How I think about managing my finances during the Sydney lockdown in Australia. Lockdown has been tough emotionally for many people, but also financially it has been challenging too.
March 2020 was a bit of a stress test for many people’s personal finances. It helped many people realise where they were too exposed in terms of how they make their money, and where their money is invested.
In this video, I share my thoughts about how to manage your money during lockdown and how to protect yourself financially in future – so big world events like this don’t affect you as much.
While you can’t fix everything overnight, this video will hopefully show you how you can diversify your money and income so you’re in a stronger position when something like this inevitable happens again in future.
Disclaimer: Not a financial advisor or accountant, just sharing my own thoughts about how I’ve approached my own finances. If you want personalised advice for your situation see a professional. The above links pay me a small commission if you join, at no extra cost to you.
Related topics: sydney lockdown, sydney lockdown 2021, sydney lockdown vlog, managing your money, personal finance 101, personal finance tips, personal finance management, personal finance podcast, sydney lockdown news, australia lockdown 2021, australia lockdown news, lockdown extended, how to diversify your income, how to diversify your money, how to diversify etf portfolio, how to diversify etfs, how to diversify income, how to diversify index funds, de risking strategies, australia lockdown finance money
There’s always going to be things that pop up. I think that’s going to be a given that stuff’s going to pop up and the good news is you can prepare yourself for this stuff in future.
Good day there, Ray Corcoran here. In this week’s video, we’re going to be talking about the lockdowns that have been happening over the last 18 months or so, and mainly the financial impact that it’s been having on people. Obviously this is a finance channel and everything that’s been happening over the last 18 months has been emotionally very draining for people, but also financially, it’s been very, very hard for people. Whether you’ve got a job and you’ve been out of work, or if you have a business, you may have a dramatic or complete drop in your income all the while you’ve still got a lot of your expenses happening.
While it’s not great and there’s no sugar coating it, it’s not good. I want to talk about some of the ways that I’ve been personally thinking about structuring my finances in a way that stuff like this just financially doesn’t really affect me. And it might not be something that you can fix overnight, but over time you can make adjustments so that things like this going to keep happening every few years or whatever it is, we know the world is an unpredictable place and you can structure your finances in such a way that this stuff just simply won’t be a big deal to you.
So one of the first things you want to go over is your income and your investments. So in terms of your income, you need to ask yourself, this will be kind of a bit of a, I guess, an audit of your own financial situation and you need to go and have a think about where does all your income come from. So do you get all your income from just one job or do you have a job plus some investments? And if you have a business, do you get all your income from retail trade or do you have an online store as well? And you need to break down.
It’s a really good exercise that you can go pause the video and start the list like where does all my money come from? And in what ratio as well. Do you get 80% of your sales, potentially if you have a business through retail and maybe 20% online? Or is it a hundred percent through retail stores and nothing happens online. If this sort of thing is the case, there’s an obvious risk there that if that part of your business stops happening or is majorly affected, you’re at a great risk because all your income is tied up with that.
And we’ve seen with lots of businesses having to pivot very, very fast. And ideally we don’t want to be pivoting in the moment. We want to be preparing for this as early as possible. And whether it’s what’s happened, I don’t want to use the C word because this video will get demonetized. Whether it’s what happened in March 2020 or started then, or whether it’s something else, there’s always going to be things that pop up. I think that’s going to be a given that stuff’s going to pop up. And the good news is you can prepare yourself for this stuff in future. One of the big reasons that I started my business was I liked the protection that I could get from the business. If I had a job, all my income was tied up in that originally. And if I lost my job, sure, I can get another job, but that was a hundred percent of my income.
And if you’re in a situation like now, some people have maybe lost their job and finding a new job can be quite hard because everybody’s looking for a job right now. One of the good things about business is you can have multiple different customers and if one customer leaves or stops buying, it’s not great. You need to address it, but it’s not going to be fatal for you. So it’s just something to think about. You know, I’ve always loved the idea that getting paid by multiple separate people. And it just de-risk that a lot for you.
The next thing to look at is geographically, where does your money come from? So say for me in my business, I have clients all over Australia and some international clients, and they’re kind of all spread out in different areas. So it is, it’s not compulsory to do this, but it does hedge the risk for me quite a bit. When I have customers, say if there’s a lockdown where I am in Sydney right now, which there is, I’ve got clients in Melbourne, I’ve got clients up in Queensland, I’ve got clients in WA, in New Zealand and so on.
And it means that I haven’t got all my eggs in one basket, and this is going to be a recurring theme. It’s largely about diversification. And just making sure that I don’t have all my eggs in one basket because when it’s going good, it’s fantastic. But if things go bad, you’re really at risk. And you need to think in terms of national versus international, maybe state, state versus state within your country, as well as even, city to city or regional versus metro. All these areas that are affected by world events and national events differently. So we need to sort of tailor out, I guess, our portfolio, based on that.
The next thing to consider is asset class. So, how much of your money is tied up in property versus shares or gold or bonds or cash or crypto or whatever it is. How much of your money is tied up in that? A lot of people have all their money tied up if they’d even do have investments. They have a lot of that money tied up in one thing. And like I said, if it’s going great, fantastic, but all of these things will have peaks and troughs and how times, where it’s not going great and it’s not going great for extended period in many instances. I can’t say recommend you a exact portfolio, cause I would go to jail for many, many years, but basically have a think about how exposed are you? Are you really, really heavy on property or really heavy on shares or really heavy on crypto or whatever it is because this can be a bit of a good red flag for you to be like, all right, you know what, I’m a little bit too heavy on this.
