Podcast: How to recession-proof your finances during COVID-19

A conversation on how to be proactive in the face of uncertainty.

A recession or any type of economic downturn can be an incredibly challenging and stressful time. As unemployment rises, incomes fall, stock markets crash and bills continue rolling in, it is natural to be worried about your money. But there are things that you can do to prepare.

On today's episode of the Pocket Money podcast, Sally and Kate welcome a slate of experts to get the tips and strategies you can use to protect your finances.

From managing debt, sorting your savings and budgeting to superannuation, home loans and earning more with side hustles, this podcast will help you better understand what's in your control and how to be proactive.

Thanks to our guests Taylor Blackburn, Alison Banney, Kylie Purcell, Richard Whitten and Maurice Thach for joining us on this episode.

Given that economists are predicting a recession or financial depression following the tidal wave of disaster caused by COVID-19, arming yourself with knowledge about your financial security is as important as ever.

Mentioned in this episode

• Guide to managing your money for a recession
• How to balance transfer a personal loan
• Guide on how to make money online
• How to protect your rainy day fund when it rains a lot
• Refinancing your home loan
• Coronavirus early access to super
• Strategies for investing during the market crash

Read the transcript of this episode

• Episode 209 transcript

  Note: This is a machine-generated transcript. We've tidied it up, but we're sorry if any glitches have slipped through.

  Sally McMullen
  Welcome back to pocket money everyone find his podcast for Doomsday preppers when it comes to their money, isn't that right, Kate?

  Kate Browne
  Oh god, it's kind of depressing isn't it. We are kidding, but in today's episode we are going to hit up some experst at Finder for their tips on recession proofing, we've got so many people at Finder that are super nerdy about what they write about. Superannuation, savings, Home Loans. Ah and in fact, young Sally here is our super nerd on credit cards.

  Sally McMullen
  That's my official title.

  Kate Browne
  Super nerd in the best possible way. Sally's our credit card expert at Finder. So she's going to talk about that too. Look, a recession or any kind of market downturn is super stressful. It's extra stressful right now, as people are in lockdown and all kinds of stuff going on and everything's changing day to day but what's really important is the is the most important time to be on top of your money and get prepared. We could be looking at this for quite a long time. So it's been really critical we've realised no matter what situation you're in, this is the time to really look at your money and figure out what's going on. Sally, you talked to a bunch of people at Finder, what did you find out?

  Sally McMullen
  I sure did. So as you said, obviously, we've been seeing headlines everywhere that you know, a recession is likely coming. I reached out to a bunch of our experts at Finder on basically everything from savings and budgeting to superannuation investing. Home loans starting up side hustles as well to make some extra cash during this time, just to figure out all of the things that we can do to I guess, just prepare ourselves as best as we can. In the case that there is an economic depression coming our way.

  Kate Browne
  We're not trying to be like overly optimistic here but we are trying to find some silver linings and some of the research we've done at Finder does show that for plenty of sort of average households, I know that's not everybody, but plenty of average households, there is a bit of fat in their budget that they could look at cutting and make thousands of dollars worth of savings and there was any time to do it. It's now so that's what we're going to go into in a couple of different areas so you can kind of maximise what you got for the future.

  Sally McMullen
  Exactly. And I think the biggest issue with this is that it can just seem really overwhelming, like where do you even begin to start and I think that was really great about the conversations that I had with some of our experts at Finder is that they just broke it down super easy. These are the steps that you can take and yeah, I'm hoping that everybody will get a lot out of this episode because I know that I did.

  Kate Browne
  Let's jump into it. Okay, Sally, let's talk about debt and also what often comes with debt which is credit cards. So talk me through jet in general here. What are we what are we looking at for people if they do have debt at the moment?

  Sally McMullen
  So if you already have either a credit card or maybe like a personal loan debt, I think now is the time to consider consolidating if you have multiple debts. So if you have you know more than one credit card, you can consider combining those with a balance transfer and then you pay off that debt with no interest for an introductory period which depending on the card can be up to 26 months in some cases, there are also debt consolidation options for loans so look into that if you have multiple loans, you can usually get a more competitive rate and then just pay down that debt much cheaper and then usually much faster as well. So I think that's probably my biggest tip right now is get it all onto one account makes it so much easier to track your debt repayments and also just makes it cheaper to cool.

