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How will I afford to live if I lose my job because of coronavirus?

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? Montara Wealth Managing Director, David Hancock, speaks to Australian Women Online about you can survive if you lose your job.

Seek help and support if you lose your job, 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.

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.

What about your rent?

If you are worried you won’t be able to afford your rent, you should talk to your landlord or the property manager.

If you are looking to break the lease to seek out somewhere less expensive, some rental leases will include hardship provisions which cover shifting financial circumstances. Your landlord may also negotiate something with you directly.

If you want to remain in the home, you can request a delayed payment, payment plan or a rent reduction. While the landlord doesn’t have to accept this, they may be willing to negotiate given the unique circumstances. There is a good chance that you’re not the only one struggling to pay your rent during this time, so in the interests of holding onto a good tenant rather than trying to find a new one in the current environment, your landlord may be willing to negotiate.

The good news is that the government has taken steps to protect people from being evicted for a period of at least six months. This is designed to provide a safeguard for tenants affected financially by coronavirus.

However, at this stage, it looks like after those six months are up, the old eviction rules will apply.

While it varies in each state, typically the landlord will need to issue a termination notice. That still gives you time to repay the rent owed. Rather than face eviction and potentially be blacklisted on tenant databases, it may make sense to negotiate to leave earlier if possible.

Tenancy laws vary in each state so it’s important to do your research on what your rights and responsibilities are in your state.

What about your mortgage?

If you have a mortgage and are worried about being able to afford your repayments, you have several options.

You can request a mortgage repayment holiday from your bank or lender. Talk to your mortgage broker to organise.

With record low interest rates, make sure you’re getting the best possible deal.

If you extend your loan term it will reduce your repayments or you may want to consider moving to an interest only loan.

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.

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:

  • 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.
  • 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 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.

What about the Federal Government’s stimulus packages?

The Federal Government has now committed over $320 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 Jobkeeper Payment is a wage subsidy program worth $130 billion, designed to help businesses affected by the Coronavirus to cover the costs of their employees’ wages, so that more employees can retain their jobs and continue to earn an income. Eligible businesses will receive and pay $1,500 per fortnight per employee for up to 6 months.

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.

To learn more, get in touch with the Montara Wealth team by clicking here

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