May 25th, 2020

Well here we are, looking already at the back end of the COVID-19 pandemic, and the associated economic and social lock-down impacts.  Hopefully you have managed to weather the whole situation without too much adversity, and you might be wondering what affect this situation has moving forward.

Personally I see this crisis as having some positives. Chief among these is that people need to realise the importance of budgeting their income, and not living on a week to week basis.  Many people realised very quickly that in the situation where loss of employment was sudden and without notice, they were left in significant financial distress, and many left wondering how they would be able to pay the next week's rent payment, or next month's mortgage payment.

While some people genuinely survive week to week due to personal circumstances including low incomes, large families, or expensive medical conditions, there is still a vast portion of society that does not sufficiently budget and allow for that "rainy day".  They live for the moment, they have the latest gear, they holiday overseas.  

That's fine if you have a strong and ongoing income stream with no commitments, however as we've seen, when your income is stopped and you're unable to immediately supplement that income elsewhere, what is left to do? What money do you have aside to see you through a medium term forced lay-off?

My father always said that savings was putting money aside from your income first towards your savings, and then determining what you needed to pay: mortgage, rent, food, electricity, water, insurances.  If you didn't have enough to cover those basics, then draw from savings and review your budget going forward.  This way you always had savings aside to cover that rainy day, or home deposit, or holiday.

Basically, if you earn $100 each week, put $80 into savings & $20 towards the necessities. If $20 wasn't enough, then review the budget and draw from savings.   But what most people do with that $100 is, hopefully, addressing the necessities and bills, but then doing some discretionary spending, and then if there's something left over, putting that into savings.   The shortcoming in this though is most times you will spend what you have, and therein not have any savings.

It's a new world and a forever changed economic environment out there.  Some employers that come through this will realise they can get by with fewer staff and fewer clients, but still maintain a profitable business.  Some businesses simply won't be coming back at all.  And as an employee, how will you be affected by this changing landscape, and what will you do to ensure that you won't be financially worse off if something like this ever happens again ?

A budget and a goal isn't the sole answer, but it is a start.

​Stay Safe.