  Kate Browne
  So if it's debt like with a loan, try and consolidate into one loan, yeah, be able to pay it down. So you're only paying one lot of interest.

  Sally McMullen
  Yeah, there are some credit cards that let you combine debt from like multiple credit cards and multiple loans into one credit card as well. So I'll chuck a resource to that in the show notes for today's episode, but there are a few cards like that. So if you do have a payday loan debt and a credit card debt, and you just want them onto one credit card that awesome cards let you do that.

  Kate Browne
  That's really interesting to me, because you know, when you hit credit cards and hope before I started finding out, hey, credit cards, I'm just thinking about spending, I'm not thinking about saving. Can you explain to the listeners what a zero percent balance transfer card is because I think they're super interesting.

  Sally McMullen
  So these cards are designed to help people who already have debt, so you apply for a new card and then you can transfer the debt from one or multiple other cards into a new one and you can pay it off with zero percent interest for an introductory period. Sometimes these are six months, sometimes at 12, sometimes 26. But it basically just

  Sally McMullen
  Gives You That breathing room to pay off the debt that you already have, and paid no interest on top of that. So you can save thousands of dollars in interest costs depending on you know, the size of your debt. And it also just helps you pay it off quicker as well because then you're not paying anything extra, which I think is really important. But also, it's good for people to know that at the end of the introductory period, you will attract a river interest, right and this is usually either the standard cash advance right or purchase right? So if you're going to get a balance transfer, you need to still be discipline, you need to make repayments every month and pay it off before that interest free period ends to get real value from it. So you need to be really focused so if you take out the zero percent balance transfer credit card, you need to you know, move as much as your debt to this one place. So you're paying one fee right and no interest. Exactly. You really need to buckle down and pay it down. Not go crazy spending

  Sally McMullen
  Yeah, make sure that period that you have is locked in so you don't get that they revert. Right. Right. It's often quite high, isn't it, then interest rate after the period. So Oh, yeah, it's a really useful tool. As you said, it really forces you to focus and it gives you a deadline. Yeah, I think that's really important. And with either a balance transfer card or if you just have another card that you've been using to make purchases on. My other tip in this time would be make your repayments, you need to pay the minimum requirement, each statement period, that's usually only like, I don't know, 2% or 3% of your total balance, which isn't a lot. So while you have to pay that every statement, it's better to either pay off your balance in full or just like Chuck as much money as you can onto that debt, every statement period that will reduce your interest payments. It will you know, help you avoid going into that on manager

  Sally McMullen
  debt. And I think that's really important whether or not you have a balance transfer card or you just have a card that you're using to make purchases, make your repayments and pay off as much as you can please day God. Yeah, I think that's really key as well, because I know I think there was some research and they've changed some of the requirements for the banks to show that on the credit card statements because a lot of people misunderstood that that small amount, as you said, while is compulsory, meant that they were not getting hit with interest on the rest of it. So to be crystal clear, you need to pay off as much as you can all that within that period. Otherwise you are going to get interest and my one final tip is that if you have any existing debt and you're struggling to make repayments, get in contact with your credit card issuer, because a lot of people are in the same boat right now and they do have financial hardship options available. So whether that's a different repayment plan for you a low interest rate, just get in contact with them.

  Sally McMullen
  Ask. And I would advise that you do this before you miss a payment, it's easier to make that call and figure out what the next step is for you, then miss a payment, get charged with a late payment fee and that potentially hurting your credit score. So just try and be on the front foot of that and get in contact with your bank. Like they have those options there to help their customers. Awesome, Sally. Thanks for that. really interested to find out what you learned from some of the rest of our career about Home Loans side hustles superannuation really keen to hear what you found out.

  Sally McMullen
  So first up, let's talk about cash. I have Taylor Blackburn here who is a money specialist at Finder. Welcome to pocket money Taylor.

  Taylor Blackburn
  Great to be here, Sally.

