Why is saving money and financial security so important in 2020?
Although we’re not even halfway through 2020, it’s already been a year that has proven just how volatile markets can be, how much unexpected economic and social disruption can affect us, and the influence natural disasters can have in our lives. Even if your job isn’t at risk at the present time, it’s important to be prepared for the future to ensure you have some financial security when you need it most. After all, you will still have bills to pay, food to buy and other expenses
To ensure you have sufficient funds to pay your bills, mortgage and rent payments, and other expenses when times are tough, it’s a good idea to start building your savings.
Find a budgeting method that works for you
Using a budgeting strategy can be a good way to learn how to allocate your income to different expenses, such as rent or mortgage payments, food and leisure, while also building up your savings. There are plenty of different budgeting strategies out there that make it easy to learn how to budget, but the most important thing is to find one that you can stick with month after month. Don’t be afraid to test a few, such as the 50/30/20 budgeting rule or the Kakeibo budget. While the principles of each may vary, most focus on being more mindful of your spending habits, knowing where you may be wasting money and building your financial security.
Examine your current expenses
The results may be a little confronting, but it’s important to analyse how you’re currently spending your money to find out where you could be saving money. Take a look through your latest bank statements and try to group similar expenses, such as food, entertainment and other non-essentials, to get an idea of how much you are spending in an average month. Some banking apps also provide a breakdown of your spending grouped by category, which can make it easier to see where you’re spending.
Start making small changes to the way you’re spending
If you’re new to saving money or just want to put away a few extra dollars here and there, one of the best ways to save money is to make some small changes to the way you’re spending during an average month.
While it may not always be the case, many of us can find ourselves blowing out the budget thanks to food-based expenses such as takeaway or buying more than we need. You may be able to start curbing your spending on food by:
- Switching to generic brands for staples such as flour, sugar and rice
- Planning your meals to avoid spending money on food that would otherwise be wasted
- Cooking at home more frequently instead of ordering takeaway meals
- Purchasing fewer takeaway coffees
If you’re serious about saving money, it’s also a good idea to reevaluate the following:
- Any subscriptions to music or video streaming services
- Gym memberships you’re not using
- How often you’re using taxi or ride-sharing services when you could be using public transport
- How much you’re spending on unnecessary clothes, shoes and accessories
Save money on household bills
When you first sign up for an electricity, gas, internet or phone connection, you may receive a great rate or a special deal that sees you saving on your bills. However, these special deals and rates won’t necessarily last past your initial contract period. Don’t be afraid to shop around for a better rate from other providers, as you may be missing an easy opportunity to save money.
Take stock of your saving accounts, loans and credit cards
Keep an eye out for high interest, low fee accounts. A high interest rate can work wonders to boost your savings with minimal effort.
Don’t be afraid to open an account with a bank that’s not your usual financial institution. Just like anything, it pays to shop around to find the best rates.
Consider a term deposit if you’re in a position to use one. They can be a risk-free way to let your savings grow.
Consolidate multiple loans and debts into one. A debt consolidation loan can make it easier to budget, giving you just one payment to worry about, and you may also be able to save on fees and interest in the long run.
Get an up-to-date picture of your credit status. Both loan and credit card applications will require a credit score check, so it makes sense to review your report for any incorrect details & dispute any false penalties or strikes. SocietyOne offers a free credit score service that can access your report in as little as a minute.
Take some time to review your credit cards. If there are any that don’t offer good value or you find you’re using them less often, it could be worth scrapping them.
If you’re in the position to do so, get ahead by paying off more of your credit card balance than just the lowest monthly payment.
If you have multiple credit card balances, think about making use of a balance transfer to consolidate your credit card debt. Having just one repayment to keep track of can make it easier to manage your budget.
Safeguarding your finances during uncertain times
Before and during times of economic uncertainty, there are several ways that you can help to ensure your financial security.
How much money should you save in case you lose your job?
Although it’s something that we all hope we won’t experience, it’s a good idea to set aside some money to give yourself some financial security if you lose your job or are stood down. Finding a new job, especially when many others are in the same boat, can take some time, so it’s important to be prepared. It’s often recommended that you should aim to save an amount equal to three to six months of your average living expenses. Of course, your average living expenses are influenced by a number of factors, from the cost of your mortgage or rent payments to the amount you spend on food, meaning that the amount you should save really does vary from household to household.
What should you do if you lose your job or get stood down?
If you find yourself unemployed or stood down, there are a few steps you should take:
- Apply for government assistance if you are eligible. It can take some time for applications to be processed, so it is important to submit your claim as soon as you can.
- Reach out to your utility providers and financial institutions. Many utility providers and banks offer hardship programs that can help you to manage your bills and repayments more effectively in times of financial stress. Make use of these services if you are eligible.
- Take stock of your current financial situation. Although this may be quite confronting given the circumstances, it’s good to know where you stand financially, how much you have in savings and what expenses may be on the horizon.
- Look for ways to reduce your expenses. Although there are some expenses that you won’t be able to lower, evaluate the way you spend money on things like food, entertainment and clothing. Look for budget-friendly options if they are available or simply try to cut non-essential expenses from your budget.
What government assistance is available?
Several forms of government assistance are available to those who lose their jobs or are stood down. They include:
- Income support payments
- Household support payments
- Early access to superannuation accounts
Various eligibility requirements must be met to access these government assistance payments and services. Learn more about the government’s assistance program here.
What forms of non-government assistance are available?
Several forms of non-government financial support are also available, including:
- Reductions and deferments of home loan repayments
- Home loan interest rate freezes or reductions, and fee waivers
- Discounts on car insurance
- Reductions or pauses of credit card repayments
- Personal loan interest rate reductions
The assistance provided will vary between banks and lending institutions. It’s best to get in touch with your bank or lender to discuss your personal situation.
Periods of social and economic uncertainty bring the challenges of maintaining financial security to the forefront of many people’s minds. If you’re wanting to take charge of your finances and make paying off your loans simpler, debt consolidation could be an option for you.