The COVID-19 Emergency Budget Meeting
Mar 22, 2020
If there was ever any doubt about what an emergency might look like, well this is it, folks!
I hope that each and every one of you is coping well and today I wanted to let you know what Jonny and I are doing, in the hope that you might gain a few pointers about what to do with whatever situation you may find yourselves in.
Our current situation is that my house is a lot tidier, the washing is being done, odd jobs that have been waiting have been completed and all my meals are being cooked for me and the main reason is that Jonny’s work as a graphic designer has suddenly gone quiet. Every cloud has a silver lining - who doesn’t enjoy having dinner cooked for them? Up until this point he has always had a steady part-time stream of work looking after a bunch of clients, but the phone has stopped ringing for those clients of his too and it had an immediate trickle-down impact.
My situation is completely the opposite.
On Monday I started working full time as planned, for two weeks to cover for my colleague as she took leave to take a break...in Australia. She left the Saturday before they said you would have to self isolate for two weeks and now there are limited flights to get home to New Zealand. It’s such a fast-evolving and confusing situation for her. Therefore, I’m working full time until she can get back and get through her quarantine period, for the next two weeks at least if she makes it home soon, but it’s a bit open-ended at this stage, I’m just pleased that I have work and I’m also pleased that the business I work for is prepared for this sort of situation as we are able to do each other’s jobs up until a point. But, of course, my own work may come to a halt if businesses start to close due to health regulations or lack of work.
Our situation is by no means unique and I’ve heard about many many people with previously stable jobs, suddenly out of work - the likes of Air New Zealand for example and all tourism business both large and small.
So, that’s the situation, but I’m pretty good in a crisis, so I’ve been working on a solution and that’s what I wanted to talk you through today because anyone who has suddenly had their income cut needs to get focussed pretty darn quickly to stave off money problems down the track.
Time for a family meeting!
We had an inkling that work might suffer so at the start of March we did a personal financial stocktake to look at our exact situation and how much money is required in the months ahead. Because I’ve budgeted for so long now this was very easy for us and I looked at my January income and expenses on my budgeting app PocketSmith:
My PocketSmith dashboard showing January’s Income and Expenses.
As of 21 March 2020 our spending for the month now looks like this:
My PocketSmith dashboard for March showing a dramatic decrease in fun stuff and things we could do without.
* You may notice a big yellow Insurance section, that’s because we paid our yearly car insurance in full this month, using money we had budgeted for already, so although it looks grim, the money was already set aside for it.
Just like that, we made a decision as a family to focus on immediate needs and everything else can wait for when things improve. We are basically just keeping our powder dry and severely cutting back on ALL unnecessary expenditure for the foreseeable future. No more trips to Queenstown to go luging, I’ve cancelled my annual dental appointment, no more dining out. All I want to see on my PocketSmith pinwheel for the next wee while is Red, Yellow and as much Green as possible!
As yet, we are under no financial strain but I needed to get a clear picture of how much money we have and how much we need to pay out each month in bills so I can plan the months ahead and it’s better to get a full understanding of this now when we are not stretched than when we are staring at bills that we know we don’t have the ability to pay as I never want to find myself in that situation.
Start Planning
If you are wanting to take some control back and are not already budgeting I would really, really, really encourage you to sit down with your bank statements and note down all of your recurring and upcoming expenses and just start to map out how much money you see leaving your bank account during the next couple of months. Then work out how much income you see coming in. For some people, it will be business as usual but as parts of New Zealand start to slow down or even shut down for a time in order to control COVID-19 there will be an increasing amount losing income and losing jobs altogether, so the time to start planning for this is right NOW.
My concern is for those of you who have always had a high steady income, have taken on a lot of debt and who have never needed to watch their expenditure because you have always had your next pay to look forward to. You are likely to get a sharp wake up call if you don’t pay attention right now and your work is also uncertain.
I use a PocketSmith paid plan but they also have a basic FREE plan and although now is not really the time to become a full-on budgeting whizz (mind you, if you are in isolation at home it could be!), it is an incredibly useful tool to help you work out your current situation and forecast the coming months using their calendar. If you are doing this exercise for the very first time, just think “big picture” and work in rough numbers i.e. $250 for groceries each week. This way you won’t get yourself bogged down and confused.
Failing that, just get out a pen and paper and carry out the same exercise!
