As one of the most unusual years in recent history draws to a close, now is a good time to look back at some important lessons that 2020 taught us – and take those with us in the ‘new normal’.

Having an umbrella for that rainy day

While an economic downturn had always been on the cards, no one could expect it would look like this. But recent events have shown us that change can happen quickly.

Covid-19 has exposed New Zealanders’ financial vulnerability with unprecedented clarity. According to a survey conducted by the Commission for Financial Capability (CFFC) during Alert Level 4, 34 per cent of households surveyed were in difficulty, and 40 per cent were at risk of tipping into hardship.

It has been a reminder of the importance of protecting from the unexpected – be it a sudden medical expense, the loss of a job, or a life-changing event.

How? By making sure you have an appropriate level of insurance in place, and setting aside an emergency fund, big enough to cushion the impact. How big depends on your circumstances, but Sorted.org.nz recommends saving up at least the equivalent of three months’ expenses.

Debt – and the ‘lockdown budget’

According to data, credit card spending dropped by 41.3 per cent between March and April (during the national lockdown). As a result, in March the amount owed by credit cardholders in New Zealand dropped 5.4 per cent to about $300 million.

Despite a strong lift in consumer spending after the lockdowns, 2020 has proved to many New Zealanders how little they can spend – what’s needed and where the budget can be trimmed. Also, it has highlighted the role of paying down debt in creating financial resilience and reducing financial stress.

A good takeaway from 2020 could be to practise ‘mindful spending’ in your day-to-day life. Could you turn your lockdown budget into a recovery budget for the coming months?

The NZ property market is resilient

This year, we’ve also learnt that the property market is stronger than we expected. Despite the Alert Levels put in place across the country and the rising unemployment rate, sales volumes and house prices have defied predictions and set new record highs, month after month.

In part, this is due to lower-than-ever interest rates. In March 2020, to support the economy, the Reserve Bank of NZ cut the Official Cash Rate from 1 per cent to 0.25 per cent. Many lenders have subsequently passed on the cut to their customers, reducing their mortgage rates. And this, in turn, has seen more and more buyers and investors flocking to the market.

The reality is, Kiwis have always loved property. Now, on the back of the remarkable performance pulled by the property market, they may love it even more.

Getting advice can make a difference

According to independent research commissioned by Financial Advice NZ, Kiwis who work with a financial adviser are more confident about their finances than their unadvised peers.

Having an expert adviser in your corner can help you understand your options and make a well-informed decision when it matters most. Remember – we’re here to help, now and for the years to come.

 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.