How to handle tough talks about money caused by COVID-19

COVID-19 has loaded Australians with financial issues many have never experienced, and that means there’s a need for some painful conversations. Here’s how to approach them.

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COVID-19 has caused Australians to have harsh money conversations they previously would never have imagined.

Whether it is with banks, other lenders or even family members, disappearing jobs and dried up incomes mean tough talks are inevitable for many.

Finance specialists say the best way to avoid problems spiralling out of control is to act quickly.

KNOW YOUR SITUATION

Chartered accountant and director of dmca advisory Tania Tonkin said personal pride often prevented people from acknowledging financial problems, so step one was to understand your current position.

Chartered accountant Tania Tonkin says understanding your financial situation is the first step.

“Work out what money you do have coming in, then what expenses you need to pay for the next three to six months and prioritise these in order of importance,” she said.

“Once you know this, you are then in a good position to negotiate payment arrangements that will work for you while keeping the people you owe money to on your side.”

CHECK FOR HELP

Banks are providing repayment deferrals for debts ranging from mortgages to car loans and credit cards.

The Federal Government’s JobKeeper package currently pays millions of workers $1500 a fortnight, while an enlarged JobSeeker benefit pays $1100 a fortnight to unemployed people.

Find out what you’re entitled to – you may be surprised by the generosity.

DON’T PUT IT OFF

Whether it’s bank loans, rent, school fees or other debts causing you stress, get on the front foot.

“It is best to propose some sort of payment arrangement,” Ms Tonkin said.

“Therefore, before you have the conversation, know what you can afford to repay.

NDA Law’s Lisa Christo says be honest in all conversations. Picture Roger Wyman

“As long as you can show that you have a clear plan and acknowledge that any deferral of repayments is only a temporary measure until things improve, then most people you owe money to should be understanding and willing to accommodate a payment plan.”

BE HONEST

NDA Law associate lawyer Lisa Christo said honesty was the best policy with money conversations.

“If ever people are going to be sympathetic, it’s right now when the whole world is feeling the pain,” she said.

“If you can discuss getting any or part of the debts waived, that would be the best result.”

AVOID CRYING WOLF

Giving someone a sob story when you’re not really struggling is likely to come back to bite you.

“At the moment, some people who haven’t been impacted by COVID-19 are still trying to push the boundaries,” Ms Christo said.

She said people should offer to make a reasonable level of repayments that reflected their drop in income.

“Remember there are legally binding contracts you have signed up to and you need the other party to agree to make any changes,” Ms Christo said.

Originally published as How to handle tough talks about money caused by COVID-19