Rain, cushions, and public servants
The Tasmanian State Government needs to save $50m, so it tried to enact a pay freeze for public service employees. It seems they pushed their draft bill hard up to the edge of the cliff at the 11th hour, and couldn’t get it to fly. Rather than push it over the edge it’s plan B: reduce the state’s public service by 1,200 to straighten out the budget.
Looking to Canberra, Uncle Joe Hockey is having similar issues – with the Federal budget deficit for 2013-14 hitting $48.5billion (1). It doesn’t matter which side of the political fence you sit on, the bottom line is that somebody has to pay for it.
I’m not an economist, but it seems as though the only options the state and federal governments have are to lift revenue (usually via taxes), decrease expenditure, or both. Either way, if I were a public servant I’d be keeping one eye firmly on the rear view mirror right now.This got me thinking about consequences for those who will unfortunately be affected, and the appropriate level of savings people facing job loss are likely to need. I’m not talking about putting $50 in your shoe for your cab fare home after a night of revelry here, I’m talking about money to put food on the table, keep a roof over your head and pay the bills to keep you going in the weeks and in some cases, months – until you land another gig.
Looking at the stats I found that almost 2/3 or 63% of Australian households say they’re cash strapped between pay days at some point or other, and 1/3 have used credit cards to get by while 15% say they are always stretched between paydays (2). If you’re in this camp, now imagine (on top of juggling plastic) that you lose your job unexpectedly or that your income stops for another reason (check out Illness, Injury and Wealth Protection Roulette for tips on insuring against loss of income through illness or injury).
While it can be difficult if you are already struggling to make ends meet, the reality is that we all need some kind of cushion against unexpected financial emergencies. By financial emergency, we’re also not talking last minute AFL grand final tickets; getting your hair done for your best friend’s wedding or that vitally important upgrade to an iPhone 6.
ASIC’s Money Smart website recommends that each and every one of us should have a ‘rainy day fund’ of 1-3 months living expenses (and that’s sans iPhone and grand final tickets). For those with bigger commitments like family, children, a mortgage and other debts, a more appropriate figure is closer to 6-9 months, particularly if you work in a specialist area with limited re-employment options.
Need help getting on track or structuring an appropriate savings plan? Don’t panic, call us.
Wealth information for the iGeneration.
By Dean Johnson
