We launched The Thomas George Collection (TGC) in early 2020. Pre-sales were off the chart. March was looking good. Then COVID happened. Sales suddenly flatlined. TGC was like a marathon runner that had hit the proverbial 'wall', only we'd just passed the start line. My other business was at least paying its bills but there wasn't much left in the way of income. The only thing to do was to bunker down, spend less, and try to get through the worst of lockdown without undue financial hardship.
Lockdown is thankfully easing and business is picking up. Job Keeper has kicked in and I'm hopeful..but not naive. With the economy heading into uncharted waters, I'm focussed on proofing my family's personal finances against uncertainty - a case of hoping for the best, preparing for the worst. Together with my wife (who is a Certified Practising Accountant), we have made some substantial savings over the last few weeks, which I've outlined below.
1. Keeping track of our daily spending
I sometimes struggled to follow the budget my wife sets. I'm sure I'm not alone here, but by being denied the luxuries of life - coffee, eating out, shopping etc, - we saved a ton of money during the lockdown. Tempted as I am to fall back into my convivial ways, the signs are telling me to keep things tight.
Treasurer Josh Frydenberg declared Australia was in recession after an almost 29-year run of economic growth ended on Wednesday with a March quarter contraction. https://t.co/fbqtdUObU4— Financial Review (@FinancialReview) June 3, 2020
From a personal finance perspective, I need to continue practicing these good spending habits - within reason (hey, I live in Australia's coffee capital) - which my weak-caffeinated-will had no hand in forcing. She’s on the Money Podcast host Victoria Devine reminds us of the need to remain frugal. That morning latte, daily eat-out lunch, and Uber Eats dinners really start to take “bites” out of our wallets. “In these times a $10 bottle of wine tastes just as good as a $30 bottle.” Cheers to that, Victoria.
2. Getting on top of direct debits and subscriptions
New research has found that "three in five Australians (62%) are wasting money on subscription services they either don’t use or have forgotten about," that's $3.9b Australia could REALLY use right now. On the other hand, I like nothing more than a good Ken Burns doco and tuning into my playlist, so I wasn't prepared to go full-Luddite. Although, I was surprised that I had inadvertently signed up to a creative service last year that had slugged me £39 (or $70aud) for an annual subscription I hadn't touched.
My wife and I took the opportunity to get on top of our bills. Those unused subscriptions were cutaway unceremoniously. We’ve also stopped direct debits for services, such as gym memberships, that we’re not using (or requested a credit note for). Collectively, we'll be saving hundreds of dollars.
When was the last time you checked your bank statement? Beware of recurring subscriptions, which are bank account life-suckers.
Check out this article by Popular Science to track down many of the usual suspect subscriptions that are silently draining your account.
If you're struggling to pay your bills, the Government’s stimulus payments package (see the guide on how to access it here) and bank assistance programs are designed to help you during these difficult times.
3. Reducing mortgage stress
This was the big one. Both fixed and variable home loan rates have tumbled to crazy low percentages, with many rates at the mid-2% mark and even lower for fixed rates. That’s unprecedented. For my family, we’ve changed from variable to fixed in order to take advantage of these record-low rates. Some of you may want to keep your repayments at the current level in order to pay less over the life of the loan, others may find that an extra $100 or so a month comes in handy at the present moment. If you’re paying an interest rate of over 3%, I'd personally be looking to refinance to benefit from the low-interest rates.
4. A credit card better suited for post-lockdown
We keep tight track of our credit card spending and always pay before the interest free period ends. But I will be honest, I wasn't completely across what my credit card interest rates were. When I asked my wife I was a little shocked. The average rate in Australia is 19.94%! In the current economic climate, that's potentially a crippling mountain of debt and with retailers moving to a 'card-only' payment method, it's a recipe for a sticky financial situation.
When my wife asked me if I even knew how much I was being charged annually for my credit cards, all I could mutter, sotto voce, was a shakey, 'Yep!' When I looked it up, I muttered, much more audibly, 'what the f..'. It made no sense to own premium credit cards with high annual fees when all their perks, such as lounge access and travel points, were useless coming out of lockdown.
Is a low rate credit cards really cheaper? What is a cash advance? What is a balance transfer?— InfoChoice (@infochoice) February 17, 2020
Before you compare credit cards on cost, take a couple of minutes to look at our guide to low-rate credit cards in Australia …. https://t.co/fz4kUYHO2y pic.twitter.com/FeIKfsLW30
According to the RBA, most Aussies could save up to $250 per year in credit card costs by switching to a more suitable card. I've stopped using my premium credit card and I'm currently on the market for a new card with a better interest rate and low (much lower) annual fee. I'm also keen to benefit from "bank transfer" promotions, whereby the bank will transfer your existing credit card debt to their card and offer a “honeymoon period” at a very low-interest rate, sometimes 0%.
If you're concerned about your credit card, check-in with your bank as many are currently offering credit card relief.
5. Making smarter purchases
This bit of advice is something I'm very familiar with, and it really does save you a fortune. So let us take clothing and footwear, something I am apt familiar with.
With lockdown easing, there may be a need to purchase new clothing or footwear (and, heaven forbid, shaving). But here's the thing. You don't need more clothes, you need better clothes. We wear about 20% of our wardrobe 80% of the time. Well-made clothing lasts longer, you spend less and they're usually more comfortable than more mediocre items. Put another way, cheaper clothes end up being more expensive. Quality is always the best bargain.
Check out our recent post on how to save money buying quality footwear.
James Seaford is the owner of the popular shoe care website Trimly and co-founder of the Thomas George Collection. The experiences and opinions expressed in this blog post are for general informational purposes and are not intended to provide specific advice for any individual with regards to his or her personal finances.