In the span of a few weeks COVID-19 has upended how people in Australia and around the world work and live. You may now be working from home, have reduced income, be dealing with redundancy – one way or another, most of us will be adjusting to new financial realities. For those who still have plenty of work and a high income, the reduced spending that comes with iso life is an opportunity to put money towards your long-term goals.
Economic uncertainty ahead
While the government’s economic stimulus packages will help right now, it’s impossible to predict how the real economy will bounce back in the medium-term. So now is the time to review your spending and tweak your budget in line with those new realities. Eliminating expenses you don’t truly need and directing any excess cash to your savings or mortgage will give you some wriggle-room as you navigate through the uncertainty ahead.
Spending is more invisible
Tap and go, AfterPay, multiple credit cards and rewards programmes can all make it hard to keep track of expenses as our spending becomes increasingly invisible. One thing we can still do in lockdown is shop online and it’s easy for those credit card charges to stack up without even leaving the couch.
It’s not just young people in the early stage of their careers that can fail to achieve their goals through careless budgeting. Successful professionals or business owners in their 30s or 40s often find their income growing rapidly over a short time as a direct result of their success, and their lifestyle and expenses quickly rise too. I’ve had this conversation with many successful people who earn great money, but feel like they aren’t where they wanted to be financially. If this rings true for you, now is the perfect time to reset your budget.
Income is your greatest asset
Consider what is really important to your happiness now and in the future. Do you need two cars on lease, can you cut-back on outsourced services and with overseas travel plans on hold for now, can more money be directed to superannuation or other assets? As an adviser, I know high-income earners can only build wealth if they treat their income like an asset and invest it for greater returns. Ultimately that means spending wisely to free up funds to achieve your medium and long-term goals.
The below chart shows the importance of converting income earned throughout your career (human capital) into long-term wealth (financial capital), something our proven advice process is designed to help you achieve.
Budgeting is good for relationships too
Often couples budget well in their early years when money is tight, but as they achieve success and income grows, their spending becomes more relaxed. Just having the discussion can bring couples closer together on what they want to achieve from their shared financial success.
Control your spending to thrive
There are numerous online tools and apps available to take the pain out of budgeting and a lot can be automated. From categorising expenditure to handling multiple bank accounts and keeping track of your savings and investments, these apps are designed to make coordinating personal and business finances easier. The process of trialling one of these apps can help you get more deliberate about how much of your hard-earned income you want to spend and whether you’re getting enough of a return.
The below technologies can help you get started. Once you’ve done your research on the best option for your needs, you can use their online portals or download the apps from the App Store for iPhone or Google Play for Android.
1. Moneysoft
An FMD partner, Moneysoft solutions support the adviser-client relationship and help make achieving clients’ financial goals a shared responsibility. Cash flow, budgeting, saving and goal-tracking are all available through their user-friendly platforms, supported by a single dynamic view of financial data. There is also a personal product where those not currently under advice can use the Moneysoft online financial management tool to brings together all their financial data, from multiple accounts and different locations, into one easy-to-use view of their finances. Visit Moneysoft for more information.
Great for: Quickly and easily understanding your family spending
Shortcomings: The app is not yet as good as the online experience
2. Pocketbook
The free app syncs with most local banks making it easier to transfer your account information for accurate on-the-go budgeting. If you pay your bills via your online bank account, Pocketbook will alert you to overdue expenses, as well as send you weekly budget summaries. Visit Pocketbook for more information.
Great for: Personal budgeting
Shortcomings: If you’re with a smaller bank or neo bank, it may not be supported in the app’s syncing feature. This will require you to add in your information manually.
3. Money Brilliant
With MoneyBrilliant, you can connect bank accounts, credit cards, loans, superannuation and more, in a single location. While the ‘Basic’ plan is free, the app also has a ‘Plus’ plan which gives you access to features such as the tax tool which can help identify tax-deductible transactions, an Insurance Tracking tool, and Bill Watch for good deals on electricity and gas bills. Visit Money Brilliant for more information.
Great for: A comprehensive look at your finances
Shortcomings: Some great features are only available through the Plus (paid) plan
4. YNAB
You Need A Budget, or YNAB, is built on four rules of budgeting, one being ‘zero-based budgeting,’ a method in which all expenses must be justified and approved for each new period. The app lets you set and track goals and sends reports showing your progress. YNAB also offers a financial support team and budgeting workshops for a highly controlled approach to managing your budget designed to change spending behaviour. Visit YNAB for more information.
Great for: Getting spending and debt under control to achieve your savings goal.
Shortcomings: There is no free version of this app (but it delivers more support than some of the free options)
5. Moneytree
The Moneytree app links all your finance streams like bank accounts, digital money, superannuation and credit cards, and uses AI to aggregate it into a financial picture for you. The app also lets you monitor your loyalty points (Frequent Flyer, Myer One) and alert you when they are close to expiry which is another handy benefit. Visit Moneytree for more information.
Great for: Tracking net worth and cash transactions
Shortcomings: Work expenses can be tracked only in the Premium version
6. Your bank’s app
While it’s common amongst digital and neobanks, many of Australia’s major banks have also jumped on board to create apps that help their customers with their saving goals. Your bank’s mobile app may have tools for budgeting, categorising expenditure, paying bills and more.
Great for: Security. You don’t have to share your bank details with another app
Shortcomings: You can’t connect to multiple bank accounts.
The bottom line? Dealing with anxiety around money and COVID-19 is new territory for everyone. By controlling our spending, we can alleviate some of that anxiety and refocus our energy on our future goals, health and wellbeing.
Need more advice?
Contact your FMD adviser, Nick Stanley, to arrange a free financial health check.
Nick Stanley, Senior Financial Adviser – Melbourne CFP® BCom GDipFin
Nick specialises in providing strategic advice in relation to superannuation, retirement income streams, wealth creation, personal and business insurance, investment portfolios, managed funds and asset allocation. Nick has been involved in the financial services industry since 1998. Prior to working at FMD Financial, he was employed in various roles within the superannuation and wealth management areas of a global consulting firm. Nick commenced his employment with FMD Financial in April 2007. He has a Bachelor of Commerce degree as well as a Graduate Diploma of Financial Planning and is a Certified Financial Planner™ professional.
Schedule some time with Nick.
About FMD Financial
We’re a team of qualified, experienced financial advisers in Melbourne, Brisbane and Adelaide who want more people to enjoy good health, wealth & happiness. We can’t give you the formula for financial success but we know from 15 years’ experience working with highly satisfied clients that making the right move in six key pillars of financial management can help you achieve your goals. Our proven advice process and open and transparent fees can help you take control of your finances, bring you greater peace-of-mind and improve the lifestyle you can afford at every stage of life.
This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained in this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Financial Pty Ltd ABN 64 153 896 078is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977.
