PWM: Article

PWM Advice – Protect What Matters Update May 2020

Budgeting, Business, Business Community, Cash Flow, Debt, Financial Advice, Financial Planning, Income Insurance, Income Protection, Insurance, Investment, Mortgages, Orange NSW, Personal Lending, Portoflio, Retirement, Self Managed Super Fund, Shares, Small Business, SMSF, Superannuation, Trauma Insurance

Welcome to the May Update

We want to welcome everyone receiving our update for the first time, including all our new clients, there is some information and ideas you already may know and some that may assist with getting through Covid-19.

Right now everyone needs to be focusing on their physical and mental health and putting themselves (and their families) before anything else. This will last for some time, world markets will be up and down, interest rates will be low, we will need to social distance, we will not be able to travel overseas for some time and hopefully petrol stays under a dollar a litre.

This update will focus on three points relating to you and your family in relation to the current state of affairs around the world at the moment.

  • What does all of this actually mean for my finances?
  • What should I be doing in the short term?
  • What can I do to make sure I’m positioned well for the long term?

What does all of this actually mean for my finances?

There are a number of areas that the Coronavirus Pandemic has affected and financially we have been hit hard with most of us  being unable to work due to our job type, having hours reduced or have been stood down. With non-essential services now coming back to work this week and the economy slowly starting up the measures in place will not be taken away, they will remain in place for at least the next 5 to 6 months.

Some of the measures are;

  • Economic support payments in March and July of $750 to Government payment recipients such as any pension and Family tax benefit recipients.
  • Coronavirus supplement of $550 per fortnight on top of the various allowances such as JobSeeker and Parenting payment, with Sole Traders and self-employed eligible.
  • JobKeeper payment of $750 per week paid to employers to assist to continue to pay staff or cover part of wages, this must be used for wages and is also available to Sole Traders and self-employed.
  • Early release of Superannuation in the current 2019/2020 year of up to $10,000 and then a further up to $10,000 for 2020/2021 from July 1, 2020.
  • Business Support Loan of up to $250,000, 50% guaranteed by the Government with no repayments for 6 months at an interest rate of 4.5%. This loan must be paid back over three years and is through your bank.
  • The ATO is doing what it can for Small Business covering between $20,000 and $100,000 of tax obligations, to maximise please speak to the accountant.

There are other measures in place that will have long lasting affects on the Australian economy, but needed to be put in place to support families and business.

What should I do in the short term?

Being at home, working from in some cases, schooling from home, not going to the pub or cafes or restaurants or movies, not using the car and being forced to reduce our discretionary spending can mean that we will have a better chance of surviving from a financial stand point, some ideas to assist in the short term;

  • Contact your bank about any lending you have, including home loans, personal loans, business loans and all credit cards and look at your rates. The current RBA interest rate is 0.25% and lenders have reduced rates to all-time lows, so please inquire about your options.
  • Look at consolidating debt where possible to make one payment rather than multiple payments and if you can reduce overall interest that is the goal.
  • If you are struggling to make any lending or credit card repayments contact your bank about deferring or reducing payments for a specified time.
  • Some banks are offering you the ability to pause minimum payments or reducing minimum payments to $25 a week for a specified time on lending, so give them a call and see what is on offer.
  • Creating a budget is essential, defer anything you can so long as it does not cause long term issues, if you are having trouble get advice from us.

What can I do to make sure I’m positioned well for the long term?

It is fair to say we are all experiencing something for the first time in our lives, that has affected us so much we have changed the way we live and will probably do so forever. Given the last financial market meltdown in 2007/2008/2009 was caused by greed, the fact this one has been caused by a virus what can we do so we are future prepared?

Here are a few ideas to;

  • Starting an Emergency fund – There is no ideal balance to have in it and there is no amount you need to start with, the best idea is to start one and add to it whenever you can.
  • Starting an Investment Fund – With many strong companies share prices lower at the moment and the fact many will recover and grow in time, it is a great opportunity to start investing. An ideal amount to start with is $1,000 and to add regularly to the fund to buy and build a portfolio, make sure you get advice though.
  • Personal Insurances – Having your income protected is so important and having Life insurance that covers all costs now and into the future if you were to pass is as important, make sure you get advice though.

Not taking on debt you don’t need – It might be easier to access lending at the moment given there are Government guarantees for some loans and repayment deferrals in place, just remember don’t take on more than you need because they will want you to pay it back eventually.