  Sally McMullen
  So of course when we're talking about recession proofing, one of the first things that comes to mind is savings and budgeting so what would be your tip for people who want to set up an emergency savings account?

  Taylor Blackburn
  Rainy day savings is something that's all it's always great to have, the first thing to do is to just kind of slowly put money away, what I do is I have a certain amount of my paycheck that goes to a separate savings account. But I don't really see I don't use this gaining interest. There might be a, you know, people that are in the situation where they've just lost a job or they've reduced hours or things like that. It's obviously harder to save when you're not making as much and you still have a lot of similar bills. But even you know, putting away a little bit a week, my dad used to say you don't go broke picking up a dime, the effort that it takes to bend over to pick it up. Is is worth picking it up. So I think a lot of people would be in a really good place of knowing how much they're spending and what they're spending on because a lot of people maybe aren't moving around as much as they used to.

  Sally McMullen
  Yeah, exactly. Right now we have the time to maybe sit down and look at our our finances and take the time to do that. And there are so many apps as well that people can use to track their spending and like makes it really easy to break down their expenses. So I know that's what I've been doing in this time. So for anybody who is thinking about building up their emergency savings in an ideal world, how much would that be?

  Taylor Blackburn
  Yeah, well, I mean, it's different for everybody but but three to six months of your living expenses is a good place to start, you can feel comfortable that you know, with with any kind of shift, that you can probably kind of get back moving in the right direction in that amount of time. If you're just starting out, it's not too late. It'll take a little bit of time. But if you have that as your goal, as you're saving, you've got something to shoot for.

  Taylor Blackburn
  So we've covered how much you should save, but where should people be putting their emergency savings, there's two ways you can go about it. So even though the cash rate is at an all time low, it's at 0.25%. And and it's not going to change much in the future, according to the experts, we've actually seen term deposits increase. And we've seen high interest savings accounts rates increase. So that's a nice kind of unexpected benefit from the bank. So two ways to do it with a high interest savings account, you have access to that money. So while it grows, if, for instance, you need to access it, you can get to it and the rates variable, so it could, it could go down or up. You know, depending on how the the bank changes that rate. With a term deposit, you're locking in an interest rate, which they're closer to 2%. Now, so whether it's three months, six months or a year, you'd get guaranteed interest on that money. Like I said, depending on where you're at the high interest savings account gives you a bit more flexibility with the term deposit gives you that guarantee.

  Sally McMullen
  Great, perfect, well, thank you so much, Tyler, all of that was super helpful, and we'll make sure to pop a bunch of links to some of those resources and more information about budgeting and savings accounts and deposits in the show notes. Unlike cash or property, your superannuation might not be top of mind when you're thinking about recession proofing, but it should be. So I've got Alison Bonnie with us as superannuation expert to give me the lowdown on what we should be doing with our super. So thanks for joining me, Alison.

  Alison Banney
  No worries.

  Sally McMullen
  The government recently announced that Australians can access their superannuation early with everything that's happening with COVID-19. But can you give me a bit of a wrap up of what's happening there? And is it a good idea for us to touch our super at this time.

  Alison Banney
  So how it works is if you're eligible, so you can go online to my gov and apply and if you are eligible, you can access $10,000 of your super this financial year. So right now and then another 10,000 from next financial year, which is only a few months away in July, so you can potentially access $20,000 if you're super oily. Normally, you can't access your super at all until you retire, which could be for a lot of us 5060 years away. So there's a few things to think about here. If you're in real financial troubles, then maybe accessing some of your super oily would be beneficial to help you, you know, pay those ongoing, ongoing bills that you need to pay. But I think that it really should be a last resort for anyone considering this because you're super assertive under retirement. And, you know, if you take some money out now you're basically robbing your future self of that money. And not only is it $10,000, but because of the way super compounds over time, particularly if you're young, it could be in excess of $100,000 by the time you retire. So it really is, you know, a lot of money that you'll be thinking about withdrawing here. The government has also announced few other measures as part of Coronavirus. So, you know, there's things like support to get your mortgage repayments deferred or your energy bills, pause, that kind of thing. So I'd really look into those other measures before you dip into your super.

