Retirement
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the first recession in nearly three decades.
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the first recession in nearly three decades.
In a conversation with nestegg, Minnik Chartered Accountants director and wealth educator Leah Oliver has advised investors to adjust their spending habits during the market slowdown.
“People need to be taking less risks and being more conservative in the current economic environment. Everything in moderation. Not overextending. Be very mindful of spending on unnecessary things. Review your living costs and shave where you can,” Ms Oliver said.
During this time, the wealth educator noted impacts on income streams may need some careful thought around potential backup income, in the event that existing income is lost or otherwise affected by the pandemic.
She also told Australians who are managing their finances to be careful about adding to their debt.
“Now is not the time to undertake debt funding, it is more appropriate to be minimising or eliminating debt as we move through this downturn. Aim to remove all forms of debt in the way of credit cards, Afterpay and vehicle finance to whatever extent possible. Positive cash flow and surplus are required; these facilities lead to a deficit,” she said.
“We recommend using debt only to fund assets that go up in value, i.e. appreciate. Use debt to ‘step up’ into investments, and then smash it down, fast-track. Refer to your personal accounting file and plan the number of years to become debt-free on each portfolio asset.”
Ms Oliver also advised investors to be careful in the current landscape, noting that investments that look sound might actually be held up due to government funding.
“With interest rates low and government stimulus measures still in place, the economic problems are somewhat ‘masked’ and the property market is showing resilience at least for now. It is predicted that there will be market instability in this area within the coming year,” the wealth educator explained.
“There are specific considerations for people holding shares and commercial property in their wealth portfolios. COVID has brought new changes, leaving office blocks empty and demand for commercial investments falling.”
Further, Ms Oliver told investors that it is important to assess your own personal circumstances, considering what you have and what your strategy is to move through the recession and keep your assets intact the best you can.
“Do you need to sell, hold, lease, move debt? Do you need backup income streams? Can you divert savings in less travel and transport costs to your mortgage or your wealth portfolio?
“There is a lot to consider. If you are in tune with your financial position, [you] are reading your numbers and consistently researching your options, plus working with your adviser, you are being proactive with your wealth, and this will ultimately give you peace of mind,” Ms Oliver concluded.
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