Return to main website
Call Us 1300 300 922
Contact Us
Mybudget
How to budget for ‘what if’ scenarios (like coronavirus)
image
By MyBudget Editor

With what’s transpiring around the globe at the moment, it certainly heightens the need to stop and consider ‘what if’ scenarios more seriously. And so we’re asking the question: What do emergencies, such as the coronavirus, mean for your finances? As budgeting and money management experts, MyBudget is especially conscious of the potential impact that an unexpected break from work can have on individual and household finances, as well as the uncertainty that comes with the prospect of an economic slowdown.

Off the map

At the time of writing, the chance of catching coronavirus (COVID-19) in Australia is low, according to the Australian Government Department of Health . Still, public health officials are encouraging Australians to practice caution with extra handwashing and personal hygiene, and by avoiding contact with people who have coronavirus symptoms.

In the meantime, our newsfeeds are dominated by images of supermarket shoppers panic-buying rice and baked beans, and wrestling in the aisles over toilet paper. Travelers are being quarantined. Employers are hastily writing infectious disease policies and coming up with contingency plans.

Industries such as tourism and education are reporting sharp downturns and a handful of schools and companies have been temporarily closed as people test positive to the virus. The term “global recession” has already been mentioned and the prime minister is warning that it could be worse than the global financial crisis.

It’s easy to feel that we’ve suddenly ventured off the map and, not surprisingly, many are wondering what it all means.

Casuals, contractors and gig workers

The biggest immediate financial concern is for casual, contract and gig workers who have no paid leave entitlements to fall back on. Additionally, casual workers are concentrated in industries such as hospitality and retail where coming into contact with people is part of the job, and working from home isn’t an option.

What will it mean for non-permanent workers should their workplace be forced to close for an undisclosed amount of time or their hours reduce or they need to quarantine themselves or look after children when schools are closed or care for sick family members? The list goes on.

Considering that 25% of Australian workers are casual and that one in five adults has less than $250 in savings, the question is therefore a very important one.

Permanent workers

While permanent workers have leave entitlements to fall back on, those who have already used up their entitlements may also be vulnerable.

It’s certainly not uncommon for flus and colds to work their way through families one member at a time, while one or another parent takes carer’s leave for one child after another. In the case of coronavirus, the duration of carer’s leave would be longer than normal due to the 14-day quarantine involved.

Likewise, the government is recommending that returning travelers self-quarantine for two weeks. Some employers are requiring staff to use personal or unpaid leave to do so, all of which adds up to greater demand on leave entitlements.

Then there are the general effects of a slower economy on employee earnings—factors such as less overtime, lower bonuses and shutdown periods—all of which can reduce income and increase financial stress.

So, what can you do prepare yourself financially for the “what ifs”?

Preparing for potential income loss will help to strengthen your financial fitness overall. Should the day come that your work or income is affected by, say, a quarantine period or company shutdown, following these tips will help to make sure you’re ready for it.

1. Buy a little extra food when you go shopping

Experts say there’s no need for Australians to panic-buy or stockpile large supplies of groceries. Instead, it’s recommended to buy a few extra items each week. Not only does this approach put less strain on the supply chain—it puts less strain on your finances and means you can stick to your existing supermarket budget. Choose non-perishable items and food you can freeze, and don’t forget that grocery delivery is an option for people who do end up housebound. Aside from the convenience, online supermarket shopping is a great way to avoid impulse buying and to spot bulk discounts when you sort items by unit price.

2. Boost your savings

Having savings in the bank is the best way to protect yourself from financial stress. The aim should be to have a couple of months of income saved up, but even a few hundred dollars is a great start. If you’re wondering where to find extra money to boost your savings, it’s usually hiding in your everyday spending habits. Where could you find an extra $20 a week? Cancel an app or streaming service? Bring your lunch to work? Clean out the garage and sell items you don’t need? Every little bit helps when it comes to creating a savings safety net.

