Earlier this year, Australia was scorched by bushfires that tore through the country; these bushfires were later extinguished and replaced by heavy downpours that triggered bouts of flooding. We now find ourselves in the grips of a COVID-19 pandemic.
Australians are no doubt feeling the impact of these catastrophic events not only from a physical and emotional standpoint, but from a financial perspective also.
These natural disasters have wreaked havoc on people’s homes and property, and in the case of COVID-19, have meant that some Australians are now facing the risk of being without an income for a period of time. Not only could this be caused by being personally infected by the virus, and having to remain isolated for at least 14 days, it may be your place of work is shut down due to the threat of COVID-19 and you suddenly find yourself without work.
All of these events have been very real reminders that unexpected expenses can catch us by surprise when we least expect them, and they can have a massive impact on our livelihoods if we haven’t prepared for them.
What does your Plan B look like?
While the bushfires, floods and COVID-19 are some extreme examples of unexpected expenses we may incur, Aussies encounter these types of stressful costs every day. From unanticipated car repairs and veterinary bills, to your washing machine breaking down all of a sudden – these expenses are very real possibilities and are often out of our control.
We recently conducted a study into the financial confidence of Australian employees and found that unexpected costs (64%) topped the list of what Aussies are most stressed about.i This was closely followed by inadequate savings (62%), which suggests that many Aussies would be plunged into unanticipated debt if they suddenly encountered an unexpected expense.
So how can we minimise the blow to our back pocket when we’re hit by a surprising bill?
One word – automation.
With life as busy and as hectic as it is, you want to avoid the burden of micromanaging your finances. By automating your finances, you can feel confident that your money is being taken to where it needs to go without a second thought or effort on your part. Automation can give you the flexibility and comfort of knowing that all of your basic essentials for living are paid for, you’re still enjoying life the way you want to, and you can easily take care of unexpected expenses when they pop up out of the blue.
So how does it all work? Let’s get down to the nitty gritty.
Using technology to your advantage
To begin with, you’re going to want to split your finances into three different bank accounts (make sure you choose accounts that don’t attract any fees). Let’s call these your Needs, Wants & Emergency Funds accounts. Two of these bank accounts will be everyday transaction accounts, and the third will be a high interest online savings account.
We take a deep dive into this below:
Name your accounts! Many banks allow you to name your accounts so you’re able to clearly see what they should be used for and, most importantly, are more motivated to stick to the purpose of each account. As an example, you could call your Needs Account ‘Everyday expenses’, your Wants Account ‘Splurge money’, and your Emergency Funds Account ‘Plan B fund’.
It’s important to keep in mind that the above approach does not take into account any future savings measures nor wealth creation strategies. For guidance on accumulating wealth and saving for your big life goals, you can get in touch with us 1300 850 757, or email us at GBSAU_Admin@ajg.com.au to book in a consultation with one of our expert financial advisers.
While automating your finances may seem daunting, putting in the hard yards to begin with will mean you can reap the benefits in the long run. As life comes with uncertainties, it is near impossible to avoid unexpected expenses altogether (unless you plan on bubble wrapping you’re entire life). By automating your finances, you’ll not only be able to enjoy life the way you want to, you’ll also feel confident and prepared for the most important ‘what ifs’ in life.
i Gallagher Employee Financial Confidence Report 2020
ii ASIC’s MoneySmart Budget Planner: https://moneysmart.gov.au/budgeting/budget-planner
iii Budget Direct Research 2019
The information and any advice in this article does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. When considering whether to acquire a financial product, before making any decision, you should obtain the relevant product disclosure statement.