund on hand can buffer you from the shock of these unexpected events. This is a money bundle that will cover all of your essential expenses for at least 90 days while you figure out what you want to do next.
4. Speak with a professional
If you don’t feel comfortable planning your finances on your own, seek the advice of a skilled financial planner or consultant. These are experts who can examine your unique situation and advise you on how to achieve your financial objectives.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.