Covid-19 coronavirus Financial Impact
Qantas announced this morning that they were ceasing the majority of their flights. As a result, they have decided to lay off 20,000 employees and cease paying salaries to senior executives. Many other businesses in Entertainment, Travel & Hospitability will close. Many people are suffering an unexpected loss of income. This will be a tough time for many.
What should you do to manage your finances in this situation?
- Access cash reserves
We recommend that people keep a minimum of 6 months net salary in a readily accessible cash account. When the entire NRL is living paycheque to paycheque it’s obvious that not everyone has done this. That’s a lesson to learn for the future.
- Update/Write a personal budget
What’s the bare minimum amount of money you need to get through each month?
Download your credit card statements into excel and turn it into a budget going forward. Divide the amount of cash reserves you have by the monthly minimum to determine how long your money will last.
- Cut down on discretionary expenses
Don’t cancel your Netflix, chances are you will be using that a lot more but there are some things you probably don’t need to worry about for the time being:
- If you have a membership that you cannot use consider cancelling or suspending it
- Temporarily stop your Charity donations
- Conferences/Concerts/Events/Fun runs (all likely to be cancelled)
- Cinema/outside entertainment
- Restaurant meals
- Travel won’t be possible
- Shop around for a cheaper phone, internet or electricity deal
- Is there anything else you are paying for that could be reduced or stopped?
- Talk to your bank
It is likely that Mortgage payments will be your biggest expense. The Reserve Bank is reducing interest rates but if you are having difficulty making loan repayments you should contact your bank and ask them for assistance. Banks can convert loans to interest only or temporarily suspend repayments. They are not losing any money by doing this so don’t be afraid to ask.
- Talk to your landlord
If you are paying rent, you should look at your lease to see when it expires. If you are on a month to month lease or have an upcoming expiry, contact your landlord and ask them if they are willing to temporarily reduce your rent for 6-12 months. Most landlords would prefer to accept a reduction in rent than lose a good tenant at a time when it will be difficult to find a new one.
A large number of furnished apartments are now coming onto the market as a result of AirBnB allowing free cancelation to their customers. Eventually, this will push rental prices down.
- Talk to other creditors
If you have bills that you have difficulty paying, you can contact the organisation and ask them about their hardship provisions.
There are strict rules about debt collection and they won’t be knocking on your door anytime soon so you shouldn’t be afraid to have an honest conversation with people that you owe money to.
- Access Superannuation for hardship payments
Depending on your circumstances, it may be possible to access up to $10,000 from your superannuation under hardship provisions. It also may be possible to access non-preserved benefits.
- Talk to friends & family
In tough times, we need to support each other and get through the crisis together. We will all need to share resources with our closest friends & family.
Where else can I get help & info?
Local, State & Federal governments are all offering programs and advice to people who need help. Visit the websites of your local council or member of parliament to find detailed information about the support available to you.
It is likely that there will be an evolving government response and more support programs will be rolled out over time.