The coronavirus crisis has had a huge impact on all of us. As we emerge from lockdown with restrictions easing across Europe, many internationals in are seeing the way they live and work has changed quite dramatically and is not likely to go back to the old ways any time soon.
With all these changes, it might be that your financial set-up needs adjusting if it no longer matches your long-term goals, and/or your lifestyle and needs.
The team at Black Swan Capital has compiled some key points for keeping everything in order and some potential changes you can make as we adjust to these changes in our lives. Take a look and see what you can do to perhaps reduce your costs, increase your reserves and rebalance your life. And speak with us if you have any questions from this article, we would love to speak with you and hear what you are doing.
1. Reducing household costs
Energy: Wholesale energy prices have dropped as a result of falling oil prices, and demand for energy has fallen around the world this year. Some of these reductions are being passed to the consumer so it might be a good opportunity to renegotiate your energy contract and reduce your monthly spend.
Mortgage holiday: For some, this is still available. If you are suffering from a fall in income and you have a mortgage it might be an option you can consider. But be careful this is not free money. It has to be paid back and you need to consider the impacts it might have on future cash flow. Our advice is get impartial advice and carefully assess whether you should be taking advantage of reducing your household expenses by taking a break from paying your mortgage.
Benefits and Bills: Depending on where you live, you may have the chance to freeze payments on your income tax or your local council or regional taxes. There are also grants and loans offered by some governments across Europe to the self-employed and those running their own companies. Check out the details and make sure you read the fine print, so you understand the obligations and implications on you, now and in the future.
Health: If you haven’t already, take a look at that gym membership. Gyms have been closed across Europe since March and depending on where you live, they will gradually open up from July. Dig into the details, see what you are paying and what the options are after they re-open. We see two groups of responses: those who can’t wait to get to a gym and who have been happy to support their local gym through lockdown; and those that have decided they can maintain a health regime without paying for a gym membership. If you can manage to do your workouts in your home or at the park, maybe it’s worth looking into seeing if you would like to cancel that membership.
2. Travel and transport
If you are paying a public transport subscription every month, it might be another way to save money in the monthly budget. If you are likely to be working from home for the next few months, it might be a good idea to suspend or cancel the subscription. Look out for cancellation fees first and check that you can start up again when you resume travelling to your office.
If you have a car to get you to the office and back, you can consider it the same way. It’s a substantial, and often depreciating, asset that could be sitting idle in your driveway racking up expenses. There’s insurance and maintenance whether you use it or not. If you have a car that you are not using you can do a careful analysis and see if you really need it. It might be a way to reduce your monthly expenses and perhaps even free up some capital.
If you do need to keep your car, or if you have a company car, it could be worth speaking with your accountant to see what impact driving it less will have on your costs and your tax deductibility versus the attributed income tax payable from it. Do the analysis and see if there is a chance to save some money.
Get healthy with transport
More and more people are using bikes as their main form of short and medium distance commuting. The infrastructure across much of Europe to support this is excellent, and many governments across Europe have programmes to encourage bike use. The Dutch government extended their tax rules since January 1 2020 making it more attractive for people to use bikes and for companies to provide access to bikes for their employees. Take a look at the support in your country and at your company.
3. Watch how you shop
The pandemic has had two consumer effects: one it has increased the volume of online purchases and two, it has reduced the amount many people are consuming. With more stores closed and fewer people venturing out to the shops that are open there has been a reduction in consumption. For many it is a good time to assess what is important to us and where we need to be spending our hard earned money. A cautionary note, be mindful of how you are shopping online and the easy impulse buys.
4. Prepare for the next Black Swan
This pandemic has sharpened many people’s resolves to realise that they need to be better prepared for the next unexpected event. That means reviewing and perhaps increasing their cash reserves. We at Black Swan Capital believe whilst we cannot predict what the next event will be or when it might happen, we can prepare for it. One way of doing that is by having between 3 and 6 months’ living expenses in reserve.
5. Manage your investments
A crisis is often a time when we question what is really important to us. Spend some down time to review your long term plans and then see how they align to what you are doing day to day and how you are managing your investments and retirement plans. Get advice. Speak with us at Black Swan Capital and we can help you through this process of capturing and quantifying your goals- what is most important for you- and making sure you have the right investment structures in place to achieve those goals.