Although none of us could anticipate the world going into lock down due to a pandemic, I cannot help but wonder how many of us were financially prepared for a crisis. Prepared or not, I have witnessed some mistakes that people are making as a result of Covid-19.
1. MAKING EMOTIONAL FINANCIAL/INVESTMENT DECISIONS.
When the share market suffers sharp falls, it is a natural reaction for many to panic, or at least lose confidence in the market. However, history shows that after every financial crisis, the market experiences a recovery. It is important that you regularly review your investment strategy and stick with it for the long term, rather than make rash decisions as a result of market fluctuations. When you sell assets during a downturn, you are essentially crystallising that loss.
2. ACCESSING YOUR SUPER EARLY DUE TO COVID-19
This measure was introduced to provide relief for those experiencing genuine hardship as a result of Coronavirus, but have you considered the long-term effects? Depending on your age and current super balance, accessing the maximum $20,000 under the temporary Covid-19 early access to super could end up resulting in a loss of up to $100,000 by the time you retire. Also, if the withdrawal results in your fund being left with $6,000 or less, this may result in a loss of insurance cover also.
3. NOT HAVING AN EMERGENCY FUND
Everyone will have a different amount they are comfortable with having access to any point in time for those unplanned expenses. Ideally, you would have enough to cover between three and six months of non-discretionary expenses.
4. NOT HAVING A BUDGET
Having control over your expenses and having an understanding of where your money is going, will hold you in good stead at all times, but particularly during a financial crisis. Knowing where you could save money during difficult times can help reduce the possibility of increasing household debt.
5. NOT HAVING A WILL
Over half of Australians do not have a will. Passing away intestate creates havoc for your loved ones. Establishing a will is a simple process and help to ensure your assets are distributed according to your wishes.
Our team at Canny Group are here to help you and support you with all financial aspects of your life. Nobody was able to predict what a year 2020 would be, but what we are able to do now (if you haven’t already) is plan ahead and do it the right way. Get in touch with our team to find out how we can help you set and achieve your financial goals.
Samantha Butcher – Financial Adviser
BComs Dip FS