- by Ana-Marie Lockyer
1. Don't panic and take stock
- You can make more rational decisions when you are informed so take a snapshot of your financial health today. In the past, my first tip would be to create a rainy-day fund for the unexpected – that was never to plan for the next global pandemic, however this is the environment that we are faced with today. So, before you can take control check in where you are at based on what you may have been preparing for. Look at what you own and what you owe – that is the starting point.
- Next prepare or revisit your budget. Sorted has a great tool for this. This will allow you to focus on what is coming in (your income) and what is going out (your expenses) and consider potential scenarios that may play out in this period of uncertainty.
2. Prepare to manage (and cut) your expenses
- In periods of uncertainty it is sensible to take a good hard look at your expenses. Whilst we should do this on a regular basis anyway there is no excuse not to do this now to see if you can free up some extra money in your monthly budget to manage income changes or prepare for the unexpected.
- Break your expenses into essentials (e.g. housing, food, utilities, medicine and debt) and non-essentials (entertainment, gifts, subscriptions, etc). You may be able to reduce the essentials. I am by not going to the supermarket and filling my trolley with things I don’t need but also reach out to your landlord or utility provider if you are under financial pressure to see what relief they may be able to provide. Then take a good hard look at your non-essential spending – you may be able to put some of these temporarily on hold or eliminate these all together.
Now is the time to focus on needs and not wants, so think twice on discretionary spend! If you have a bit left over don’t spend it but continue to put it away for a rainy day.
3. Review your current debt and contact your creditors
- Your budget may include debt repayment, which is an important piece of your overall financial picture. During times of financial uncertainty, it may help to have credit available when you really need it, but you must manage your current debt in the most effective manner. Reach out to your debt providers to see what assistance may be available some options may include temporarily suspending payments, moving to interest-only, fee waivers, etc. You could also consider restructuring your debt or consolidating and refinancing at cheaper rates to make repayments more manageable. Some of these options may help with your short term cashflows but ensure that you understand what they may do longer term to so you can make informed decisions.
- Prepare well for these conversations and don’t be afraid to proactively reach out if you are at risk of meeting a loan, mortgage or credit card repayment. Your creditors will want to work with you on a solution, but it’s important to contact them as soon as possible and explain your situation. Late payments can hurt your credit score, and pile on extra charges and fees, so getting ahead of the issue will save you down the road. Banks have relief packages available so look into them, and if appropriate, use them
4. Avoid high cost debt and seek objective support
- Consider all your options before you take on more debt to help yourself through any crisis. There are a range of financial support measures that the government has introduced to help New Zealanders with their money at this challenging time so check it out.
- If things get rough and you feel you need some debt to help you get by, do this sensibly - avoid high cost alternatives to get cash such as running up high interest rate credit card debt, using pay day loans with high interest rates or withdrawing from KiwiSaver or your superannuation scheme – these actions can leave you in a worse position and you will lose out when it comes time to retire!
- If you think you would benefit from an expert to help you look over your financials the team at MoneyTalks may be able to help. They provide a free financial helpline that offers confidential budgeting advice so you may benefit from an objective and knowledgeable set of eyes walking through your entire financial picture to help you identify options that can relieve stress and make it easier to bounce back.
5. Be aware of financial scams
- Unfortunately, fraudulent companies are taking advantage of people worried about Covid-19 and frauds and scams related to the virus are popping up everywhere, so please make sure you verify every call, link and email that comes your way – it could be a fake! The World Health Organisation offers some good advice.
The team at AA Money is here to help sort your money needs in a simple, transparent and trusted manner. We currently offer a range of vehicle loans and refinance options. If you would like to discuss these options, email or call the team at AA Money about this today. We are available on 0800 600 777 to help you sort your money needs.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.