As more and more individuals and families become financially infected by the coronavirus, it’s hard to shake the sense that all of us will be impacted in some way.
So – beyond the stimulus packages the government has announced – how can you prepare and protect your household?
There are five main ways.
1: If you have a mortgage, see if you can redraw any additional payments now
If you’ve been diligently paying extra into your mortgage – well done you! – then now may be the time to see if you can get it out, and instead put it into an offset account beside your mortgage.
This is simply a savings account that is still hooked to your mortgage and gives you the identical savings as a redraw (or should do, if it’s a good one).
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The difference is that doing so would ensure you retain access to this surplus-to-repayments money.
Though lenders are being the most understanding and lenient I have ever seen them, you just never know when some fine-print nasty might lock away this extra, emergency money.
When you instead sit your funds in an offset account, you are guaranteed they are there for any needed financial boost. You can also simply drip feed them back in as your monthly repayment if that’s the only option until normal life and livelihoods resume.
Doing so may also make you more likely to be approved for a mortgage holiday. I’ve had word that where people have extra money sitting in redraw, some lenders are requiring you to use that to make repayments instead.
2: If you have credit card debt, apply for a 0% balance transfer deal ASAP
An interest-free balance transfer credit card usually gives you a window of opportunity that I love to clear your outstanding debt as fast as possible. I call them get-out-of-jail free cards.
But if this crisis throws you into financial hardship, forget that, and use such a card instead as a tool to maintain your credit card debt with just the minimum monthly payments, while extra repayments are not possible.
Doing that with such a card will mean exorbitant interest won’t see your debt swell, as it otherwise would.
It will simply mark time. As you are.
You must move to a new credit card at the end of the interest-free period however, as the revert rate will be nosebleed. And whatever you do, don’t make more spending on this new card. Again, nosebleed rates.
3: Do an audit of your insurances
There is virtually no insurance that will today cover a pandemic, particularly not travel. But this seems a great opportunity to price check all of your insurances to see if you have the best deals.
For general insurance like car and home and contests, Google is your friend. For risk insurances like life and income protection insurance, you can use a comparison website like finder.com.au.
My guess is that if you have had your insurances for more than two years, you are paying over the odds. Switching to a cheaper product would, of course, take some pressure off your hip pocket.
4: If you have sharemarket investments - most of us have them in super - check your portfolio
Now, it’s easy to get spooked by what’s happened on markets in the past month. But a lot has already happened.
Though the volatility might be far from over, shares are now some one-third off their (overpriced) high in February.
Provided you have more than 10 years as an investment horizon – in other words, until you will need the money – it may be worth trying to ride the recovery. Those with shorter investment horizons have probably already sold a sliver, perhaps liquidating enough just to get them through to a recovery.
Key to making your money back in your super fund is to make sure the investment mix is right. The younger you are, the more you can afford to have in equities, and they are certainly more reasonably valued at the moment!
And promise me you will only access the $20,000 slice of super that the government has offered people who see an income drop of 20 percent or more, if you really need it. A $20,000 withdrawal at 35 could cost you $80,000 at retirement.
5: If you don’t love your job, or if you’d like to earn more money, consider skilling up
One of the beauties of self-isolation time is just that: time. You could while away the hours with Netflix or you could do something really constructive, like training for a higher paid and hopefully more interesting job when the world comes off its emergency setting.
Future-you – post-Coronavirus crisis – could be so much better off.
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