GFC v COVID-19 – Lessons Learned from the GFC

Posted on: 21/04/2020

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

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

Lessons Learned From The GFC & How This Can Help You

(00:00): Hi, it’s Raffi from Manly Financial Services here. Over the last month, we’ve seen the medical market and the financial effects of the COVID-19 coronavirus take hold around the world. It’s been interesting to reflect and compare what’s happening now to what we went through during the global financial crisis in 2008, in order to see if there’s some lessons that we can learn from what we went through 12 years ago that can be applied today.

(00:23): In the next series of videos we will discuss areas where we believe we can learn some lessons from what we went through during the global financial crisis.

Watch Your Spending!

(00:29): Thinking back to 2008 debt was relatively cheap, but share and property markets were soaring, and as consumers we were spending. Then came the GFC with the collapse of Lehman Brothers in the U.S. and the financial crisis which was hammering share markets quickly spread to the real economy. Reserve Bank and Federal Government stimulus closely followed in support of employment and consumer spending. This caused many of us to reconsider the way we were spending our money and many households around the country shifted from consumption to paying down debt.

(01:11): We’re in a very similar situation and now with record stimulus packages being announced by government, in order to combat the economic effects of coronavirus. Interest rates are at an all-time low and the government has announced a series of stimulus packages to support employment and consumer spending. It’s a great time to reconsider how we’re spending money.

Step 1 – Where Are You Spending Now?

(01:31): The first step is to create a budget and easiest way to create a budget is to look at where we’re spending right now. Many online banking platforms allow you to download your expenditure or have a look at where you’ve spent money and it’s important to look back three to six months and be able to get a bit of an understanding of where your money’s been going over the last three to six months. At this point, you could start making some decisions around expenses that can be reduced or completely eliminated, in order to prioritize your financial commitments, be it education, be it healthcare, be it mortgage repayments and other costs, and reducing your discretionary spending.

Step 2 – Implementing Your Plan

(02:01): Now that all the hard work is done in creating a budget, it’s time to implement a cash flow management system and this is best done using your current bank accounts and formulating a bit of a plan on how you want to spend money and from which accounts you want to spend money.

(02:19): Clearly, some of us will need to make some major changes if that income or our work hours have been cut. But for those who have not had a reduction in income, it’s important not to make major changes all at one, because it’s really hard to sustain a big change, as opposed to little incremental change.

How Can We Help

(02:34): At Manly Financial Services we help our clients assess their spending, create a budget, and implement a cashflow management system or processes that will work for them. So if you’d like our help, please visit our website at manlyfs.com.au to start your journey towards a better cashflow management plan in these difficult times. Please subscribe to this channel and stay tuned for upcoming videos on comparing the GFC in 2008 to what we’re going through right now. Thank you.

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