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How to rescue yourself before the income cliff

Nicole Pedersen-McKinnon
·Contributor
·5-min read
How to rescue yourself before the next income cliff. Source: Getty
How to rescue yourself before the next income cliff. Source: Getty

You may be breathing a sigh of relief that your JobKeeper and supplementary JobSeeker payments are extended, at least in part, for six months to top-up your income.

(Although don’t miss the loophole that may let you claim both JobKeeper and JobSeeker, to retain almost the former’s full $1500.)

You may also be eyeing off a potential four-month extension on your mortgage holiday to slash your expenses.

(Although be sure to deposit enough to cover the interest that accrues each month unless you want to go backwards and end up paying way more as a result of this.)

Together these two things are a huge gift.

But probably the bigger gift you’ve been given is the gift of time - the time to implement a bottom-line streamline that could see you survive and even thrive on the other side of this crazy coronavirus thing.

What should you do?

One-third of all the adults in Australia are making hay while the sun shines and slashing their spend, says a new Canstar survey. That’s 6.5 million of us who are drastically reducing their outlay, so that their finances are leaner and keener on the other side of Covid-19 restrictions.

And – full credit! - it is young people who are tightening their belts the most.

Both Gen Z and Millennial’s outstrip the population average, with 38 percent and 45 percent cutting costs. Gen X is up there too at 39 percent.

Of course, we know that young people are the frontline of the economic crisis with particularly casual jobs lost, and many in hospitality and retail.

Even so, it’s interesting that Baby Boomers, whose super has taken a significant hit with the market ructions, are comparatively behind, with only 23 percent cutting back so far.

Of those Aussies who have already begun the austere adjustment, females are going much harder at 38 percent versus males’ 29 percent. Fifteen percent and 7 percent, respectively, still intend to tighten the purse strings.

The least concerned residents by location, it appears from the survey, are those in Western Australia (at 28 percent) and New South Wales (31 percent).

So, where do you start trying to milk out more from your money?

My tips for building resilient finances

Your personal finances boil down to two simple things: your money in and money out. While the first may today be further outside your control than for a long while, the second is entirely within it.

Your expenditure falls into two categories, too: your fixed costs and variable costs. But even this is misleading because your fixed costs are those you can likely cut most painlessly.

Think every insurance, utility, telco and debt product, especially your mortgage. The best–in–market rate right now for a mortgage with a real offset account – and therefore your benchmark rate – is 2.64 percent, saving $396 a month on the average $400,000 mortgage, versus the big-four average 4.48 percent undiscounted rate.

Meanwhile, your variable costs are far more determined by you and significantly made up of your discretionary spending. Think clothes, restaurants, entertainment, gym membership and travel.

One great way of culling and keeping the right stuff is to ask yourself this question: “What would I spend my last $10 on or what would I put it towards?” Then your second-last $10. Then your third-last etc. It helps you prioritise fast.

There’s a great free budgeting spreadsheet at www.moneysmart.gov.au.

Your deadlines for the streamline

You don’t have a whole lot of time to act. Here is every date you need to know, courtesy of Canstar, when your income may drop.

So these are your goal dates, to have your expenses overhaul complete.

COVID-19 Support

Dates

Description

JobKeeper

30 March 2020 to 27 September 2020

Eligible businesses can access $1,500 per fortnight for 6 months for eligible employees.

28 September 2020 to 3 January 2021

The JobKeeper payment will be reduced to $1,200 per fortnight for eligible employees working more than 20 hours per week and $750 per fortnight for those working less than 20 hours per week.

4 January 2021 to 28 March 2021

The JobKeeper figures will be revised down to $1,000 per fortnight for those working more than 20 hours per week and $650 for those working less than 20 hours per week.

JobSeeker

27 April to 24 September 2020

Currently a single recipient with a dependent child/children may be entitled to $1,162 per fortnight. This includes a $612 fortnightly JobSeeker payment, with an additional $550 from the Coronavirus Supplement.

25 September to 31 December 2020

From late September the Coronavirus Supplement will be reduced to $250 per fortnight for eligible recipients. A single recipient with a dependent child/children may be entitled to $862 per fortnight. This includes a $612 fortnightly JobSeeker payment, with an additional $250 from the Coronavirus Supplement.

1 January 2021 onwards

From January JobSeeker payments will continue, with the removal of the Coronavirus Supplement. A single recipient with a dependent child/children may be entitled to $612 per fortnight.

Coronavirus Supplement

27 April to 24 September 2020

A fortnightly payment of $550 if you already receive an eligible income support payment.

25 September to 31 December 2020

The Coronavirus Supplement will be reduced to $250 per fortnight for eligible recipients.

Early Access to Superannuation

20 April to 30 June 2020

Eligible individuals could request to access up to $10,000 from their superannuation.

1 July to 31 December2020

Eligible individuals could request to access a further $10,000 from their superannuation.

Prepared by www.canstar.com.au, 23/07/2020.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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