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How to manage your finances through the pandemic

Concerning new research reveals 4.2 million working Australians were living hand to mouth well before the coronavirus crisis.

Now, with potentially millions of people without savings facing unemployment in the wake of the shutdowns, experts are asking if the Government’s cash handouts can get struggling Aussies through the crisis?

The findings come from an independent survey of a nationally representative panel of 1006 Australian adults, commissioned by Money.com.au, a new consumer information platform offering finance options and budgeting tools.

The survey reveals nearly a third (32 per cent) of employed Australians are either in credit or have under $100 left in their pocket, after paying all their essentials each month.

Essentials refer to mortgage/rent, bills, groceries, kids’ expenses, household maintenance and supplies, and loan repayments.

One in five (21 per cent) are either in credit or only have up to $50 left each month, after paying for essentials.

Worse still, 70 per cent of Australians believed their discretionary income would have been lower or the same this year, even before the crisis (33 per cent said it would have been lower).

The Government’s cash handouts for lower-income Aussies was designed to inject money back into the economy, however, licensed financial advisor and Money.com.au spokesperson Helen Baker predicts this won’t be the case.

“The survey results confirm that Australians were already struggling to make ends meet and therefore have no safety net, with low wage growth and increases in household expenses the main factors,” Ms Baker said.

“Businesses and workers have been so significantly impacted from coronavirus – particularly the travel, hospitality and entertainment industries – that there are forecasts there will be two million unemployed.

“No one knows how long this pandemic will last and how much further the economy will decline, so those receiving Government assistance will need their cash payments immediately to keep living, as fears grow around when, and if, their next paycheck will come through.

The findings show the older population is struggling the most when it comes to having leftover spending money, with 43 per cent of over-60s admitting they’re either in credit or have under $100 left over after paying for essentials every month.

“It’s concerning, given that they’re at a stage in their lives where adequate funds should be set aside for retirement,” Ms Baker said.

“They’re also facing more pressures to save as cost of living and healthcare rises, and people live longer.

“Money needs to stretch for longer, but instead it’s depleting more rapidly than in the past.

“Older Australians need to assess ways they can cut back on their spending to ensure they can retire comfortably, by considering downsizing and even taking on jobs such as Ubering or mowing lawns.”

Helen Baker’s top 5 tips to help working Aussies manage their finances during COVID-19 and prepare for further potential job cuts:

1. Try to get rid of existing debt while you still can
Pay down or consolidate debt as soon as possible, particularly on credit cards, as they incur the highest interest rates. If you receive any bonuses or income outside of your normal pay, use this to get rid of debt while you’re still earning a steady income so you aren’t left in even deeper debt down the track.

2. Try generating a new income stream
Many finding themselves out of work will be thinking of ways to generate some income to help them survive the crisis. Think about what hobbies you can do from home that you could monetise, such as creating websites if you have the skills or offering music or language lessons via online videos.

3. Analyse your expenses to break the cycle
If you have little to no money left over after each pay, track your spending over a month and analyse where the money is going. You’ll be able to determine where you can make non-essential spending cuts. To do this, separate your spending into bills (housing, transportation, food, utilities and insurance), debt payments, entertainment subscriptions, and personal spending. Make use of tools such as Money.com.au’s budget planning spreadsheet, a free template that enables you to create a budget for your own circumstances.

4. Find work in industries that are moving
As people self-isolate and schools and businesses close, there could be a demand for work in certain areas – such as after-school care, tutoring and nannying (you will need a police check). Consider joining online sites that offer cleaners. Reach out to parenting groups on social media to offer your tutoring or nannying services. With takeaway services likely seeing an increase, get some work as a delivery driver for cafes, restaurants or online food delivery services.

5. Create a financial back-up plan
It isn’t until major life events occur, or things go wrong, that people get a wake-up call and realise they needed a financial back-up plan. If you’ve been living for the now, start building your emergency funds in preparation for a potential halt in your income stream. While it’s advised that you set aside three to six months’ worth of living expenses for emergencies in a normal climate, it will still be worth starting now.

Full survey results, including across age and State demographics, can be found here

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