I would like to start allocating more of my money to shares or something different to whatever you’ve already got. And it just means that you can just reduce your risk a bit. In terms of the business owners I talked to a lot of my clients about their marketing because we have a marketing agency and a lot of the things that we ended up discussing as well as what’s the spread of your client base. Do you have…. And also what’s your service delivery? Do you have retail versus wholesale versus e-commerce, online sales. What are the methods of service delivery that you have? Are you too heavy in one? And it doesn’t mean that you have to introduce online sales but it’s something to think about. If your business is too heavy on that side, then it is something that you may want to consider, especially as the world gets more and more crazy.
Same with customer types. Are you heavy, ah, B2B, are you heavy on B2C? Are you heavy on potentially working with government? All these things have times where they had their own peaks and troughs. So if you’re a business, I’ve seen some businesses that have gone so hard into one sector and that’s great, but there’s always moments. I’ve seen so many examples with clients or friends that I know in business where they’re being all their eggs in one basket and it’s great while it happens, but then it turns a sale off.
The second thing that you can do to reduce your risk is an obvious one, but it’s just keeping your costs low. If you have a low cash burn rate, stuff like the… I’m trying to avoid using the P word or the C word, but anything that happened last year, if you’ve got a low cash burn rate, it’s a super obvious one, but I can’t not mention it. You are way more insulated because whatever money that you’ve got, you’re not going to burn through that at any point. And this is good for personal finance, as well as your, your business finances as well, the lower the burn rate, the more runway that you have, and generally the less stress you’re going to have.
The next, one’s another simple one, just having a bigger cash buffer. If you sense that things are getting more unpredictable or you feel like there could be some, maybe negative things happening on the horizon in terms of world politics or, or in your industry, that could be some big changes coming up, increase the amount of buffer that you have in savings whether you have three months, six months, nine months, 12 months, or more. Start to increase it a little bit, if you need to so that if you do say some stuff on the horizon, that could be a risk to your business, you have that little bit extra cash buffer.
I’ve never regretted having a big cash buffer because one means that I can invest in things if really, really good deals come up. And two just the peace of mind. And also just when there’s opportunity, when stuff gets turned on its head like it did last year in March 2020, a lot of the stocks dip. There was property deals to be had. There was lots of opportunities. Those businesses…Some of my clients were buying acquiring other businesses that had been hurt badly, and they were able to acquire those businesses for much cheaper than they would have been able to pay for prior. So there’s always opportunities around. So having a big cash buffer is also great because you can jump on great deals when you see them.
The next thing to consider as well is insurances. So it’s specifically income protection. Now income protection is included for some super funds or retirement funds if you’re overseas. And you need to look at your own specific retirement fund, but you can get income protection for…It depends on what level of cover you get, but it can be as low as 40 bucks a month up to 150 bucks a month. And there’s probably a big range of different offerings you can get, but they can cover up to a usually a percentage, maybe 75%, 85% of your income for an extended period of time. If you’re affected by stuff like accident, accident or illnesses that other common ones, that is another layer that you can give yourself of insurance.
So then if anything happens, and this includes when I say accidents and it can be stuff that some policies will cover you for accidents that happen outside of your work. Just say you had, I don’t know, potentially this depends on the policy, but you might’ve had a snowboarding accident or an accident playing sport or whatever, nothing to do with your job, but it meant that you can’t do your job. And in some cases you may be able to claim for that. So then you can at least get some money coming in to pay your bills and all that sort of stuff during that time while you sort of get better.
So hope you found that useful. It’s really, really good. Like, I really, really recommend it after this video to go over, like where does my money come from? I went over my own finances recently and I was looking at, say for my ETFs that I have with Stockspot. We have exposure to gold and bonds. I’ve got some in cash, I’ve got exposure to emerging markets like Brazil, Russia, and that sort of stuff, as well as global markets with like global ETFs that talk about the top, the biggest companies across the globe and also the Australian market, whether it’s ETFs. Even in property, I’ve got property in multiple different states. We’re about to buy a house in Sydney as well towards the end of the year if all goes to plan. The whole point of this is really just to have assets in all different areas. It’s all about de-risking.
And I think especially early on for people with diversification is extremely important as you get more experienced and maybe getting more expertise with certain things, maybe you get really into property or you’re really into shares and that sort of stuff. It may make more sense for you to go hard at those things, because you have an edge through skill and experience, but yeah, so hope that kind of gives you a bit of an overview of some of the things that I’ve been personally thinking about in terms of decreasing my risk as things get more and more unpredictable, and maybe it’s a good opportunity for you as well, to look over your finances and be like, am I too heavy on this? Or am I too exposed there? And all around it can just give you a lot less stress as you sort of navigate through life and with your finances.
So that’s this week’s video. If you like the video give it a like. It helps push it out to lots of people all over YouTube. And if you want to subscribe, we do videos on making money, saving money and investing money. And yeah, that’s the video.