Our fifth in the series of ‘Ask the Experts’ articles looks at one of the most talked about topics in financial advice – cashflow.
Tribeca advisor and cashflow crusader Mariana Subasic takes us through the impact of COVID on our spending habits, how to keep on track with our savings goals while allowing for spikes like Christmas, and plenty of tips and tricks to achieve cashflow karma.
How did COVID lockdowns impact our spending and cashflow habits – good or bad? What can we learn from this?
Initially when we went into lockdown we obviously lowered our discretionary spending – going out, traveling, friends and family catch ups – it all pretty much went to zero. But as we continued to stay in lockdown, discretionary spending started increasing to mostly compensate for the lack of being able to be free and do the things that make us happy. So that played out with online deliveries increasing; particularly in areas such as clothing, gym equipment, vitamins, UberEATS, and alcohol.
Grocery spends also increased as people became a little bit more carefree with what they purchased; reflecting their state of mind of being over the lockdown and wanting to get back into normal life.
What it did provide, however, was a better understanding of basic living expenses for costs like food, water, electricity and how much other living expenses can add up. It showed many people that they can lower some of their discretionary expenses, and actually live on a lot less than they thought.
It’s trying to find a balance. And just being aware of your spending. So if one week you have a blow out from getting UberEats four days a week, that’s okay. But the next week it’s being committed to going back to normal spending so it doesn’t become a habit. That’s a big learning from lockdown. To make smart choices and being consistent and balanced with those choices.
Now that restrictions are easing, what tips do you have to avoid overspending and going over the top now that we have our freedom back?
Yeah, it’s going to be a really interesting time. I think a lot of people will fall into the trap of overspending to overcompensate for the fact that we’ve been in lockdown.
My best piece of advice is to come up with a plan that works for you. If there are certain events and things that you want to do, by all means have fun but make a plan for it. Don’t just go wild saying yes to everything; be okay with saying no to some events. Choose the ones that you genuinely value.
I’d also be very mindful of what your longer term goals are. Bring it back to that. So don’t get sidetracked with all the short-term fun if it will make an impact on your long-term plans; whether that’s retiring early, paying down debt, having a big family holiday in the future. That’s really important. Quickly pull yourself back in line with what you are working towards.
And for couples and families, make sure that you have an open line of communication to come up with a plan of attack together. Agree on what you can all commit to and hold each other accountable. And then check in with each other as life returns back to COVID normal.
Christmas is also just around the corner. What are your suggestions for managing spending around gifts, entertaining, holidays?
Everything that you do, do it with a conscious choice. If you’re wanting to go away for Christmas, think about your spending leading up to that and what compromises you need to make. Choose the things that you want to put your spending towards and plan for that, rather than just letting it happen. So be in control of those things, rather than it controlling you.
Another tip is shopping with a list. Before buying any gifts or items for entertaining make up a list and stick to it. This is when buying online can actually work to your advantage. When you’re looking for specific things online, you’re less likely to make random purchases rather than being tempted in store by walking past items on shelves or at the end of the aisle. All those snap purchases can add up.
Knowing your shopping habits is also important. For example, if you’re in a relationship and one of you is more of a spender than the other, choose the one that’s not a spender to do the shopping when they can as they’re more likely not to overspend.
Want some help with managing your Christmas gift list? Here’s a tool to help
What are your top tips for cashflow planning and saving, both for everyday life or larger goals like the big trip overseas or a house deposit?
Cashflow planning and saving really comes down to behaviour; how you commit to working towards achieving your goals.
I think the most important thing is to be in line with what you’re saving for and have that emotional link driving you. Paying down the home loan could be the goal, but it might not be what’s really important to you. The real driver for decreasing the loan could be that it will enable you to take a day off work and live a more balanced lifestyle. So get yourself in line with the emotional link to what your goal is, because you’re more likely to succeed as opposed to it just being a numbers thing.
From a behaviour point of view, choose the saving method that’s right for you. Then you’re likely to stick to it. For some people this might be using an offset account to build up savings. Others might prefer having an account they can’t access online to limit the temptation of dipping into it. Or it could be creating an investment portfolio where a monthly amount is automatically deposited so it builds up over time.
There’s many ways to tackle saving and cashflow. The key is adopting a method that works for you and you can stick to. That’s why having a financial planner or coach to guide, set up a structure and keep you accountable and on track to reach your goals can be a great ally. At Tribeca, we also provide a range of tools to empower you to take control of your finances, such as the Tribeca Tracker which is great for managing cashflow and budgets.
The other major benefit of having an advisor by your side is they can help you in times of instability – like this year – to adjust and create a new plan to react to unforeseen circumstances.
Cashflow planning and saving all gets back to working out what’s really important to you, creating an achievable plan to reach that goal, and then sticking to that plan without getting distracted along the way.
Looking for a great cashflow and budgeting tool? Download our Tribeca Tracker.
If you would like to discuss your current financial and/or cashflow situation we’re always ready to chat. Please talk to your advisor or arrange an appointment with one of our Tribeca Tribe here.
We are also offering a free 45-minute consultation if you have suffered financial hardship due to the impact of COVID-19 such as loss of employment. Please see here for more details.