Personal finances post COVID-19.
We are going to come out of this COVID era with a new set of rules. We have been forced into these rules by isolation, some we have put off for years and some we never thought we would need to learn. Many of these practices have just had the COVID torch shone on them and they are scurrying. Here are the changes we think are here to stay.
Take for example all those who have resisted online banking for a variety of reasons and or fears. Granted this has generally been the older population but not solely. Over the years they have continued to stand in queues at banks, use cheque books and send cash in envelopes for birthdays. During isolation we have been forced to sign up to online banking to enable payments, transfers and shopping and now many of us are reveling in paying bills, shopping with Amazon and transferring money online. Learn to love your bank online, branches will become a thing of the past.
Cash is no longer king.
Well, having access to cash is still definitely king but using it to purchase items has changed. Going to the ATM or the bank and filling up your wallet for the week, with that folding stuff, is a practice that we have been urged to abolish. Shopping online from home and retailers forcing us to tap and go has changed the way it the way we pay. If for whatever reason you do need to get cash it will be different.
There was a time not too long ago when we were impressed by touch screens and all they enabled us to do. COVID has made most of us hyper-aware of every touchable surface that could transmit the disease, so in a post-COVID world, it is expected that we’ll have fewer touch screens and more voice interfaces and eventually machine vision interfaces. Get ready to be recognized by your friendly ATM and having conversations with inanimate objects.
Mojo (emergency) bucket to become the norm.
With the increase in online shopping and the disappearance of cash as a limiter on what we spend, knowing and sticking to a budget becomes vital. The “spend whatever you earn and then just use your credit card philosophy” is a definite practice of the past. This is a practice that has thousands of families in dire straits today. Those who have been living from pay cheque to pay cheque are vowing to themselves never again. As in most times of financial hardship the Australian household savings rate increases, and I am guessing it will be the same again this time around. But how best to do this?
For those who have not read Scott Pape’s book the Barefoot Investor and his 9 steps to financial freedom, here is a look at his bucket philosophy. Divide your monthly income into 3 buckets:
- Blow bucket – for daily expenses, your budgeted items and the occasional splurge.
- Mojo bucket – to provide emergency funds of at least 3 months living expenses.
- Grow bucket – to build long term wealth and total security.
The Mojo (emergency) bucket is what we all need to build to ensure financial stability in the years ahead. Set the bucket philosophy in place now and be ready for anything that this world can throw at you. If you do want to take it further and follow all of Scott’s 9 steps, then check them out here.
This strategy is not for everyone and has been provided as general information only and prepared without taking into account your financial position, objectives, and needs. You should consider its appropriateness and seek financial advice before making any financial decisions.