Articles | 4 Common Financial Mistakes to Avoid During a Crisis

 

 

 

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4 Common Financial Mistakes to Avoid During a Crisis

By Fran Hughes is a Certified Financial Planner and Head of Financial Solutions at Nexia Perth, www.nexia.com.au 

 

 

 

Not paying attention to the household finances

According to a study by Deloitte Access Economics[1], a worrying 14 percent of Aussies struggle to pay their bills (including rent, mortgage, utilities and credit cards). The study found that 26 percent are spending more than they earn and live from pay to pay. Taking the time to pay a little more attention to the household finance, will ensure that you stay financially afloat and not fall into unnecessary debt.

Start by listing all discretionary spending and cancel out any non-essential spend. Identify those recurring direct debits to subscriptions to services you no longer use. Perhaps home cooking will do rather than Uber Eats. Schedule a payment plan with essential providers such as utilities and rates. Discuss holiday repayment options with your bank or landlord.

Try using a spreadsheet or budgeting app (www.moneysmart.gov.au) to make tracking your spending during this time much easier. You’ll quickly get a true picture of your financial health.

Not actively building up emergency funds

The study by Deloitte Access Economics[1] goes on to find that 13.4 million Aussies don’t have emergency savings to fall back on if they are out of a job.

While we could not have predicted a pandemic, it certainly has exposed the financial vulnerability of not ‘saving for a rainy day’. A general rule of thumb is keeping aside three to six months’ worth of living expenses in an easy-to-access bank account.

With banks letting borrowers hit pause on their home loan repayments, and as many as 375,000 individuals applying for the holiday repayment relief, saving any excess surplus into an emergency fund to cover delayed repayments will see you in a stronger financial position.

Assuming Estate affairs are in order

Half of Australians do not have a Will. Alarming isn’t it? Of these numbers, 34 percent gave reasons of ‘haven’t got around to it.’ Without a valid will, your estate affairs could lead to financial chaos. In light of the current pandemic which has fatal consequences, setting up your estate affairs is top on the list. A simple Will can be drafted up by a lawyer for as little as the cost of smart TV.

Not seeking the advice of a professional

In times of a financial crisis, most would opt for a ‘Do-It-Yourself’ approach to save on costs, rather than seek the advice of a financial professional. Working alongside a subject matter expert such as financial advisor, may just achieve the results you were looking for without the financial stress.

Speaking with a financial planner can help guide you to make smart money choices. You can use the Financial Planning Assoc Match My Planner tool to reach out to a CERTIFIED FINANCIAL PLANNER® professional near you.

                                                    

[1] Source: Financial Consciousness Index (FCI) by Deloitte Access Economics

[2] Source: Financial Consciousness Index (FCI) by Deloitte Access Economics

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