The following article was written by Suzanne Johnston, Senior Financial Planner, Apt Wealth Partners and re-published on Melbourne Mums Group with permission.
The economic impacts of COVID-19 have been felt by many Australian households, and if we look at the data, we see that working-age women are amongst the most impacted demographic. There are several reasons for this, including the disproportionate representation of women in insecure employment, such as casual or freelance work, and the fact that primary care responsibilities in many households fall to women.
Many women withdrew their superannuation under the Australian Government's stimulus package, reducing their super balances by an average of 21%. Even more alarmingly, 14% of women cleared out their superannuation altogether, and women were already behind when it comes to finances.
According to The Financy Women's Index, a quarterly report that measures economic equality for women in Australia, we are still around 32 years away from reaching financial equality, and all signs point to this timeframe only growing in response to current challenges.
So how can women get their finances back on track with so much economic uncertainty? Here are my top tips for planning your finances during COVID-19 and beyond.
Start with what you can control
If 2020 has proven anything, it's that we donít know what is around the corner, and so much ambiguity makes it hard to look too far into the future, particularly if you have lost income. It's important to acknowledge that we can't control this pandemic and we donít know what will happen next, so focus on what you can control.
A key area is spending. If you have lost or had a reduction in income, it's important to reduce your spending relatively. Concentrate on your priorities right now and, if necessary, do away with any luxuries.
Even if you haven't lost income, it's a good time to think about what you can put away. Many of us have seen a reduction in expenses in line with fewer social events and travel opportunities, so make the most of it and put any surplus funds to good use.
Addressing debt should always be a top priority, and with such low interest rates, now is a great time to pay them down. Further, while cash is not generating a material income right now, building up your emergency funds is also an excellent goal at any time, but particularly so with today's ambiguity.
Know your entitlements
Most of us are now aware of any Government entitlements under Job Keeper and Job Seeker, but if you are among those who haven't explored your options, it's critical to make use of Government Stimulus programs if you need them. If you are already receiving Job Keeper or Job Seeker payments, make sure you are aware of changes as they occur, as these payments may have new eligibility requirements or reduced payment rates in the coming months.
If you have taken or are considering taking superannuation, it's critical that you understand the long-term impact. However, if you need this money to cover basic costs of living, such as food or housing, then it's a straightforward decision. If you are in this situation, it's worthwhile thinking about how and when you access the funds. Once received, it may be worth putting the money into an online savings account and setting up a payment to your everyday transaction account on a weekly or fortnightly basis, so that you have access to it like a salary rather than as a lump sum.
If you don't need the money immediately, it's important to think about how, and if, you should use it before making decisions that could have a significant impact on your future.
Build your financial literacy
The March 2020 Household Income and Labour Dynamics (HILDA) survey showed that women's financial literacy still lags behind men's in all states and territories. Financial literacy is correlated to financial outcomes in everything from saving to retirement, so if you have knowledge gaps, this can be a great (and often free!) place to start.
Whether you want to better understand financial concepts, like compounding interest (your best friend when it comes to saving), or how to structure your assets, such as superannuation, to weather financial storms, it's important to set a few goals and just get started.
There are a wealth of resources out there, including Apt's Knowledge Centre, a hub for financial information, calculators and education modules. You can request to join free here.
Plan for how you will increase your super in the future
Even before COVID, women were significantly behind in superannuation, so even if it's not possible right now, it's a good idea to think about how you will strengthen your retirement savings once there is a little more stability.
There are a wealth of strategies that may be suitable for you, from spousal contributions to concessional catch-up provisions. You can read Apt's tips here.
Helping women navigate finances and achieve economic empowerment is something I am extremely passionate about. Get in touch to find out how Apt Wealth can help you live for today while planning for tomorrow.
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.