For the first time since the late 2000s Australia’s economy is seriously on the slide. GDP growth dipped to 0.3 per cent in the December quarter, the flat-wages funk is continuing, housing prices are tanking across the country and full time jobs growth is on the slide.
That might be scary stuff, especially following a massive run-up in debt- fuelled housing prices that has put Aussies at the top of the world’s household debt charts. But the message from experts is “don’t panic – act”.
There are six things you can do to shore up your financial situation for an approaching storm.
Get a handle on what you are spending but be kind to yourself in the process. “You don’t have to go through your bank statements line by line, there is a simple way to do it,” Stevie-Jade Turner said, part owner of Specialist Financial Solutions.
“Look at your fixed obligations and your fortnightly income. Start to ask yourself questions like, ‘Do I need Netflix, Foxtel and Stan?’ Choose the one you want.”
Work out what you want to spend on non-essentials. Ms Turner suggested to choose a mid point between your income and your commitments.
Choose a financial buffer
You need cash to draw on if you lose your job.
“I believe it’d best to have about four months of household expenses saved to give you time to find another job[if the worst happens],” Ms Turner said.
A range of apps are available to keep track of your spending and keep finances under control. Another bunch of apps will help you build savings by directing change from small transactions into your bank account. That means “you can get going right away with saving” Ms Turner said.
But the truth is that saving is something Australians have been avoiding.
Batten down the hatches
Change your outlook to one of caution and save rather than spend, said Stephen Anthony, chief economist with Industry Super Australia.
“Avoid unnecessary spending like overseas trips, a new car or unnecessary home renovations.”
Things may not get that bad but it pays to be careful.
“Just suck it and see for a year,” Dr Anthony said.
Take an opportunity
While the Reserve Bank cash rate is at an all-time low, the banks are paying more for US funds on-lent to Aussies. That’s a problem because the banks raise 40 per cent of the money they lend offshore, much in America.
That in turn has pushed up term deposit interest rates. But David Simon, principal of Integral Private Wealth, said that if the Reserve Bank cuts interest rates over housing fears the party will be over and term deposit rates would move lower again.
“So if you plan to put some cash away for a rainy day “now should be a good time to move”, Mr Simon said.
Set and forget
Make sure you close unnecessary multiple superannuation accounts and have all your super money flowing into the option that suits your needs.
“Then set and forget to make sure you build your balance optimally,” Dr Anthony said.
If you are approaching retirement and need to move to a more conservative option, “get some professional advice” Dr Anthony said.
“Check your capacity to consolidate debt to save on interest,” Ms Turner said. That could mean rolling credit card debt and personal loans into your home mortgage at a lower rate.
But remember when you do that you also make that non-mortgage debt into longer term commitments meaning you could pay more interest in the long term.
“Make sure you know what is right for you,” Ms Turner said.
The New Daily is owned by Industry Super Holdings