How to safeguard your budget against the coronavirus crisis
Australians are being inundated with information about how to protect their health to curb the spread of COVID-19, but it's also just as important for people to protect their financial health and understand how best to protect their finances given many have predicted an unprecedented global economic downturn.
It's crucial that Aussies remain vigilant about what the impacts of COVID-19 could mean for their household budget and take steps now to mitigate risk, find savings and make the most of the help that is currently being offered.
We've created a guide to help you make to sure your household budget is in the strongest position to face the uncertain times ahead.
Many gas and electricity companies have committed to supporting customers hit hardest during the pandemic. Customers struggling to pay their bills are encouraged to contact their energy retailer directly to discuss what assistance is available to them. For example, extending the bill due date by up to one billing cycle, or setting up an instalment plan to smooth out payments. By contacting the energy retailers directly, customers will be able to discuss which support mechanisms are available to them based on their personal situation.
The Western Australian Government has announced a pause on all fees and charges relating to water, electricity, vehicle registration, and even emergency service levies and public transport fares, in the hope of providing some economic relief. This freeze will be in place until July 2021. On top of this, the Western Australian government has doubled its energy assistance payments up to $600, in a bid to support vulnerable Western Australians, including pensioners.
The Queensland Government has unveiled a $300million relief package for Queensland households, including $200 off utility bills, building on the $50 asset dividend already available.
With more Australians working from home and the Easter school holidays just around the corner, many people could see their household energy bills skyrocket. One in four are currently paying more than they have to for their electricity as their discounts have expired and they are on a non-competitive standard retail contract rate. These consumers could enjoy significant savings if they switched to a cheaper market offer.
Eligible concession card holders, such as Pensioners or Seniors, Centrelink Health Care members or Department of Veteran's Affairs members, are urged to contact their energy retailer, if they haven't already, to inform them that they hold a concession card and therefore may be eligible to claim applicable rebates on their electricity or gas bills. This cost of living support measure is implemented at a State government level.
Private health insurance
"Currently, non-urgent elective surgery is being suspended until further notice, to allow hospitals and staff to allocate and preserve vital resources to deal with the pandemic. The Government and the health funds are still working through the particulars of how private hospitals will offer additional support to the public health system during these unprecedented times," says Anthony Fleming, health expert at comparethemarket.com.au.
Many health funds have postponed the April 1 premium increase for at least six months, in an effort to relieve financial pressure on Australians during the pandemic.
In addition, the government rebate on private health insurance was due to drop by almost 1% on April 1. However, it's now confirmed that the current rebate will continue until April 1, 2021.
Health funds have offered financial relief from premium costs to those policyholders who are facing hardship as a result of the COVID-19 crisis. Policyholders who are in financial stress are encouraged to contact their health fund to discuss options.
Many hospital policies - from Basic to Gold - will now also include in-patient hospital coverage for people affected by COVID-19.
Australians have been banned from travelling overseas as the government cracks down on the spread of COVID-19. Currently only Australian citizens, permanent residents, or New Zealand citizens who are usually resident in Australia can enter the country, with some exemptions available. All people entering the country must self-isolate for 14 days.
It's important to note that most travel insurance policies will generally not cover claims made in relation to pandemics. Some insurers offer limited cover, so it's important to read the Product Disclosure Statement, however now that COVID-19 has been defined as a 'known event', it very unlikely that consumers would be covered if they took out a policy after mid-January 2020.
Australians who have booked a flight or holiday and need to cancel their trip may be able to get credit to use at a later stage. Many airlines and hotels have advised customers that they may be eligible for credits, or reward points, if they make any cancellations within a certain timeframe.
Petrol prices have dropped to as low as a $1 a litre in some parts of the country, however not all consumers will find relief at the bowser as many fuel retailers have been accused of price gouging for not passing on savings to motorists.
Compare fuel prices online before filling up as there may be significant price differences in your local area. What might seem like a few dollars saving can quickly add up when multiplied by the number of times you fill up your car each year.
The country's total credit and charge card debt is approximately $47.9 billion, according to the Reserve Bank. One way to strengthen your budget is to minimise the interest you're paying each month. Make the most of free balance transfer offers on low interest rate credit cards.
Someone owing $3000 on a credit card with an interest rate of 20% who is only able to pay off the minimum balance of 3% each month would typically pay $558 in interest over the first 12 months. Add this to your annual account fee which may be up to $250 and you could be hit by around $800 in charges. There are plenty of low interest rate credit cards with low annual fees available, with some offering 0% 12-month balance transfer periods. If someone owing $3000 switched to one of these cards, then they could be around $690 better off after the first 12 months as they would only have paid a typical $60 annual fee, plus a 2% balance transfer fee. These additional savings could help pay the credit card balance down more quickly.
Small businesses will get a six-month break from making repayments on their loans under a relief package announced by the banks on March 20.
The major banks (NAB, ANZ, CBA and Westpac), as well as some of the non-majors e.g. St. George and Bendigo Bank, have announced that home loan customers experiencing financial difficulties will be able to pause their repayments for up to six months.
The government has also announced a six-month moratorium on evictions. Landlords and renters are encouraged to negotiate short term agreements, with landlords encouraged to seek help from their banks if necessary, with more information set to follow in the coming week.
The government is providing up to $100,000 to eligible small and medium sized businesses (including not-for-profits), with a minimum payment of $20,000. These payments will help businesses with their cash flow so they can keep operating and pay their rent, electricity and other bills, and importantly retain staff.
Small businesses should discuss any updates to their cover, including change of location, with their business insurer directly. It is also recommended that they consider using free government resources as well, such as support hotlines and various fact sheets.
Get a clear idea of the money you have coming in and going out. Many banks have automated tracking as part of their internet banking which can help you work out where your money goes and if there are activities or habits you can cut out in order to save.
One of the first things you can do to strengthen your household budget is to get a clear understanding of your debts. Make a list of your debts and split them into good, bad and OK debts. This will help you work out which ones you should focus on paying down first, which you could change to interest only, and which debts you could try converting to a lower interest debt.
Think about how you can find more cash to boost your budget now. You can reduce your spending by doing things like cancelling a gym membership or asking your bank/broker for a reduction in your interest rate. Or you can try to increase your income, by applying for a second job (Coles and Woolworths, and some government organisations are hiring now), or you could sell some unused items from your garage or kids' cupboards.
We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.