  Sally McMullen
  So with a potential economic downturn, or recession coming our way, what should we do with our superannuation right now then?

  Alison Banney
  Yeah, so I think the most important thing for anyone to be doing with the soup pot at the moment, and this is actually important all the time, not just you know, with a recession on our heels, but is to compare and consolidate. So a lot of people might have more than one Superfund, open in their name without even realising it. You know, if you've worked different casual jobs, for example, you could have had different funds opened at each of those jobs that you've since forgotten about, but they'll still be there in the background charging you fees, even though you might not be contributing to them. So it's really important to check that you only have the one fund because not only is it just unnecessary having multiple funds, but it's actually really expensive because those fees will just continue to eat away at your balance that you do have. And by the time you retire, it could be hundreds of thousands of dollars worth of unnecessary fees. But it's really easy to do. So you just go online to my gov, login and click on the superannuation tab, and then you'll see what you have it listed there. If you've got several funds, it's a really good idea to pick the one that you want and merge them together. If you don't like any of them, it's probably a good opportunity to compare anyway. Even if you only have the one fund, you can still compare because if you can find a fund with lower fees and stronger long term performance, then again, you'll be saving yourself potentially hundreds of thousands of dollars over your life just by switching now.

  Sally McMullen
  Nice. I love that. Well thank you so much, Alison. That was very helpful. We also did an episode on superannuation not that long ago. So maybe go back and have a listen to that as well if you want some more tips on how to pick the right super fund. It's a wild time in the stock market right now. So I've got Kylie Purcell, our investments editor here with me. Hey, Kylie, welcome back to pocket money.

  Kylie Purcell
  Thanks so much. Thanks for having me back.

  Sally McMullen
  With the stock market crash happening is now the right time to invest?

  Kylie Purcell
  Yeah, so I'd go to the point that it's really important right now not to get carried away with your emotions don't get swept up in the hype. Because when there's a really volatile market like this can be easy to you know, sell when the market is dropping and buy when the market is already high, which means you look in your losses. You know, the same kind of thing that we're seeing in supermarkets right now with panic buying of toilet paper. It's the same kind of thing you're saying in the stock market. People are panicking. They don't know what's coming and they don't know what's next. It's really important to have a strategy and stick to it. And think about where you'll be in maybe two years time and look back and think about what you wish you had done during this time.

  Sally McMullen
  What if you're already investing is now the time to sell your shares?

  Kylie Purcell
  Yeah, that's a really good question. And it's one that a lot of investors are asking now. And a lot of investors are probably doing that right now. And unfortunately, the thing is, with the stock market crash, unless you get in there really early, you've probably missed out on your opportunity to sell and we're quite foreign to the market crash now. The market is full and you know, a 30 plus percent, that's a really big drop. Even if the market continues falling, you're probably better to ride out the volatility and ride out the recovery.

  Sally McMullen
  We're going to be covering this topic in a lot more detail in our episode on the stock market crash where Kylie will be back. So look out for that one soon. And as well we actually just did an episode on investing 101. So if you are thinking about dipping your toes in, maybe listen to that episode first to get started. Thanks again for joining us, Kylie. As always, it's a pleasure. Next up, we're talking about home loans and property. So naturally, I have our home loans expert Richard Witten with us. Hey, Rich, welcome to pocket money.

  Richard Whitten
  Thank you. Happy to be here.

  Sally McMullen
  So I wanted to start off with your tips for people who already have a property and paying off a mortgage right now.

  Richard Whitten
  If you currently have a mortgage, the first thing you should always do is look around and see what what kind of home loan rates are currently on the market and see if you can actually refinance or switch your home loan to one with a lower interest rate. Because this is how you're saving money by getting lower repayments try and see what's a competitive interest rate. Maybe you've got something that's 3.50%. But now there are rights that have fallen down to 2.50 something percent twitching that could actually save you a lot of money.

  Sally McMullen
  So what would be your advice, Richard, for people who are paying off their mortgage right now? Is there a particular strategy that they should be following going into a recession?

