Two leading financial coaches have cautioned Australians against withdrawing money from superannuation to get them through the coronavirus crisis, and to focus on paying off high-interest debt.
Molly Benjamin, founder of Ladies Finance Club, a Sydney advisory agency which teaches women to take control of their financial futures, said house-bound Australians now have more free time than ever to organise their finances.
Ms Benjamin told Daily Mail Australia how we spend this time will directly determine our financial health and job security in the post-coronavirus world.
She said it’s crucial for women in particular to ‘switch on’ to financial discussions because they face unique challenges which see them ‘retire on less and earn less than men, while still living longer than men’.
Together with top money coach Betsy Westcott, Ms Benjamin has broken down complex issues like compound interest, insurance, debt and eligibility for government support payments to help people cope with financial stress as the pandemic continues.
Money coaches Molly Benjamin and Betsy Westcott are teaching Australian women how to take charge of their financial futures during the uncertainty the coronavirus crisis
1. DON’T TOUCH YOUR SUPER
From April 20, furloughed workers and those whose income has been reduced by at least 20 percent because of the coronavirus shutdown will be allowed to withdraw up to $20,000 from their superannuation fund, tax-free.
The first $10,000 will be made available from mid-April to July 1, and the second $10,000 from July 1 for roughly three months after that date.
Ordinarily, strict rules block people from accessing their superannuation until they hit retirement age of between 55 and 60.
More than 361,000 Australians have already applied for early access to their superannuation, but Ms Benjamin warned it should only be used as a last resort and not to free up funds for discretionary spending.
Early withdrawal from your superannuation fund should only be used as a last resort, Ms Benjamin warns. Young Australians could stand to lose out on as much as $233,000 over the course of their working lives if they access funds over the next six months (stock image)
‘I don’t think people understand the impact withdrawing will have on their financial future,’ she said.
Ms Benjamin knows multiple cases of young Australians who are planning to access their super to pay off car loans and credit card debt instead of using the money to offset sudden financial hardship as it is intended.
‘You need to think of it in terms how much you could lose,’ she said.
Because of compound interest (which is interest earned on interest itself) young Australians could be losing out on as much as $233,000 over the course of their working lives by withdrawing that $10,000 in the coming months.
Calculations are based on a 65-year-old worker with a superannuation fund which offers an average return of eight percent per annum.
‘The older you are when you withdraw, the less you’re affected because it’s based around interest earned over long periods of time,’ Ms Benjamin said.
If a 25-year-old withdraws $10,000, they could be reducing their super by $233,000 by the time they retire at 65.
If a 30-year-old withdraws $10,000, this equates to roughly $153,000 less in their super when they retire.
Taking $10,000 out at the age of 35 equates to a loss of $100,000, while taking $10,000 at 40 equates to a loss of $63,000.
This chart from the Australian Services Union shows projected losses based on early withdrawal from superannuation. Calculations are based on a 65-year-old worker with a superannuation fund which offers an average return of eight percent per annum.
2. ‘MARIE KONDO’ YOUR REGULAR BILLS
Marie Kondo’s famous decluttering principles for your house can also be applied to your finances.
Drawing inspiration from the Japanese tidying expert’s iconic mantra ‘spark joy’, Ms Benjamin encouraged people to look through loan statements, credit card and utility bills and recurring subscriptions to decide if there is a way to reduce spending.
‘Write down what you are paying, and ask yourself if there might be a better deal out there that can help you save big in the long run,’ she said.
Following Japanese tidying expert Marie Kondo’s ‘spark joy’ mantra, Ms Benjamin encouraged people to look through loan statements, credit card and utility bills and recurring subscriptions to decide if there is a better way to spend their hard-earned money
A simple online search of like-for-like products and services like insurance and internet providers will show you what else is on the market, and how much you could bank by making a switch.
Finder and Canstar are two of Australia’s most reputable online price comparison websites.
Melbourne-based organisational consultant Gemma Quinn previously told Daily Mail Australia that the Marie Kondo method can be applied to all aspects of your life, from relationships and health to finance and work.
‘It’s about tidying up in a way that enables you to live your ideal life and be surrounded by the things that spark joy,’ Ms Quinn said in October 2019.
3. PAY DOWN HIGH-INTEREST DEBT
Any debt with interest rates above 10 percent should be prioritised and paid off as quickly as possible to avoid spiralling costs that become impossible to repay, Ms Benjamin warned.
‘This kind of debt is expensive and taking you backward. Direct any spare cash to knock it over and fast,’ she said.
‘After that, if you have any loans with an interest rate above five percent keep paying them down, but it’s ok to focus on saving at the same time too.’
The longer you take to pay off high-interest loans or credit card repayments, the more money it costs you because you pay more in administrative and finance charges when you pay the debt off slowly.
Ladies Finance Club is running a six-week ‘Money Makeover Bootcamp’ starting on Wednesday, April 15, to teach women how to avoid mounting debt, invest in shares, understand superannuation, buy property and protect their cashflow.
