We’re all a bit worried at the moment. If you’ve been paying any attention, you are probably absorbing a lot of news on the state of the world economy, unemployment rates and overall strain on society. But it doesn’t have to be all doom and gloom when it comes to your finances. While there are relief options for many affected individuals, your wealth management is the biggest influence on your personal finances.
A savvy approach to personal wealth in this economic climate is the best way to ease your circumstances. We’ve provided an in-depth look at some of the highest priority financial considerations you should be making during this time.
Review of Financial Activities
Regular review of your finances is crucial to navigating the current economic climate. Consistent assessment of all financial activities means you’ll need to evaluate any luxurious expenses you have to see if you can better use that money elsewhere. Your reviews should also analyse any ongoing financial commitments.
Cashflow Management and Budgeting
Proficient management of your cashflow is the foundation of any viable financial plan. You will likely need to re-budget if your income flow has been disrupted by the effects of the pandemic. Your regular review of your finances will make it immensely easier to budget. During this process, you’ll be able to reprioritise the expenses you cannot go without and manage your cashflow accordingly.
If you’ve not already done so, you should immediately check what individual and business relief entitlements you are eligible for. These relief options exist to make life a little easier for all of those who are feeling the strain at the moment. Repayment deferment for loans, early superannuation access, business support grants, JobSeeker, JobKeeper and rental and land tax relief are some of the most relevant to Victorians in need.
Life Insurance Premiums
Although you might be searching for expendable costs you can cut, we need to remember the value of the protection that life insurance cover can provide for us and our families during these difficult times. There are other alternatives besides cutting cover altogether that will save money. It may be appropriate to structure ownership of some insurance policies within superannuation to help pay for your premiums. Alternatively, look at trimming certain features of your policy, removing indexation, a premium pause (for up to 12 months on some policies), a temporary suspension of cover and premiums for up to 6 months without the obligation of a health or financial reassessment to reinstate cover or a temporary reduction of cover.
Income Protection Insurance
First and foremost, be aware that income protection insurance will not cover you if you lose your job. It will, however, cover you for illness or injury. Having sufficient cover (which is highly unlikely to be that which comes default with your super) is crucial. You should also know that most insurance provided by superannuation has a pandemic exclusion clause, something mainstream media has largely failed to pick up on.
You might be able to take advantage of any spare free time by having your Will and Power of Attorney drafted or reviewed – tasks which are frequently neglected in the modern age. The pandemic crisis has reminded us how unexpected circumstances can flip the world upside down. Estate planning is something we all need to think about in order to protect our legacy and ensure the fulfilment of our wishes, should anything happen to us.
Considerations for Investing
To navigate markets as volatile as these, we highly recommend consulting with a private wealth professional to assist your decision-making process. General investment principals suggest to:
- Focus on long-term opportunities – patience is a virtue;
- Review your risk profile – it’s a crucial determinant for your investment strategy in the future;
- Flexibility and planning will help you to take advantage of opportunities; and
- Consistently review your investment strategy to facilitate responsiveness in your actions, ensuring you can keep your best foot forward.
The tense state of the economy has incited reprioritisation for most people. These decisions are not to be taken lightly, with the focus for many on survival. If you’re unsure about how to handle your finances during the current climate, consider consulting a financial professional. Although this will invoke a fee, the knowledge you gain from that discourse can help your finances long term. If you have any concerns or are in need of any assistance regarding any of the above matters, please contact the team at Morrows.