  Richard Whitten
  Well, you're obviously always paying off debt as early as you can is always going to save you money. The thing is, though, online debt is not the worst debt. It's a long term low interest debt. it's manageable, and it's backed by the property you own. It's there's value there, right? So if you have other debts, I would say actually, hold on, let's look at your credit card debt, personal loan debt. Other debts like that, which are higher interest, even though they're smaller debts. You want to prioritise, probably paying those ones off first, and then obviously, you have to keep paying off your mortgage, but in terms of making extra payments, that kind of stuff. You want to really focus on those higher interest debts. The mortgage is not one of those.

  Sally McMullen
  Right, and how can people use an offset account right now?

  Richard Whitten
  Yeah, an offset account, especially if you're coming into a recession, or you're looking you're worried about your financial future, the offset account really is great because it's essentially a savings account that is attached to your mortgage. Not every mortgage has one. But a lot of them do now. And essentially, you can save money in your offset account. And then you can spend it as you need it in an emergency or just as you know, General saving and spending as you would with a bank account. But any money you save in the offset account, while it's in there, will temporarily reduce your overall loan amount that you're repaying. So you're being charged less interest while you're still saving money. So if you're worried about a recession, trying to recession proof yourself a bit. If you can go out some money in that account. You've got it for emergencies and you're saving yourself money while it's just sitting there doing nothing.

  Sally McMullen
  And for anybody who is maybe struggling to repay their mortgage right now with everything that's happening with COVID-19. Can you tell me a little bit about some of the mortgage relief options that are out there?

  Richard Whitten
  Yeah, so pretty much as soon as the economic reality of the Coronavirus started hitting, most banks and lenders were pretty quick to announce some kind of hardship policy or support for borrowers, and that essentially can come in a few ways. One thing is you can talk to a bank your lender and ask for either a temporary reduction in your repayments or an actual cause or deferral of your repayments, sometimes called a homeland holiday, usually three months up to six months depending on the lender. The only thing is you can pause the repayments, but you will still probably be charged interest on those repayments and you'll have to obviously make those repayments later. So once you go back to making repayments, your future repayments will be slightly higher to make up for that difference. But over the whole life of a home loan. those differences might not be that much week to week or month to month.

  Sally McMullen
  And what about if you're renting Do you have any tips for renters in this time?

  Richard Whitten
  Probably the hardest sort of people to help, right? Because really, you're in the entertainment half kind of situation. If you lose your job or you lose income that can be really tough at the moment, what you can do, I think you should always do is know your rights as a renter, so know what your landlord can and can't do. Because often your landlord won't try and you know, play by the rules. So you can always talk to a local tenancy organisation. every state and territory has attendance union, which is a voluntary organisation, they can give you sort of free advice and help. But also currently, the government has said that they're going to have a moratorium or kind of suspension of evictions during the COVID-19 crisis. So if you lost a job, you can't pay rent because of Coronavirus. You still have to pay your rent at some point, but the landlord can't just kick you out.

  Sally McMullen
  And we've seen headlines about you know, panic buying toilet paper and tinned food and hand sanitizer but I was also saying that there's been some panic buying around property is now the time that that I should be, you know, giving up my avocado toast and buying a house instead. Richard?

  Richard Whitten
  Yeah, it's interesting. It looks like prices could be falling, obviously, if this economic downturn continues, but if you're looking to buy, then you just kind of buy what works for you when the time is right for you At A Price You Can Afford, especially buying a house to live in. Yeah, I would say don't try and time to market. If you need to buy and you want to buy a place just do your research and make a decision that works for you. Don't try and profit off this by price going up and down. You'll never be able to really pick it.

  Sally McMullen
  Yeah. recession or not do the research. That was very, very helpful. Thanks, Rich. We've covered a lot of ground on savings, debt and expenses. But I want to talk a little bit about opportunities to diversify or boost your income in this time, so I've got Maurice Thach with me, outside hustles expert Welcome to pocket money Maurice.

  Maurice Thach
  Thanks for having me.

  Sally McMullen
  We've spoken a lot About savings and repaying debt. But Maurice, is there anything else that people can do to recession proof themselves right now?

