6 Tips For Managing On A Reduced Income

Posted on: 16/04/2020

Raffi Pailagian
MBA, BSc, DipFP
Financial Planner / Managing Partner

Categories: Financial Planning & Advice Holistic Planning & Advice Investing Wealth Management

It is human nature to live according to your means. Some people are savers, some are spenders, but generally, we all live life based on our income. In the last few weeks, that paradigm has shifted, and the income we may have thought was somewhat reliable is suddenly not, and you may now be faced with managing on a reduced income.

Whether you have lost your job, your business has had to close down, your hours have been reduced or you are a retiree living on the return on your investment, most people have been financially impacted by the fallout from Covid-19. In fact, over 3.9 million Australians are unemployed or underemployed, that’s 1.4 million more than prior to the virus hitting.[i]

So if you find your income reduced, you are not alone. Here are a few tips on how to manage in the short or even medium term on a much tighter budget.

1 – Budget

Firstly when managing on a reduced income, you need to have an idea of where your money is going. Traceback a couple of weeks, even a month through your credit and debit accounts and get a feel for what you are spending your money on. Then think about what is a ‘need’ versus a ‘want’. Once you have decided what it is you really ‘need’ to spend your money on, you can draw up a budget, and identify if what comes in will cover what goes out.

2 – Review Your Commitments

Look at costs you can reduce, even if it is only for 3-6 months. Include things like:

Mortgage – are you paying more than the minimum? Are you ahead on your payments? Do you have an Offset Account that can cover the payments? If you determine you are not in a position to continue paying your mortgage at the existing level, talk to your bank. They will most likely offer you alternatives and if they don’t, you can call the Australian Financial Complaints Authority (AFCA) for help.
Rent – contact your agent or landlord and ask for reduced rent for a fixed period.
Superannuation – suspend your voluntary superannuation payments
Health Insurance – talk to your Health Insurer to see if you can suspend your health insurance payments, and what effect this will have on your coverage.

3 – Shop Around

Most of us get a little complacent around things like electricity and gas bills, phone coverage, internet providers. car and house insurance. Use the extra time to shop around and see if you can get a better deal. You may be surprised by how much you can save.

4 – Bills Bills Bills

5 – What You’re Entitled To

Check with Centrelink as to what you are entitled to from the Government. Whether it is JobSeeker, JobKeeper or some form of business support from one of the many stimulus packages the government has announced, if you are entitled to it, you should make a claim.

6 – Review Again

Now it’s time to revisit that budget, drop in the new numbers if you have been able to reduce any of your outgoings. You may find you have enough to spring for the occasional ‘want’ after all.

Lastly…

Remember things are not going to be this tough forever. We will come out the other side of this and go back to some form of normal. In the meantime, it is a great opportunity to identify what is really important in your life.

If you would like some help or advice from us in these difficult times, please give us a call or contact us via the link below. We can sit down with you in person or via any video link platform, to review your situation and help you make some positive plans.

Interested in knowing more?

[i] Roy Morgan