Despite COVID-19 restrictions easing across the country, the economic fallout from the pandemic continues to be felt many thousands of Australians from all walks of life. However, it’s also the perfect time to look forward and make sure your finances are stronger than ever to meet whatever challenges arise down the track.
Indeed, with so many Aussies still experiencing employment disruption like layoffs and reduced hours, now is an ideal moment to look at your budget, actual spending, and savings to make sure you can navigate these unprecedented times.
With that in mind, here are some simple and effective ways to budget with the money you have right now to make sure you build a safety net of savings and protect your financial health for the long term.
Revamp your budget
When it comes to budgeting, now’s a good time to get money smart so you can emerge stronger and more prepared in relation to your personal finances.
First, you’ll need to reassess your income. When it comes to this side of the ledger, you can split things up into dependable income, like your salary and things like capital gains from shares or dividends, and examine what they look like now.
Depending on your individual circumstances, you might find your income has a new baseline if your hours have been reduced or if you’ve been impacted by a layoff caused by recent economic disruption. However your spending may have fallen more, creating excess savings which could be put away for a rainy day before your expenses increase again. Doing this analysis now, after forced cut backs in spending during COVID may give you a foundation to start reassembling a sustainable budget that works with your expected income during these difficult times.
Cut your expenses
If you’re strapped for cash, the next thing you may want to do when figuring out your budget is look at how you’re spending your money and where you can make cuts. Some of these cuts may have already happened due to COVID with the forced reduction in your discretionary expenses like shopping, eating out, subscriptions and holidays.
On fixed costs, like rent, utilities and insurances, you can also get active by looking for better deals or asking for payments to be temporarily suspended or deferred, then restarted as social distancing eases and your financial situation becomes more certain.
Take a close look at essentials
With essential spending like housing, it also pays to get creative. For instance, if you’re renting, consider letting out a room to a lodger to help make up a sudden fall in income.
Or, if you’re a home owner worried about falling behind on mortgage repayments, don’t hesitate to reach out to your lender about options for reducing your payments temporarily. You could also consider refinancing your home loan if that suits your particular financial circumstances.
Money for a rainy day
While some people may need to make fundamental changes to their budgets, today’s altered conditions also represent a chance to plan and safeguard against other unknown shocks that may occur down the track.
This is where building an emergency fund now is a smart idea. Just putting a small amount away on a regular basis can add up over time and make a big difference.
How much you should aim to have in your emergency fund will differ from person to person, but it’s advisable that it can cover the basics like rent or mortgage repayments, food, loan repayments, transport, utilities and phone and internet for two or three months.
The final word
In these unprecedented times, being as smart as possible with your money is more important than ever. If history has taught us anything when it comes to budgeting, it’s that being on top of your personal finances goes a long way when you’re looking for extra security and peace of mind in times of greater uncertainty.
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