Financial literacy in 2020: The best financial skills to ride out an economic downturn

Good financial literacy is an essential skill no matter the economic landscape, but with COVID-19 leading to more than 1 million Australians out of work, reduced hours and job losses for casual workers and elevated financial stress for households, having good financial skills at your disposal is more important than ever.

To help ride out this major economic storm, here are 5 key skills to focus on.

1. Learn how to budget – and stick to it!

For many of us, budgeting is the financial equivalent of giving up junk food or promising yourself that you’ll go to the gym five days a week – it’s an admirable goal that typically falls into the ‘too-hard basket’ after a week or so. But good budgeting doesn’t have to be about ‘going without’. In fact, something as simple as cutting back on your subscription services can save you a significant amount of money over the course of a year.

Whether you use an online budgeting tool or stick with paper-and-pen, the first step is going through your bank statements to find out how much you are earning every month and how much you are spending over that same period.

From there, review your spending and be critical about where your money is going. Do you really need those two streaming subscriptions? How often are you using that gym membership?

Once you have done that, then set yourself a goal to save, for example, $100 every week. It might be helpful to set up a separate high-interest savings account that you’re not allowed to touch unless it’s an emergency. That way you can set up an automatic transfer of $100 every week and not be tempted by it sitting in your everyday account.

2. Check your credit rating

Did you know that more than 2.1 million Australians are currently at risk of credit default or another adverse credit event? Many are completely unaware of this fact, which can come back to bite you when it’s time to apply for a loan, start a side hustle or buy a home.

Requesting a credit report is simple and free – just use one of the approved government services like Equifax, illion or Experian. It takes 10 days to process, and you won’t have to pay unless you want the report delivered faster, or you need more than one in a 12-month period.

3. Negotiate your essentials

Most people feel awkward at the thought of negotiation, but when money is tight it can be a helpful way to save a few dollars and ease those financial worries. During an economic crisis like we’re seeing with COVID-19, it’s probably not the best time for employees to ask for a raise, but other day-to-day expenses could be negotiated.

Essential utilities like your gas and electricity bills, for example, are easy to compare online. Once you find a better deal, your new supplier can make the switch for you – and in many cases, your previous gas or electricity provider will contact you to see if they can charge you less to regain your business. Also consider looking for a better deal on your mobile and internet providers.

4. Seek out flexible access to your earned wages

Going into debt is something we all want to avoid, but it’s an unfortunate fact of life that one in three Australians wouldn’t have access to $500 if they needed it unexpectedly. The good news is that many employers are taking a more flexible approach to staff accessing their earned wages.

One example is Wagetap, which is easy for your employer to integrate into payroll systems so you can access up to 50% of what you’ve earned before payday. That means you can get on top of mounting bills and ease financial pressures with the money you’ve already earned. The alternative could mean incurring penalties or not having enough for everyday expenses while you wait for your monthly paycheque to be deposited.

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Being able to access your wages as you earn them can make an employer much more attractive. Contact Wagetap today to find out more.