Whether you’re faced with a job loss, a change in financial circumstances, or a crisis like the current coronavirus pandemic, you’re likely feeling increased anxiety about managing your money.
But there are some simple things you can do to take control of your finances and manage your money with confidence during uncertain times.
Finance expert Natasha Janssens shares her tips.
Address your psychology about money
First things first: you need to address your psychology about money. You cannot begin to take control of your finances if you don’t first acknowledge and identify the mindsets or beliefs that are holding you back.
“Stress and anxiety in people is causing them to mis-manage their money and potentially make some big mistakes,” Janssens said.
Check-in with yourself and journal what it is that is going through your mind. Janssens said you should ask yourself: What are the big fears about what’s happening right now? What are the emotions that are coming up?
“Research has found that you will not make good financial decisions when you’re coming from a place of stress. That compromises your decision-making,” Janssens said.
“The other thing is, when we’re stressed and anxious, that tends to cause us to spend more. We get into that emotional retail therapy and think ‘I need something to make myself feel better’. That’s going to put a drain on your finances.”
Create a budget and take action
The next thing to do is create a budget that incorporates a detailed cash flow of your finances. What money is coming in versus bills that are going out?
“Figure out the lay of the land and where you stand at the moment financially,” Janssens said.
“A lot of these fears, questions and anxieties [about money] are coming from our imaginations. So, the antidote to that is to work with facts and plan out your cash flow.”
Once you have a detailed view of your financial situation, you can easily determine where you need to take action.
If your job has continued throughout the coronavirus pandemic, and you’ve shifted to working from home, Janssens said you should find it easier to save money now. This is because you can’t currently go out and spend money, and some costs like transport and parking will have significantly decreased.
“There is actually a really good opportunity, if your employment has continued, to boost your [savings] buffer,” she said.
If you have lost your job or your income has decreased, it’s important to know how much money you need to live off and how long your savings will last for the foreseeable future.
“You need to know what you’re aiming for,” Janssens said.
“If you don’t know whether the government support you’re going to get will be enough to cover that shortfall, you’re still going to feel anxious. Whereas, if you’ve figured it out… that’s a much a stronger position to be in.
“And then if there’s still a shortfall you can start to plan out how to bridge that gap, whether that’s switching your mortgage from principal and interest to interest only, or putting certain bills on a payment plan, or negotiating your rent with your landlord.
“It’s about pushing yourself to deal more with the facts rather than those imagined threats.”
Pivot, but be realistic
While you may be facing hardships, Janssens said it’s important to remember that you’ll be OK and that things won’t always be like this.
“You can pivot. Technology makes it so easy to do online networking. Look at who is hiring – it doesn’t matter if it’s not what you were trained for or wasn’t your previous line of work,” she said.
“Perhaps it means taking on a second job for the next six months or doing some freelance work on the side. Look for other ways you can generate income.”
While payment deferrals are an option, Janssens encourages people to only opt for this as a last resort, as you’ll be forced to pay for it in future.
“I’ve seen people with savings wanting to do home loan payment deferrals just in case. But future you is going to have to pay for that. Taking out money from your superannuation? Future you will pay for that,” Janssens said.
“If you are struggling to save now, then what’s going to happen when you have to pay back extra when things resume to normal, and you’re expected to keep on top of your bills and pay back what you owe?
“Recognise what is going to happen and be proactive about it. What can you do now to help yourself out later?”