20 January 2021
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One in five Aussies are financially falling over a Coronavirus-induced cliff

Peter Switzer
30 July 2020

The Coronavirus has caught a lot of businesses off guard, with few of us thinking that firstly we’d face a pandemic of Spanish flu proportions and threat but secondly it would lead to lockdowns, closures of operations and shut borders!

I could imagine in the past that many of us on hearing about a time like this one having the incredulous reaction: “Sure, that’s going to happen!”

Well it has and many Australians have been found out and it’s not just business owners.

The ME Bank’s latest biannual Household Comfort Report has concluded that this damn virus has found one in three Australians out for being hopeless money managers.

And I’d like to go soft on these ‘unlucky’ people but there has been a too cavalier approach to money by too many Aussies. And that’s why they find themselves in the pooh. I hope this terrible COVID-19 tragedy becomes the wake-up call that means a threat becomes an opportunity for many to get their money acts together.

Why am I being so harsh? Well, the following facts from the ME Bank Report, which surveyed 1500 households can’t be glossed over as simply being bad luck. These numbers are a call to action for 20% of Aussies to lift their game. Check these out:

  • 20% or one in five households have less than $1000 in the bank
  • 34% of Australians have less than $5000 in cash savings.
  • 9% of mortgage customers are unable to meet their repayments on time.
  • 65% of renters who pay more than 30% of their income have experienced rental payment stress.

With these sorts of numbers, it’s no surprise that 2.6 million people have withdrawn $31.6 billion from their super funds, thanks to the Government’s Coronavirus early access exemption. And to date, the $30 billion has come to households via JobKeeper and JobSeeker payments, which has gone to 40% of working Australians.

But it’s not all bad news. There is evidence that some Aussies are adjusting their lives to the new challenges of COVID-19. The Report found that 57% of households spent less than they earned – the highest level ever in the Report’s nine-year history! Also RBA stats show that we now owe $40.1 billion on credit cards. A year ago, that was $50.7 billion. So the annual interest bill we pay has shrunk from $30.8 billion to $24.8 billion.

That’s a great development but those accessing their super have created a future problem for themselves, when they retire,unless they get their money act together, as I said earlier.

Our financial planning business recently had to construct a plan for a wealthy couple who had precious little in their super fund, despite the fact they were in their 50s and planning to retire in 10 years’ time.

Our plan started with a budget, which most Australians think is boring but it highlights where your money comes from and where it goes.Using it you can create strategies to create savings that go into investments that can have exciting outcomes, like getting richer, having better holidays to go on, cars to drive and homes to live in!

And you can help others who you care about because you have your money act together, unlike 20% of Aussies!

The big lesson for anyone now financially struggling because of the Coronavirus’ economic implications is that after doing a budget, you have to do something I call GST’ing your life.

Effectively, if you save 10% of all the income you get and put that into what’s called a “buffer” account, you always have that emergency money to stop you falling over a cash cliff. Then you use your budget (which shows what you spend) to try and cut that spending by 10%. Effectively you’re taxing yourself but keeping the tax!

This is the road to riches. And if you embrace this starting point, one day you will Join the Rich Club, which is the title of my recent book! (Sorry, I couldn’t resist that.)

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