So, Australia has reopened and your bank account has been emptied. It’s not surprising – between squeezing in four months’ worth of social catchups, pre-holiday sales and every beauty appointment under the sun, there’s suddenly a lot more things to spend money on.
But even as we embrace the pub with new gusto, there are ways to mitigate the financial damage. Here financial advisers share a few relatively pain-free tips for getting your money in order after lockdown.
Revisit your budget
The first step to taking charge of your finances is always creating a budget – but make sure you’re doing it the right way.
“A lot of people think that budgeting is about restriction and limiting your spending, when in reality it should be you fully comprehending what you’re actually spending every week,” says Victoria Devine, author, financial adviser and host of the podcast She’s on the Money.
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To budget properly, look at your bank account to see how much you actually spend on essential things like groceries – not what you want to spend. That way, Devine says, “you can align your budget and your money goals to your actual spending”.
The pandemic may have changed what you consider “essential” – for instance, Devine says, “if you found yourself thriving without a gym membership during lockdown, I think that’s something you could ditch from your budget”.
Cancel those subscriptions
Speaking of gym memberships, when yours reopened they may have started charging you again – even if you are no longer attending. Add to that signing up for every streaming service imaginable during lockdown, and it means it is time to take stock of your monthly subscriptions, and scrap the ones you aren’t actually using.
View image in fullscreenSmall recurring expenses like streaming subscriptions can quickly add up. Photograph: simpson33/Getty Images/iStockphoto
“Monthly subscriptions can be death by 1,000 cuts,” says Hamish Landreth, a financial consultant at Prosperity Wealth Advisers. “A lot of people take the view of, ‘oh, what’s another $10 a month?’ But those small recurring expenses can very quickly end up as quite a large annual outflow.”
Check over your bank statements to get a clear picture of what you are paying for each month. “If you are committing to an ongoing subscription or payment, it’s important to make sure it’s something you’re actually getting value in and not just paying out a force of habit,” Landreth says.
Curb online shopping
Similarly, if you became passionate about, ahem, supporting small business during the Delta days, Landreth suggests putting a cap on things.
“Coming out of lockdown it is realistic to assume some expenses, like petrol costs or work lunches, are going to increase,” Landreth says. “Try and offset these extra costs by cutting back on meal deliveries or setting some limits on online shopping.”
Automate your holiday fund
If you’re (perhaps optimistically) considering an overseas holiday in 2022, now’s the time to start saving. The best way to do this, Devine says, is to set up automatic transfers. First, open a savings account with a different institution to your everyday account, so “it’s out of sight out of mind”. Then arrange the automatic transfer for the same day your salary is deposited.
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It’s the set-and-forget approach to saving. “[Automation] can actually be a really good tool for people who don’t want to do too much with their money,” Devine says.
Check your income protection
Are you one of the Australians who changed careers during the pandemic? If so, you should check your income protection is still in line with your current salary.
View image in fullscreenIf your wage has changed during the pandemic, it is worth revisiting your income protection insurance. Photograph: Fly View Productions/Getty Images
“If there’s been a change in employment, you need to make sure that what you’re covered for is consistent with what you’re earning,” Landreth says. “So if people have changed jobs or their salaries are different, it’s worth making sure that the benefit amount remains appropriate.”
And if, um, you don’t even have income protection?
“Not everyone has it,” Landreth says. “But I would say it should be a very high priority for people that have financial responsibilities, either to a mortgage or to dependents, or anyone that would be in a serious situation if their ability to earn an income was taken away.”
He says this insurance essentially replaces your income if you’re unable to work for medical reasons. “It’s sort of like unlimited sick leave, if you will.”
Look at your loans
If you’ve got a mortgage, car loan or some credit card debt, this could be a good moment to refinance it, Landreth says. This isn’t particularly pandemic related – it’s just something worth doing from time to time to avoid paying what’s known as the loyalty tax or, less generously, “lazy tax”.
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“It’s a bit of a trend, unfortunately, that banks will often offer the best rates to new customers, often at the expense of their existing customers,” he explains. “If you’re a regular customer that never makes an inquiry, oftentimes you’re being overcharged on your interest rates. Whereas the customers that call up and ask for discounts or shop around are the ones getting the best rates.”
Cut yourself some slack
When all’s said and done, this is a moment in history when it’s OK to be a little less than perfect with our finances. Devine recommends planning to spend more than we usually would over the next month or so – especially as we’re also going into the festive season.
“We need to give ourselves a tiny bit of permission to spend a little bit more. It’s actually OK to go out for an additional glass of wine with a couple of friends right now,” Devine says.
“I feel like this could be classified as a little bit of self-care. It’s looking after your family, nourishing yourself and filling your cup back up after what has been arguably a pretty traumatic experience.”
Now that’s financial advice that’s easy to get on board with.