  Maurice Thach
  Yeah, I'd say to consider where else you can make income to sort of help them sell through a potential recession. I don't start with like looking at where the demand for workers right now. So it's online. So that's, you know, using some skills that you have like writing, hoping they will do that on a freelance scale. You kind of have skills, there's other options available, right. One example is like doing surveys online, or do we use the testing, so reviewing people's websites or the app for instance, the one thing with that is you're probably not gonna replace your entire income, but it's, it's kind of better than nothing. Another one is deliveries. So becoming like an Uber Eats driver perhaps I say that anything with that it takes a bit longer to get started then and say like, I'm going online and and doing freelance right? So you need to get your criminal background checks. Can you get your car rego checked, insurance, anything else like that they might ask. And the last one is grocery stores. So our packing shelves like Kohl's or worse, I'd say that's more of a if you're really desperate for money, right? Because doing that means you're going to be in contact with people in a confined space. Right. So I believe it's absolutely necessary. I'd say.

  Sally McMullen
  Yeah, that's such a good point. And I think it's also a good thing to point out that at the time of recording, a lot of these options are available, but it's good to just like, keep your eye out on the news and what's changing and what opportunities are available as everything with COVID-19 progresses. So I think that's a good point. And what about for people who are thinking of starting a side hustle? Do you have any tips for like investing in yourself during this time, like what should people be doing to prepare?

  Maurice Thach
  Yeah, I'd say like upskill where you can, there's a lot of digital jobs out there. So for instance, writing proofreading design, video editing and there are definitely things that you can learn and there's a lot of online courses that sort of used to supplement that. You have a lot of downtime, right? use that time to do the reading. obscure where possible.

  Sally McMullen
  Well, thanks so much Maurice, our side hustles expert, all of that information was really great.

  Maurice Thach
  Thanks for having me. Always a pleasure talking to you Sally.

  Sally McMullen
  Well, there you have it, Kate. Now we know everything we need to do to recession proof our finances Do you feel ready?

  Kate Browne
  Uh, I think I feel a bit more ready than I did a week ago, three weeks ago. Things are changing really fast. And I guess that's just the times we're living in right now. I look like I keep banging on about but it's so true. This is this is the time to have a good look at all the things you're doing when it comes to money understanding it, we've got loads of resources around the stimulus that's happening, what's happening for casual workers, what to do if you've lost your job, how to manage your money in the light of all the current events, you know, where you can find some ways to optimise so jump into the show notes they're at Finder.com.au/podcast. You can join us on Instagram at @pocketmoneypodcast you can message us honestly we are super happy to help chase down some information for you have a chat. As we mentioned before, we've got a virtual army of people that know about this stuff. So don't be shy. Jump on and let us know. And feel free to leave us a review on Apple podcast tell a friend about the show.

  Sally McMullen
  Send some love our way, we all need it right now.

  Kate Browne
  Pocket Money is hosted by Sally and Kate. It's produced by Franko Ali and editing is from Brianna Ansaldo at Bamby Media. Thanks again to all of our pals at Finder, across zoom from their homes helping us out with today's episode and we hope that you all found it super helpful. Check out our back catalogue because we've got episodes on home loans 101, superannuation, all that good stuff. So if anything has sparked an interest, go back through our back catalogue. It's all still up to date so jump in and have a listen.

  Sally McMullen
  Yeah, there'll be an episode of Pocket Money ready and waiting just for you. Thanks for listening to Pocket Money from Finder, head over to finder.com.au/podcast for the show notes for this episode. The Finder podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we're licensed and authorised, we don't provide financial advice. So please consider your own situation or get advice before making any decisions based on anything in our show. Thanks for listening.

The Finder Pocket Money podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we're licensed and authorised, we (and our guests) aren't providing any form of financial or legal advice. So please consider your own situation and get proper advice about your individual circumstances before making any decisions based on anything on our show. Thanks for listening.

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Pocket Money is hosted by Sally McMullen and Kate Browne, produced and directed by Franko Ali, with editing and theme music from Brianna Ansaldo of Bamby Media.

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