Once you have laid it out and you get to actually eyeball how much you spend on Netflix or Uber Eats then make a decision, is this expense critical or is it going? If your income has taken a hit already or you know it is likely to, cut all that stuff out right now. After slashing all unnecessary spending, list out all of your upcoming bills in order of priority and work out if you have enough income to cover these and set money aside to pay the most crucial first (food, power, rent/mortgage etc). If you know you are going to come up short then immediately reach out to those suppliers and talk to them about your situation and the fact you may only be able to make partial payments. If it’s your mortgage you are going to struggle to make then phone your bank immediately and talk this through with them. If you are eligible for any of the government support then don’t delay and fill out that application form immediately. If you have the opportunity to take on any work, take it. In times of job loss, you need to get a stream of income coming back in so just start looking for work right now.
Because I have budgeted for many years I have a comprehensive understanding of where our money comes from and goes to, so for us it was a ten-minute conversation and planning session. Just doing that exercise makes me feel calm and ready and it gets us working together more than ever as a family.
Personally speaking, although the world is having an emergency right now, for us it’s not yet a financial emergency. Having discussions around these current events takes me right back to the Christchurch earthquakes and the walk Jonny and I took along the banks of the Avon River near our home shortly after it all began. I said to him at the time, “I don’t know how all this is going to play out but I can tell you that we have enough money set aside to see us through”.
Peace. Of. Mind. A large sigh of relief.
And that is where we sit today, we always knew there would be another emergency somewhere down the track, we just never knew what shape it would take but once again, we have an emergency fund of $16,000 sitting in a bank account just waiting to be used if required, which if it became our sole source of income would last about six months. Now, I’m going to do everything in my power NOT to have to use it, but if I need to, that’s exactly what it’s there for.
For the people who challenge me on my aversion to debt, the comment I will often say is that ‘debt adds a layer of risk’ and THIS is the risk I am talking about and I’m just extremely thankful that we don’t have debt obligations to meet at this time.
What about our Investments?
As for our investments, I’ve still not looked at all of them because I know they are all down, so what’s the point? But I know I’m in the right KiwiSaver fund and the right investments so there is no need to make any changes at all and I won’t be selling anything. Buy and hold has always been my investment strategy and nothing has changed and although many are surprised, my focus right now is not on our investments at all, the stock market is just doing what it does and we will just ride it out.
We continue to invest in our three funds and KiwiSaver as per our automatic payments. I sorely wish that at a time like this I did have a lot of spare cash to invest as shares are certainly on sale at the moment and they will recover in time. In the meantime, every time someone uses my Sharesies link, I’m putting that $5 I receive straight into my New Zealand Property fund and that has been a great psychology lesson in itself because I know that with each investment I make the price will likely be lower the next day, but I still invest because I know that when things recover and I look back at March 2020 I’ve bought cheaply… Buy Buy Buy
My Sharesies dashboard showing the NZ Property Fund.
In times of crisis, there is always an opportunity, so it’s going to be interesting to watch how this plays out and certainly if we can take advantage of the situation, we will - just to be clear here, I’m meaning good, solid POSITIVE advantage, not like the spammers who are already hammering my inbox trying to get me to click on dodgy links or the dirty rotten payday lenders who have begun to prowl around! They are just dirtbags.
I’ve already heard from a reader of this blog who has worked hard over the last three years to turn his financial life around from the disaster it used to be and his workplace has asked if there is anyone wanting to take voluntary redundancy. He put his hand up, so for him, COVID-19 is the launch pad from which he is starting his new early retirement! Out of adversity comes opportunity and I could not be more pleased for him.
Be Kind, Be Supportive, Help Yourself and Help Others
Plus, I’ve heard so many stories of people reaching out to help other people and this is the New Zealand I want to hear about. Our daughter, in readiness for possibly having to do her school work from home, has created what she is calling her “box office” AND she is eating up all her dinner so we don’t waste food! Plus, a big bonus is that we have always loved spending time together so having her home from school if it comes to that, will be enjoyable and not a chore.
My daughters home work station “the box office”.
If your employment is uncertain then please don’t put your head in the sand but instead face it head-on and prepare yourself today. If your employment is assured, then look around at who you can support and guide as there will be many people facing uncertainty right now which may be a completely new experience for them, so look out for each other.
I also just wanted to say a heartfelt THANK YOU to every Kiwi who is working to fight COVID-19 on our behalf. And to Jacinda Ardern, we look for leadership in a time like this and she is certainly delivering.
I’m a positive person and in trying times like these I just always look ahead to the next three weeks, the next three months, the next three years because I know that if I give it time, things will improve. So, chin up, be kind, be supportive, help yourself and help others too. No hugging (such a shame because I’m such a hugger) and wash your hands!
