posted in: Coronavirus
Surviving Unemployment During the Coronavirus Pandemic
Many of us are worried that our jobs may be vulnerable as a result of the coronavirus. What should you do if the worst case scenario occurs and you lose your job?
Seek help and support, you’re not alone
First of all, you are not alone. Coronavirus is going to have a large impact on many industries, individuals and families. While individuals will be impacted at varying levels, there is no doubt everyone will be impacted in some way by the current pandemic.
From what we have witnessed in other parts of the world, governments and communities have been stepping in to support those most affected with numerous initiatives such as enabling homeowners to put their mortgage payments and other expenses on hold.
It is important in these times to remember you are not alone, and more than ever this is the time to support each other. However, if you are being significantly impacted we suggest you speak to friends, family and colleagues or potentially seek professional help to assist you during this period.
Prepare for a period on a reduced income
Have a look at potential scenarios to determine what the impacts to your income may be so you can prepare. What happens if you lose your job but your partner keeps their job? What happens if you both lose your jobs? If you’re at home does that reduce the costs of childcare? Do you have other potential income streams that can help fill the gap?
While experiencing a period of unemployment is worrying, facing a period of reduced income is actually not unprecedented for most of us. If you have children, your household has no doubt experienced periods where your household income has reduced due to maternity leave or a reduction from full-time to part-time work. The key takeaway is that adapting to a period of reduced income is possible.
How to free up cash flow
If you think you may be facing a period without income down the track, the best way to prepare is to establish an emergency savings fund that is dedicated to cover you in periods when your income is disrupted. Don’t touch it unless necessary. To be able to put this money away, you will need to reduce your spending and free up your cash flow.
Here are some options you may want to consider:
- Request a mortgage repayment holiday from your bank or lender. Talk to your mortgage broker to organise.
- Speak to your bank or mortgage broker to see if you can access equity from your property to provide a greater cash buffer during this period
- Drop non-essential regular expenses such regular subscriptions such as magazines
- Cease any voluntary super contributions. You can resume these at a later date when you no longer require the cash flow
- Negotiate with your providers to pay annual bills in more frequent installments. That way you won’t be hit with a big bill at once, preserving your cash flow in the short-term
- Move personal insurances such as income protection, life insurance and TPD insurance into your superannuation. The costs will be paid from your superannuation balance, freeing up cash flow. Talk to your financial advisor to see if this is the right option for you and to discuss the impacts
- Reduce the number of days your children attend daycare or take them out completely to reduce your costs
- If you are self-employed you may be able to set up a payment plan to pay tax in installments
- You may be able to vary your PAYG installments if you think the current rate will result in you paying too much tax for the year. By varying this, you free up the cash now rather than having to wait for your tax refund
- If you are worried you won’t be able to afford your rent, you should talk to your landlord or the property manager about your options
- If you have equity in a property, speak to your bank about accessing cash from equity in your property to help for a rainy day.
If you don’t yet have a household budget, create one. This will give you transparency on your spending and will highlight where you may be able to cut spending, at least in the short-term.
If possible, establish an emergency savings fund with any available cash that is dedicated to cover you in periods when your income is disrupted. Don’t touch it unless necessary.
What about the Federal Government’s stimulus packages?
The Federal Government has now committed over $190 billion in stimulus packages to help Australians deal with the financial fallout of Coronavirus. While the stimulus packages largely support small businesses to stay afloat, there are also measures to help individuals.
If you access the age pension, Family Tax Benefit, Youth Allowance, Jobseeker Payment (previously known as Newstart), Austudy, Disability Support, or parenting and carer payments, you will receive a $750 one-off cash payment. This will be paid into your account from 31 March. It has recently been announced that some welfare recipients will also receive another one-off $750 payment on 13 July.
The Jobseeker Payment (previously known as Newtstart) has also been temporarily doubled, providing people with an additional $550 a fortnight. While the payment will be subject to income tests, the Government will waive asset tests and waiting periods to access the payment.
People under financial stress will be able to access up to $10,000 from their superannuation this and next financial year. The money won’t be taxed and won’t be treated as income when assessing Centrelink or veteran’s payments.
The states are also introducing their own stimulus packages, so do your research to see if you are eligible for any benefits.
As the lockdown continues to deepen, you can expect that further stimulus packages will be announced, similar to other countries around the world.
While the prospect of unemployment is understandably scary, there are things you can do to prepare. In the worst case scenario where you lose your job, at least you will have lessened the impacts significantly. In the best case scenario where you don’t lose your job, you will have strengthened your financial position. Either way, putting plans in place just in case makes a lot of sense.
N.B: At the time of writing, this advice was given on current circumstances. This may change as circumstances or government advice changes
About David Hancock
David Hancock is a director and Senior Financial Planner at Montara Wealth. His role is to oversee the running of the business and ensure the delivery of exceptional service and strategic based advice to clients. David is well known for developing strong long-term relationships with clients and is passionate about helping them identify and implement life changing financial strategies. www.montarawealth.com.au