Do you have enough money set aside for emergencies? It’s fair to say that 2020 was a challenging year for many Aussies, with 40% of us experiencing some form of financial stress during the year.
We’re sharing real stories from people living and working in Australia about how they managed financial stress during COVID-19. From reviewing their financial position and rethinking future plans, to exploring every possible option just to stay afloat, read on for their stories. Names have been changed.
Learning to save and invest for the first time
Charlie is a 25-year-old analyst whose income went down by 20%. He found the changes a little challenging, as he was usually quite social. The switch to working from home made him realise he had to be much more organised with his schedule, but he has managed to save some money in the process.
“I’m not spending anywhere near as much as I used to. I realised socialising definitely ate into my income, and I ended up being in a better position financially, despite the drop in salary.”
Charlie also decided the time was right to do some forward-planning with his finances, and eventually make a move into the stock market with the money he’d saved.
“I know the market enough to know I don’t know enough to invest my money yet, but I hope to learn and then invest in Exchange Traded Funds (ETFs) or something like that.”
Although he hasn’t started investing yet, he plans to get started soon, and he’s hoping the returns on his investment might just help him cover the reduction in his salary in the longer-term.
Finding some financial independence
Jane, 31, lives with a chronic illness, which has prevented her from working the past few years. She doesn’t qualify for any government payments and is reliant on her family for financial support.
“Depending on how sick I am, my out of pocket costs range from $2,000 to $3,500 every year on medical expenses. Most specialist surgeons that deal with my illness only operate privately, and I can’t afford private health care. If I needed surgery, that would be an additional $5,000 to $10,000.”
Her family is very supportive, but she still feels like a burden sometimes. When COVID came along, she was concerned that her needs would become more challenging for her family.
Jane chose to access some of her superannuation early to help cover her medical expenses. She also used some of the funds to help set herself up to earn income in a freelance capacity. “Not being able to earn my own income has been really hard for me. I invested in a laptop that I hope to use for freelance work once I’m healthy enough to do so – that’s the only material item I purchased.”
Staying on top of financial goals
Justin, a 36-year-old sales executive, set ambitious financial goals for 2020. When COVID hit, he wasn’t sure if he’d be able to achieve them. His salary was reduced by 20%, and he had to work longer hours as he’d lost members of his team.
“I had planned to buy a house this year, and with the impact to my income, it looked like I was going to be about 40% short of where I needed to be.”
Justin decided to utilise government stimulus to help make up the shortage and maintain the hope of getting into the property market.
“It’s [the stimulus money] currently in my high-interest savings account. I’m looking into the property market, and I’m hopeful in the next couple of months I will be putting it to good use.”
He acknowledged that his age was a factor in ensuring he didn’t spend the money until he planned to invest it. If he were 10 years younger, he might not have been as financially responsible.
“It’s still helping me achieve what I want when the economy and my job isn’t able to deliver that right now. I think that’s quite good, but I’m 36, and I don’t think I would be using it in such a practical way if I were 26.”
An expat reconsiders his living situation
Sam and his partner are originally from the UK, and currently living and working in Australia. The onset of COVID has caused them to rethink residing in another country without permanent residency. Sam’s employer dropped their workforce down to 4-days per week, so his salary was reduced as a result.
“From a personal perspective, it’s been incredibly tough. We had a very close family member pass away back home, and another is in the hospital with a serious illness. As we’re on visas, we haven’t been able to get an exemption to leave the country and be able to return, which has been really stressful.”
Despite this stress, they have found some positives, too — with them both working from home they feel closer as a couple, and they’ve managed to save some money in the process.
“My partner and I have learnt to tolerate each other better. And we actually found ourselves saving more, because we didn’t realise how much we went out before COVID. We would go out three or four nights a week, and even with a pay cut, we ended up ahead.”
Overall, however, their personal situation and lack of financial support from either government have caused them to rethink their position as expats.
“It’s made us re-evaluate being in another country without permanent residency (PR) or citizenship. At the end of the day, we’re far from home, and we’ve fallen through the cracks of government support in both countries. If either of us were to lose our jobs, which are directly tied to our visas, we would not have access to JobKeeper or JobSeeker, and would essentially have to pack up our lives and leave. It’s not a great place to be.”
A sole trader struggles to stay afloat financially
Melissa spent many years building her animal practitioner and pet carer business, but when COVID hit, like many small business owners, things took a turn for the worst.
“COVID had a massive impact on my business, income and overall finances. I had to let go of casual staff and open an online store, my income went down by 80% overnight, and I’ve felt incredibly anxious overall about the future of the business.”
Despite finding other streams of income, Melissa was still worried about her financial position. She opted to access her superannuation early. It wasn’t a decision she took lightly, but due to her financial obligations and lack of other support, she felt she had no other option.
“I used the money to pay for business and medical expenses, minor renovations and repairs, and general cost of living. I wouldn’t say I’m happy about having to access this money, but without it, I would have had to sell my home.”
As well as the short-term financial stress, Melissa is concerned about how accessing her super early may impact her in retirement.
“This was a very real concern of mine, but due to the preservation age raise, I wasn’t sure if I would ever be able to access these funds again when I really needed them.”
The long-term impact of COVID is likely to keep running into 2021 and beyond. Our lives have changed, and will continue to change in many ways, and increasing financial pressure could be one of the most difficult and stressful challenges to tackle. We hope to share more stories about how Aussies have handled the curve balls that were thrown their way this year, to help you understand your options, know that you’re not alone, and decide the best path forward for you. Stay safe, stay sane and don’t forget to look out for your loved ones.