3. Avoid using your credit card or Afterpay

Make sure you’re living squarely within your means and not overspending. This is especially important for people who are concerned that their income may fluctuate or be unreliable in the future. The key to living within your means is to create a budget and stick to it. A detailed budget will show where your money is going and how to make the most of it.

4. Work extra when you can

If you’re worried about losing income in the future and you have the opportunity and capacity to work extra now, ask your boss for more hours. The important thing is not to spend your extra earnings, but to keep them set aside for future contingencies. If you don’t already have a separate bank account for your savings, open a no-fee account online.

5. Understand your entitlements

Most large employers are being proactive about plans to keep their operations running while protecting the health of their staff and customers. But a lot of other businesses are in wait-and-see mode, in which case, this could be the right time to have a talk with your boss about work arrangements and entitlements should the coronavirus cause disruptions. According to Fair Work, casual employees needing to look after a sick family member are entitled to just two days of unpaid carer's leave per occasion, but many employers are likely to be more flexible in light of the current situation.

6. Suspend subscriptions

A quick win for your budget—and a great way to generate spare cash—is to suspend or cancel your subscriptions. Pay TV services, gym and club memberships, newspaper and magazines subscriptions and meal box services are good examples. It doesn’t have to be forever—just while you build up some savings or get back on your feet.

7. Get conscious about consumption

Winter will soon be here and a lot of budgets will be stretched by heating bills, so now is the time to start thinking about energy efficiency in your home. Experts say that for every one degree you reduce the thermostat on your heater, you can cut your heating bills by up to 10%. A thermostat setting of around 20C is recommended. Also, plug up draughts, open curtains and blinds to let heat in during the day and close them at night to keep the cold at bay. When your kids emerge from their bedrooms in shorts and t-shirts and complain about being cold, remind them to wear warm jumpers, pants or dressing gowns around the house.

8. Shop around for insurance

When it comes to cost-cutting, the general rule is that a lot of small change adds up to big savings. One exception is insurance where shopping around can result in hundreds of dollars of savings in one foul swoop. Online insurance comparison sites such as Compare The Market allow you to compare a range of products and insurers. You might even find that your current insurer comes in cheaper, which means you can pocket the savings without swapping.

9. Talk to your creditors early

If you find yourself short of money and unable to pay your bills on time, talk to your creditors before the bills are due. It’s as easy as calling the company to explain your situation and ask for a payment extension. If your financial situation is more severe or likely to be long-term, you could alternatively enquire about financial hardship arrangements. (For MyBudget clients reading, this of course is a service we can do for you.)

10. Apply for government benefits

Should you find yourself out of work and with no job opportunities lined up, talk to Centrelink about unemployment benefits. A lot of people resist asking for assistance because they want to be independent (and because Centrelink can be difficult to deal with!), but delaying it can make the process more stressful.

The government has announced that casuals and independent contractors who can’t work because they have coronavirus or have to self-isolate would be able to access an existing government welfare payment called Sickness Allowance. It is a means-tested payment that currently provides up to $560/fortnight for singles without children and $1,010/fortnight for couples out of work due to illness. For more information, go to the Services Australia website. It’s not yet clear when proposed changes to current waiting times and other criteria will come into effect. We will update this information as we discover more.

11. Ask for help

If the idea of sorting out your finances makes you feel anxious, reach out to someone who can help. This could be a friend or work colleague who’s good with money. MyBudget would also be pleased to design a customised budget and money plan for you. Our budget consultations are free and the tailored budget is yours to keep.

12. Are you a MyBudget client already?

If you have any concerns about the impact of coronavirus on your income or budget, please get in contact with a money coach. We’re here to help every step of the way.

Read more articles about improving your financial fitness or, for help with budgeting and achieving your financial goals faster, contact MyBudget on 1300 300 922 or enquire online.

We're here to help
Our clients say that we are ‘life changing.’ This could be your story too.
Let's Talk