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Australian Government has introduced a range of measures for citizens facing hardships due to COVID-19, including payments to elderly, job seekers, and unemployed people.
Stimulus payments are directed to keep the Australians in business and jobs, and support those who have been out of jobs already. There are measures like early superannuation access and job seeker payment.
As per ME Bank’s Household Comfort Report for the six-month period ended December 2019, the financial comfort for Australians living in metropolitan cities improved while for regional Australians – it continued to slide, reaching the lowest point in eight years.
It was noted that financial comfort in the regional Australian has been on a downtrend, primarily due to drought and bushfires. At the same time, it was understood that record low mortgage rates and rising house prices had helped to improve comfort with debt in major cities.
Around 27% of households said to be benefitted by the record low interest rates, 23% of households cited adverse implications, and the rest took a neutral stance on the impact of record low interest rates.
Regional Queensland witnessed a sharp fall in comfort levels of households. Casual workers, having the lowest comfort across workers, continued their downward trajectory in the survey with comfort falling 4%.
Single parents continued to be numbered in the lowest in the comfort when compared to any household. And, households living on rent continued to exhibit low comfort albeit high rental payment stress.
Let’s discuss how you can spend the stimulus delivered by the Government:
Spend on essentials
Essentials are perhaps the most important items you would require surviving at home. If you have been buying essentials on credit, you should refrain from doing that as increasing personal debt won’t do any good to your near-term obligations – when things are normal, you will need to repay along with interest.
Get your spending sorted on food, staples, medicines, and other essential items, and maybe you’d want to buy puzzles and games for your kids so that they are not bored as long as lockdown is in place. Since you have work from home, you may also want to upgrade your internet plan to complement your usage.
Besides, you should spend the funds wisely and avoid panic buying – because the world is not going to end as a result of coronavirus – and you shall exhibit some social values in this Team Australia moment.
Work with your bank
Since banks are offering a lot of measures to people in financial distress, you should talk to your bank and check the available options at this time of crisis.
If you have lost your job due to coronavirus, there are multiple measures announced by the banks that you can avail at this point in time. However, you should consult the bank extensively and know about the consequences once this is over.
As the interest and repayments of your loans may not be waived but deferred, you may want to check what fits best for your circumstance – and continuing to pay-off or completely paying-off your loan obligations – may be beneficial if have resilient cash flows.
At the same time, you may discuss customised option if you are repaying your debt obligations early with your banks. And, bankers might be inclined to do so, given that large measures are already hurting their incoming cash.
Save or invest wisely
There’s never a bad time to save and when Government is paying you to carry on – your surplus savings are sitting idle that could be used to generate some returns – even increasing your term deposit allocation could be beneficial.
Investing doesn’t only mean term deposits, stocks or bonds, one can buy a health insurance policy, life insurance policy, home insurance, motor insurance and so forth.
Interesting Read: Guide to Build Emergency Proof Portfolio
Although it may not be a lot of money, Government payments could provide you with the headroom to continue with your normal life and not drawdown your precious savings.
Decide on superannuation drawdown
Since people in financial distress have the option to draw down funds from their superannuation account prematurely, a lot of Australians have already applied for the early super access.
As per reports, the number is estimated to be over one and a half million Australians. The Government has started to take applications for the superannuation withdrawal.
Even though the early withdrawal is tax free, the value it would have had say 30 years later – embedding all potential compounded returns on those $20k worth cheques – could easily dwarf the value it may provide you today.
One should consider taking out super, when it is extremely challenging to meet ends or when the individual is plagued with high debt, among other extreme level challenges. In addition, the markets haven’t been on the favourable track of late – drawdown may induce your super operator to sell out of holdings at lower prices.
Although you want to take out funds from your super, you shall consider applying for the amount you need and applying for whole $10k in two tranches is not compulsory.
Related: Super funds likely to embrace potential consolidations?
What about an emergency fund?
It could be the case that your job is safe but having an emergency fund will provide you with insurance for unexpected and unforeseen events. As we have been heading for potential recession, the risks of job losses are increasing imminently, thereby having emergency funds could be your saviour.
An individual could keep aside three to four months’ worth of expenses to be ready for any unforeseen events. It’s about planning things proactively, which not only applies to your personal life but professional life as well.
