Managing Your Cashflow

Like managing a business, sound cashflow management is at the heart of a solid financial plan. In times like these, where income is uncertain, utilising the below tips can help protect your financial buffer. Even if you haven’t been adversely impacted, having time at home is a great opportunity to review and reset.

Keep in mind there is support available. If you have been displaced from your role as a result of COVID-19, you may be entitled to government support via the JobSeeker or JobKeeper schemes, without needing to meet the typical criteria such as waiting periods and asset tests. 

Budgeting

A solid budget will help too. Now is also a good time to re-cut your family’s expenditure profile and consider your essential and non-essential items. Review and run a line through any direct debits which are not essential or put them on pause for 3-6 months. 

Try our free cashflow budgeting tool to help with this.

There are some great apps like Moneysoft (Apple iOS or Android) and MyProsperity (Apple iOS or Android), which can help you keep a close handle on cashflow and your finances in general. We can assist you with setting up and using these tools.

Expense Negotiation

Don’t be afraid to request discounts, rate reviews and payment plans on phone bills, utilities and rent. Large corporates will be more receptive to this than chasing bad debts or losing customers...and it doesn’t hurt to ask!

Life Insurance Premiums

Now is not a good time to cancel or materially reduce important insurance cover; however, we know it comes at a cost. So seek advice and look at utilising superannuation for part owning/funding insurance, trimming certain aspects, or requesting a break from premiums. These are all options to avoid cancelling cover.

Early Superannuation Access

Our Head of Superannuation, George Karavias, has prepared a great summary regarding the ability to access $10,000 this financial year and next for those in need.

Mortgage Repayment Relief

The Australian Banks are offering distressed lenders support in the current climate, both for businesses and personal contracts. Personally, consider a principal repayment holiday with your lender (3 to 6 months) or explore a refinance, given current interest rates and the potential capacity to utilise Interest Only debt and/or access additional capital from your loan.

Reviewing Your Investment Strategy

Investing in times like these can be daunting – and so it should be. The GFC provided a once-in-20-year opportunity, and so will the downturn we are experiencing now. The question is how deep, for how long, what to invest in and when to invest! This is why we have a well-credentialled Investment Committee to guide these decisions.

Rather than simply offering reassurance, we are getting great results by actively managing our client portfolios to reduce risk in the short term and ready ourselves for opportunities as they arise. Now is not a time for DIY; however, we can provide some guidance on what to be mindful of, should that be of interest.

Reviewing Your Existing Investment Portfolio

The mix of investments you currently have in Australian Shares compared to Global Shares amongst a range of other portfolio characteristics will determine how your portfolio fares in the current climate. The BlueRock Private Wealth team are more than happy to offer their views on the current state of play and to review and provide advice regarding your existing portfolio. 

While things have already substantially dropped, it’s not too late to health-check your current investment or superannuation strategy. A proactive approach and high level of communication with your current adviser is critical in times like these.

Setting Up an Investment Portfolio

Making good decisions during volatile times is complex. This is why we have a strong Investment Committee to help guide BlueRock and our clients, and we recommend staging your initial investment over a period of 3, 6 or 12 months depending on your circumstances and risk tolerance.

Matching the right investment strategy (in terms of style and risk), and the right amount of capital, is where you should start. However, whether you seek advice from BlueRock or elsewhere, you really shouldn’t go it alone.

Superannuation Considerations

While it’s very important to check you have the right level of risk in your portfolio and that you are in a great fund, making changes without guidance right now can prove to be a masterstroke or a disaster. 

Be mindful not to roll over a superannuation fund until you have checked what insurance you might be losing. Don’t rely on reported performance figures from 31 December 2019. Seek guidance on how your fund has actually performed over the past 3 months as a start. We can let you know if that is good, bad or otherwise. If you can afford to, continuing to make contributions during a downturn generally proves to be a great strategy when things recover.

Assessing Your Property Investments

Depending on your short-term plan to buy or sell, professional guidance in a market like this can result in a 6-figure difference to your bottom line outcome. If economic forecasts continue to worsen, then property prices will weaken, perhaps severely. This creates both risk and opportunity, which we are experienced in navigating and are happy to share our views on.

To start with, have a read of the current views of our Investment Committee and the solutions we have formulated for our clients to invest money.

Protecting Your Wealth

Ensuring you have a solid Plan-B to mitigate risk wherever possible can give you peace of mind when other uncertainties exist. It sounds heavy but now is a great time to make sure these aspects of your life are ticked off.

Estate Planning

Getting a Will and Powers of Attorney drafted or reviewed is often a rainy day job. We can help you review what you have or put something in place that meets you or your family’s objectives. We have both a low-cost, simple solution and a comprehensive service for those who need it. Having a Will is critical to ensuring your wealth is protected from a range of risks, including tax.

To make it easy during this restrictive period of social distancing, our Estate Planning Service can be delivered by video conference and an electronic data capture process.

We also have some educational material you are welcome to access as a starting point, including a ‘Stage 1’ Succession Planning health check.

