Saving every penny
AUSTRALIANS FORCED TO CHANGE SPENDING HABITS DUE TO COVID-19
AHIT to hip pockets during COVID-19 has forced many Australians to reassess their finances and it could change their financial habits for life.
Millions of households have suffered income reductions in recent months and some fear they may have to work longer to bolster their savings ahead of retirement.
New research commissioned by Colonial First State quizzed 1000 Australians aged between 30 and 65 and found the following:
• 34 per cent of Australians have saved less during the pandemic because of income loss or an increase to bills.
• 49 per cent are planning to change their lifestyle financially after the pandemic by cutting spending.
• 45 per cent of people are scared or do not feel confident about retiring.
• 23 per cent said they could be forced to delay retirement and work longer as a result of Covid.
Owner of Melbourne-based small business Beauty and Bronze Charlotte Poulson said together with her business partner Chelsea Wegener they have taken a significant financial hit.
Both on JobKeeper, they have been forced to completely overhaul their business and Ms Poulson said they had to focus on “exploring other ways of securing an income”.
“Our business went from being 85 per cent face-to-face service to now 100 per cent online, so we’ve changed our entire business model to reflect this by providing our clients with doit-yourself treatments and products to use at home,” she said.
“With JobKeeper being extended we now have a little more time up our sleeve to future- proof our business and ensure all of our staff are taken care of too.”
Colonial First State’s general manager of product Kelly Power said the pandemic had been “a real wake up call” for many people including younger Australians.
“They have had to reassess their spending habits and look at their finances as a result of being stood down,” she said.
The research showed 42 per cent of Australians regularly checked their super balances, while 16 per cent had started checking their balances more frequently during the pandemic.
Ms Power said there were some easier ways to bolster retirement savings.
“You can contribute more to your super and a little goes a long way,” she said.
“A small contribution of $10 a week can make a really big difference over the long term, if you are a 30 year old and you add $10 per week salary sacrificed you can end up with $25,000 more when you retire.”
Ms Power also urged Australians to consider making spouse contributions where one spouse contributes an amount of money into their partner’s super.
If your spouse earns below $40,000 annually you can claim the maximum tax offset of up to $540 when you contribute $3000 to their super.
Financial adviser Scott Haywood said people should look at their biggest expenses which for most was accommodation including rent and mortgage, to see if a better deal could be secured.
“Then you should look at whether you have been getting benefit from all the things you pay for via direct debit,” he said.
“This includes health insurance, car insurance, home insurance – are you getting the right deal?”
He warned people looking to refinance their mortgage to be careful if they were receiving wage subsidies such as JobKeeper.
“The bank may not look favourably at you because they are going to assess the security of your employment based on a business that has already dropped 30 per cent,” Mr Haywood said.
“Speak to your existing provider but don’t go through the refinancing process until you know you have a job beyond September.”