COVID-19 has altered plans all over the world, which has made people stop and rethink how they manage their finances. In a new study, it was found that more than half of Australians were forced to change their financial goals in 2020 due to unexpected circumstances.
We’ll look at why Australians are focused on savings this year, and what they’re saving up for. From budgeting to property buying, knowing these top financial priorities may give you more insight into how this year will go.
In the new study, it was found that building emergency savings was the top goal for Australians, which makes sense after the disruption of the pandemic. With so many unknowns, having more money would be a welcome certainty.
Having experienced financial uncertainty first-hand, in many cases for the first time, many Australians are focused on building up a stockpile that will last during the worst of times.
About 66% of people surveyed said that COVID-19 had reminded them of the importance of having enough savings for a rainy day. This awareness is a welcome change for financiers, especially when past surveys have shown that 21% of all Australians had less than $1,000 saved.
2020 has been a huge eye-opener for many people, which has forced many to rethink how they can cope financially when things are out of control. Whether it’s a car breaking down or finding out that your company is downsizing, there’s no need to panic as they have enough set aside to cover the essentials. Setting up an emergency savings plan is now a top priority for Australians as it gives them better peace of mind and improves their mental health.
Australian household debt to net disposable income is currently at 217%. The pandemic has brought families to focus on paying off their existing debt and closing off credit card accounts, with as much as 70,000 credit cards closed in September.
The government has taken a variety of initiatives to ensure that Australians aren’t overwhelmed right now. However, as of 1 January 2021, the government’s temporary debt relief measures have ended and the bankruptcy threshold has now been adjusted. Now, a minimum debt of $10,000 can trigger a bankruptcy (down from $20,000), and the debtor has 21 days to respond to a notice (down from 6 months). This is still a significant compromise though, as before the pandemic, the minimum debt amount was set at $5,000.
In the wake of these changes,paying down and closing off unsecured debt first to avoid further complications is becoming a priority. Debt consolidation can also be a simpler way of bringing all of your existing debts into a lump sum — with just one interest rate and payment, which helps reduce fees and improves your credit rating at the same time. This will come in handy when looking to apply for personal financing or a mortgage down the track.
Exploring how you can better manage your finances this year is crucial, so you can start to pare down what you owe and avoid getting into any more debt.
With people being unable to travel since March 2020, more people are looking at doing home improvement projects and renovations, sharing portfolios to look for better-paying jobs, and exploring new property investments.
When their savings are unable to cover these personal expenses, Australians are also exploring other loan products available in the market such as car loans, home loans, personal loans and renovation loans, which can be key to moving forward with personal goals this year. However, it’s pivotal to choose the best kind of loan for your needs and consult with your bank to ensure you can afford to pay them off with your income.
When it comes to home loan serviceability, it’s important to keep in mind that more banks are playing it safe, as the Australian Prudential Regulation Authority (APRA) is holding them more to account for previously issuing loans that borrowers can’t afford.
Banks usually calculate home loan serviceability by checking your income and expenses and generating a debt service ratio (DSR). This is a percentage of your monthly income that can go towards servicing your debt. Ensuring that this ratio is manageable is key when seeking any type of loan from a lender.
How the details are structured within each contract will have everything to do with how you acquire and pay off your assets. You can also consider a dispute resolution scheme that can remove blemishes from your credit report.
Shore Financial knows that your finances are so much more than numbers on the page. It’s why we work with dozens of experts to help you maximise your opportunities this year. When it comes to financial assistance, our loan specialists know the products inside out, making it easy to recommend those that will give you a streamlined and cost-effective solution.
Every cent that you work for and save has a story behind it. When you trust us for mortgage advice, you get personalised recommendations that take into account everything from your career goals to your lifestyle. It’s important to save for a rainy day, but it’s also important to take steps that will protect your long-term financial future.
We take the time to find out your financial goals 2021 before crafting a roadmap that will get you there. Whether you’re ready to invest, buy a car, or just take a serious vacation when the border restrictions close, we’re here to make it happen.
Get in touch with the Shore Financial team today.