Life and Income Protection Insurance

Whether you're considering Life Insurance for the first time, or are unsure what cover you have with your current Life Insurance policy, we know there are a lot of unknowns at the moment. The onset of COVID-19 means people are uncertain and concerned about their health and income, and the protection of their families.  

Does Income Protection Insurance Cover Me If I Am Laid Off From Work?

Yes and no. You can’t claim on your policy for being made redundant because of COVID-19; however, some Income Protection Insurance policies do include a feature to waive the income protection premiums for up to 3 months.

‘Repayment Relief’ or ‘Mortgage Option’ can also be purchased as an optional benefit. This is a monthly benefit for up to 3 months to help cover home loan repayments. This can be claimable if you have become involuntarily unemployed for more than 60-90 consecutive days (subject to your insurer’s Product Disclosure Statement).

You may also consider a Premium Pause/Holiday Benefit. This means that you will not have to pay premiums for up to 12 months, although you will also not be covered during this time. It simply means that you can restart your cover within 12 months without having to go through underwriting again. This is a preferred option to cancelling your cover; however, there are better options that help to avoid not having insurance. 

Am I Covered If I Contract COVID-19?

Terminal Illness

As morbid as it sounds, you are most likely covered for terminal illness as there is generally no pandemic exclusion on good-quality Life and Income Protection Insurance policies. Most insurance policies provided as the default cover of a superannuation fund, however, are NOT likely to cover you for COVID-19 as they do have a pandemic exclusion clause. This includes Industry Funds.

Trauma and Critical Illness

Some insurers have a critical care definition in their Trauma Insurance policy, although this is different for every insurer. It is subject to how many days in intensive care you require. As well as this, if a secondary medical condition arises and it meets the current insurer’s Trauma Insurance definitions, you are likely able to claim on that condition 

Income Protection

Yes, you are most likely covered for Income Protection but, like all Income Protection claims, this is subject to the current exclusion definitions on your current policy. You must also meet the Waiting Period requirements due to your policy’s accident and/or injury definitions or sickness.

Total and Permanent Disability (TPD)

You are covered for TPD as a result of COVID-19; however, you will need to meet the TPD definition of whether it is a total disablement that has arisen due to the virus. This means you need to be off work for at least 6 months (TPD owned via Super) or 3 months (TPD personally owned), and unlikely to ever return to your usual occupation.

If I Am Suffering From Financial Hardship, What Are My Premium Options?

There are multiple options available, based on each case-by-case scenario. In the case of redundancy, premium waivers are offered by some insurers. ‘Premium holidays’ are also an option, but note that by putting your premiums ‘on hold’, you are also without cover during the ‘holiday period’. 

What Are The Insurers Doing To Support People During The COVID-19 Crisis? 

So far it seems that the majority of insurers are treating each client on a case-by-case basis, but there has been some noise around whether insurers can offer some form of disaster relief discount. For example, a 1-month premium freeze while keeping individuals covered.

The difficulty with this option is that this pandemic definition does not meet the natural disaster definition; however, we’re hopeful that some respite will be offered, perhaps with some government or regulatory intervention. As advisers, we are pressuring our insurers to implement this.

Are Insurers Comfortable Taking New Insurance Applications During The COVID-19 Crisis?

The answer is yes, subject to possible altered terms. There is talk about a mandatory travel exclusion that will apply during the pandemic, but whether this applies to soft borders or overseas travel, we are unsure at this stage. There is also talk of a possible blanket COVID-19 exclusion, but this is only a discussion point at this time. Generally, insurers are still providing cover and, in times of uncertainty, applications for Life Insurance tend to increase, which we are experiencing.

More recently, TAL was in the headlines for “excluding COVID-19” for new policies. This has been on a case-by-case basis where applicants have been subject to some heightened level of risk due to travel or their profession. Due to the recent market pressure and the media/public response last week, TAL has reversed this decision.

We hope this insurance information provides some clarity and peace of mind during these times of need. If you do need any further assistance when it comes to your life insurance options, we are genuinely here to help you.

Please get in touch with our BlueRock Life Insurance Specialist to discuss your situation.

Health Insurance

Generally, insurance companies increase their premiums on 1 April each year so it’s worth revisiting your policy before this occurs. It was announced on 29 March 2020, however, that health insurance premium increases will be put on hold for 6 months as a result of COVID-19.

This means you now have more time to review your policies, make sure that you are with the right health insurer and that you’re covered for what you need. This may be something to look at while you’re home on the weekends...and every day!

CTA: Feel free to chat to one of our health insurance advisors for more information about your cover during COVID-19.

General Insurance

We also have a BlueRock General Insurance team which can assist with making sure you have the right cover (home, contents, cars, landlord, professional indemnity, public liability, etc) and that you are paying the right premiums. 

Note that the above information is General Advice and does require further validation before you make any drastic changes to your current private wealth strategy. But there are some important considerations that may help you to ask the right people the right questions and ultimately, benefit your future self.