The program costs $475 and is designed for women who want to regain control of their money and stop living from paycheck to paycheck.
Weekly sessions will be held over video call in light of current social distancing restrictions.
Ladies Finance Club is also running a free webinar with Australian debt specialist Lisa Simpson from 8.30pm – 9.30pm on Wednesday, April 8, which will teach women how to create debt repayment plans that work for them.
Register for the webinar on Ladies Finance Club’s official website or via Eventbrite.
4. TAKE STOCK OF WHERE YOU’RE AT
Before opening a new savings account or mapping out lofty financial aspirations for the coming year, you need to know exactly where you stand with income and expenditure.
Ms Benjamin suggests writing a list of everything you own (assets), owe (debt), earn (income) and spend (outgoings), to paint a clear picture of how financially secure – or insecure – you are right now.
The Australian Government’s Money Smart website offers a range of free tools and advice to help you make informed decisions in the midst of the uncharted territory of COVID-19.
Information on consumer rights, early access to your superannuation fund, mortgage and rent freezes and eligibility for government support payments are all available on the site.
5. LEARN A NEW SKILL (FOR FREE)
As the global economy grinds along at snail pace leaving hundreds of thousands of workers either unemployed or under-employed, many find themselves money poor but time rich, with a golden opportunity to learn new and profitable skills.
Ms Benjamin said this time should be used to ‘future-proof’ careers for the post-coronavirus era, and it seems her advice has reached the ears of the New South Wales government.
The state has announced it will make 21 TAFE courses available for free in a bid to help Australians stay productive and entertained at home as lockdown continues.
The courses, which can usually cost as much as $1,570 for 12 weeks of study, cover practical skills across a range of industries including administration, business, computing and management.
NSW Premier Gladys Berejiklian announced the roll out on Monday as more than a million Australians face unemployment, one in ten of the country’s working population.
She encouraged people to use time spent at home to upgrade their skills and prepare for the end of these difficult times.
TAFE New South Wales (pictured) is offering 21 free courses for Australians eager to learn new skills while isolating at home
Online learning platform Udemy has also launched more than 250 free courses for people wanting to study tech and coding skills, web development, photography, time management, productivity and public speaking.
Udemy is also offering free courses on learning an instrument or digital painting.
Coursera is providing learning resources free of charge until the end of May, including lectures and quizzes.
Free tutorials are available on career development, public health, science and even poetry.
The full list of courses is available on TAFE NSW’s website and at the bottom of this article.
6. REMOVE TEMPTATION
While buying coffees and takeaway dinners to support floundering local businesses is both kind and thoughtful, living exclusively on restaurant fare will damage your financial well-being at a time when it’s crucial to protect it.
Ms Benjamin recommends limiting takeaways to once-a-week treats and trying home meal kits every other night.
Meal kit services Hello Fresh and Marley Spoon both allow you to trial a box for free and deliver packages straight to your door.
This means you can cut down on trips to the supermarket and in doing so, reduce the risk of catching COVID-19 and spreading the virus to others.
‘It’s healthy, tasty and convenient food without breaking the bank – plus, you don’t need to think of ideas for what to cook next!’ Ms Benjamin said.
Pricey gym and exercise studio memberships should be regarded in the same vein and frozen until fitness clubs are permitted to reopen.
Tide yourself over in the meantime with the increasing variety of free home workouts available online, which include bodyweight exercises, high intensity interval training, yoga, barre and Pilates.
Many of the country’s most highly regarded personal trainers have shared their favourite routines for free to help Australians stay in shape in isolation, including Brisbane coach Georgio Batsinilas who is the co-founder of the FitazFk fitness programme.
He showed gym-goers how to work up a sweat at home by completing a 28-minute routine of six simple exercises – push-ups, squats, high-knee sprints, lunges, sit-ups and ‘towel rows’, which involves pulling a towel taut and pretending to row with it.
The Nike Training Club, Daily Yoga, Aaptiv and Daily Workouts Fitness Trainer are other examples of free gym apps on offer.
Co-founder of the FitazFk fitness programme Georgio Batsinilas showed gym-goers how to work up a sweat at home by completing a 28-minute routine (pictured) of six simple exercises – push-ups, squats, high-knee sprints, lunges, sit-ups and ‘towel rows’
7. ASK FOR HELP
The breathtaking reach of the COVID-19 pandemic means few people have been left untouched by the uncertainty and hardship suddenly created over the past four weeks.
If you are struggling to make ends meet, cannot pay your rent or utility bills or simply need emotional support, don’t keep it to yourself – make use of the myriad agencies and networks standing by to help vulnerable people during this time.
For confidential financial support, the National Debt Helpline can be reached on 1800 007 007.
For personal support, help with suicidal thoughts and domestic violence, call Lifeline on 13 11 14.