Stabilising and Regrouping: Tips to Improve Your Financial Resilience Amid Covid-19

March 20, 2020

There are many people who will be severely financially impacted by the economic implications of Covid-19, and there are many others who aren't necessarily, but they're still feeling a little spooked and wondering what they should be doing to ensure they can withstand whatever is around the corner.

If that's you, there are many things you could be considering. Please note these tips are general in nature - to determine the best option for you would require tailored financial advice, ie meeting with a financial advisor who can review your specific financial situation.

If you’re OK for now, but you know you need to be more financially resilient, this list is for you:

  • Establish what your life costs - including how much of that is spent on discretionary things and could be cut if necessary, so you know the minimum you need to get by
  • Determine how long your current savings would last you in either of those two scenarios
  • Consider cutting discretionary spending so you can increase your savings buffer – you want to aim for three months of expenses in reserve, minimum. Discretionary spending typically accounts for 20-percent of a household's budget.
  • Consider whether you need to restructure your mortgage to bring your down borrowing costs. However remember while interest rates have fallen, there are fees associated with breaking fixed loans.
  • Determine what access to credit you have should you need to call on it – revolving credit, credit cards, family loans
  • Delay any non-essential planned large expenses or extra borrowing
  • Consider what Government support you might be eligible for if your circumstances change
  • Prepare your plan for if your income was to fall or be lost altogether. If your employer cut working days down, how long would your buffer last?
  • Consider what non-essential assets you could sell if you needed to – and determine whether you want to action that now or it’s just a trigger you can pull if you need to
  • Determine whether you should be taking a KiwiSaver contributions holiday to increase your cash buffer (and ensure that cash is actually directed to savings)
  • Determine whether you are in the appropriate KiwiSaver fund. This will depend on how soon you need to access the money and your appetite for risk. While shifting to conservative funds will prevent further losses, it also locks them in and may reduce your ability to benefit from an eventual recovery. However depending your time frame and risk appetite, it may still be something you need to consider.

If you'd like tailored advice on your options, how to improve your financial resilience, or to prepare yourself to take advantage of any opportunities this volatility creates, please click here to book a consultation with one of our Financial Personal Trainers.

Helpful Links:

Click here for information on leave payments, wage subsidies and other benefits

Click here for information on tax relief, the economic response package and employer support

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