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5 (fixable) signs you’ve lost control of your money during COVID

·4-min read
Real estate agent going through diocuments with concerned-looking couple.
Has COVID hit your financial security? (Source: Getty)

Almost two years into pandemic panic, your finances are probably not what they once were.

Don’t be too hard on yourself. In money, as in broader life, you can only control what you can control.

But as the pandemic (hopefully) peters out, it’s time to re-emerge, rebuild and reimagine.

In Part 2, we will look at exactly how you do that.

Also by Nicole Pedersen-McKinnon:

But first, Part 1 looks at how badly you need to?

Here are five warning signs that your money needs your urgent attention.

Warning sign 1: You carry over a credit card debt from month to month

Aussies have actually been cutting up their credit cards in droves across the coronavirus crisis. But there are still millions of people who have not - and who cannot clear their balance each month.

Collectively, Australians owe an ongoing $18 billion on cards and on that, pay an average of 18 per cent interest. Credit card interest rates - irrespective of how far the official rate has plummeted - have not budged.

If you started 2020 behind, it’s unlikely you’ve been able to claw your way ahead. It’s also possible you have slipped further into the red.

Do a little stocktake. How serious is the situation? In Part 2, we will redress it.

Warning sign 2: Your credit rating has fallen

Now, lenders in particular committed to all kinds of leniency when COVID-craziness began.

They gave repayment holidays freely. Of course, these were not ‘free’ at all because they are pretty much guaranteed to earn lenders more interest over a longer period of time… but that’s another discussion.

Some credit providers also agreed to keep these repayment pauses - and the fact that you needed them - off your credit report.

However, not all of them did. What’s more, it was different again with utilities providers.

The rules are usually that if you are more than 14 days late with a credit repayment, this is marked on your record under ‘repayment history information’ and stays there for two years.

With non-financial providers, think utilities and mobile phones, you get 60 days’ grace before a default is recorded against your name (you get a default if the bill is over $150). This hangs about for five years though.

Get your credit report and score now and see what might need to be repaired. You can do this free at getcreditscore.com.au, creditsavvy.com.au or finder.com.au. Just remember to unsubscribe from their marketing material - this is why it’s free.

And building on that last warning sign…

Warning sign 3: You can’t pay your bills or meet your credit obligations… still

There are only really two levers that drive your finances: money in and money out.

‘Money in’ is probably more ‘out’ of your control. And many people are still enduring the income-suppressing effects of pandemic restrictions.

But it’s possible there are still ways to make your money stretch by pulling that ‘money out’ lever.

Your fixed costs are the surest, easiest ways of doing this. Simply getting better deals on your utilities, insurances and credit products could save thousands this year.

But if you still simply cannot cover your cut-down costs of living, this is a big alarm bell. We will get into what you can do about it in part 2.

Speaking of spending…

Warning sign 4: Your buy-now, pay-later use is out of control

What defines ‘out of control’?

Probably more than four transactions on the go at once. And definitely more than one open buy-now-pay-later facility.

Businessman cutting a credit card in a bid to save money?
Have you got rid of your credit cards to save money? (Source: Getty)

This is the reason, I suspect, that Aussies are abandoning traditional credit cards.

But, although you must repay purchases with most facilities within eight weeks, it is very possible to overcommit. Without credit checks on this clever, scary shopping innovation, your pay could already be spent by the time it lands.

And stay away from any product that offers you early access to your income. You will pay dearly for the privilege.

Warning sign 5: You have used a payday lender

Payday lenders are more accurately known as loan sharks. But they are now disguised as legitimate, empathetic finance companies.

In fact, an advance could cost you the equivalent of 400 per cent interest.

Much like payday lenders, these products slip through the regulatory cracks - they are not governed rigorously under the Consumer Credit Code because they are small-amount credit contracts. And a planned crackdown has been ridiculously slow.

A final word: How has the pandemic impacted your money? If the answer is “significantly”, don’t fear. Instead, tune back in for Part 2 and we will get into some fast financial fixes.

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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