Coronavirus has thrown the world into the unknown, especially when it comes to money.
We don’t know how long the pandemic will last, but it will – and already has – left a mark on the UK’s economy and personal finances.
Many are digging into savings to keep themselves afloat or taking on a second job to be able to afford monthly expenses.
Others have relied on furlough cash, with the Government pitching in for workers’ salaries – but with the scheme due to end on the 1 November and be replaced by the Jobs Support Scheme, many are worried about the futures.
According to recent statistics by Comparethemarket, 35% of people are concerned about paying bills if a second national lockdown is announced – while 33% say they will struggle to afford to look after their families.
There are many areas we can’t affect, but sorting out personal finances now to prepare for any outcomes in coming months could help with the impact of major change (like losing a job).
We asked financial experts to share their top tips with us on how to prepare finances ahead of a potential second wave and hard lockdown.
Take a deep breath, and let’s go.
Save while you can and pay off debts
Spending money hasn’t been a big hit in 2020 (apart from when people were eating out to help out), which has helped many people squirrel away cash during this time.
A recent poll by Sheards Financial Management showed that 53% of participants have started saving or saved more during the pandemic.
However, 16% have not yet started to put money away – if you belong to this group, it’s time to seriously consider it.
‘The pandemic and subsequent lockdowns have certainly strengthened a “savings” mindset around the country, with unsecured debt recently hitting a new peak of £14,540 on average per household,’ Shahid Munir, co-founder of Minted, tells us.
‘Emergency funds can be used to cover anything from broken down boilers and car services, right up to living expenses in the case of redundancy. ‘
If you are investing your savings, do so carefully and research to get the best rates, rather than dumping the cash into your current bank because it’s easier.
Shahid adds: ‘High street banks currently offering very low interest rates and ISAs are extremely vulnerable to currency fluctuations and recessions, so choosing an option which allows money to be accessed easily, and offers opportunities for growth, is important.’
Saving money is good advice, but Justin Basini, CEO and co-founder of ClearScore, a debt management company, recommends first clearing existing debts.
That way you don’t have to worry about repayments or interest rates putting you in even more debt, should money suddenly get tight.
‘With interest rates so low at the moment, you should consider prioritising paying off any debt you may have first, rather than continuing to save,’ he says.
‘Missing just one month of repayments on your credit card could cause your credit score (how lenders judge your financial suitability for credit products) to drop by 21 points, so it’s always worth ensuring that you make at least the minimum repayments on any debts you may have, rather than putting extra cash towards your savings.’
If paying off debts isn’t viable right now or you need a payment holiday for a loan, credit card or mortgage repayment, you have until 31 October this year to apply for one.
However, financial expert Justin doesn’t recommend doing this unless you really have to.
He says: ‘This should be considered a last resort, as you’ll still need to pay back the money you’ve borrowed when the freeze ends (plus any interest you’ve accrued).
‘And remember – always contact your lender before you stop any repayments. They may be able to sort a bespoke plan for you.’
Make a budget and cut corners where possible
Looking through your finances can be scary. Out of sight, out of mind, right?
It’s time to face that fear, because knowing as much as possible about your money situation will put you back in control.
The nation was caught off-guard with the last lockdown, but now we know better and can plan accordingly.
‘What does a second wave of coronavirus mean to your finances?,’says Chris Jones, proposition director at Dynamic Planner.
‘We learnt from the last wave that you do tend to spend less and if you were still getting paid then hopefully that extra money has accumulated in your bank account.
‘If you were one of the many who also lost your income then you will hopefully have had some savings to call upon or ate into your overdraft.
‘In any case, some basic cashflow planning is essential. How much have you got; how much do you need; and how long will it last?
‘If you have long-term savings such as stocks and shares ISAs or pensions and think that you may need to call upon them then maybe seek advice on how they can replace or supplement your income; checking that the investment is right for that, whether you are eligible to access them and the tax implications.
‘However, if your cashflow plan shows that you don’t need to spend your investments, leave them where they are.
‘We have also seen a disconnect between your real economy and the world’s stock markets so you are just as likely to lose out by cashing out.’
Qiaoji Li, co-founder and CEO at the digital wealth management service, Rosecut, shares her top tip for how to keep track of your money.
She says: ‘The most important thing to do is to work out exactly where you are and where you want to be, in terms of your finances.
‘A personal balance sheet can help you do that, by working out your income and all of your spending (both annual and one-off).
‘Once you have worked out your outgoings, you should put aside roughly three months’ spending money as an emergency cash fund, then consider investing what is left.’
Find areas where you can easily cut down on spending.
Working from home? Save up the money from your commute and make lunch at home.
Working from the office? Bring a homemade lunch and skip the fancy coffee (or rather, buy it from a supermarket so it’ll last longer).
Shopping for the whole family? Batch cook.
Give up luxuries such as holidays, gym memberships and new fashion or, if that feels too difficult, do a cheaper staycation, take part in clothes swaps or buy second-hand, and work out in the park.
If your rent is high and you don’t think you’ll be able to afford it in future, consider moving to a cheaper property.
Or, if you’re a property owner, perhaps rent out any spare rooms temporarily, even if the idea of a housemate doesn’t appeal (though choose them wisely, as a national lockdown will mean you will be stuck indoors together).
Use free resources and be smarter with your money
OK, so you’ve got your balance sheet and you know everything you need to about your personal finances.
Next step: get technical.
If saving money isn’t your strong suit, you could use an app like Chip (where you can set savings goals, with these taken out of your bank account automatically) or Squirrel, which lets you split up your salary into outgoings so that you don’t go over your budget.
Making a big but necessary purchase? Use money comparison websites to get the best deals.
And scour the web or use social media to see if there are any freebies available.
After all, one person’s trash could be your treasure.
‘A second wave could bring a similar degree of financial uncertainty as the first did, with this in mind it may be worth making some small changes now so that you are prepared for what could be around the corner,’ says Jon Ostler, CEO of Finder, a personal finance comparison site, who recommends two other apps.
‘Free personal finance apps such as Yolt and Money Dashboard enable you to track and maintain your budget easily.
‘They have a range of features from budgeting tools, monitoring multiple accounts at once and real-time breakdowns of your spending, which allows you to monitor and understand your outgoings.’
Additionally, speak to your bank to see if they have any free money-management services.
As an example, Natwest offers a free Financial Health Check service, with video banking sessions where you can speak to their team members, while Barclays has so-called ‘Money Mentors’ to help answer any financial questions.
Prep your CV and build your network now
Is the company you work for in trouble? Have they started making redundancies?
Is it likely that your department is next?
The job market isn’t great right now, and admitting that you might have to give up a role that you enjoy or have held for years is hard, but by building up a network of business contacts now, the process could be easier – should the unthinkable happen.
Catch up with old contacts, follow up on leads and update your CV and/or LinkedIn.
Does you company offer free online training or courses that could benefit you in a new job?
Take them up on it (but, obviously don’t tell them the truth about why you want do it…).
Look after your mental health
Last but not least, one of the most important ways to prepare for a financial downturn is simply to try not to panic.
It’s not an easy task, but keeping a calm head in a stressful situation will help, as will talking to loved ones and – here’s the big one – asking for help.
Always remember: this too shall pass.
Do you have a story you’d like to share?
Get in touch by emailing MetroLifestyleTeam@Metro.co.uk.
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source https://metro.co.uk/2020/10/05/how-to-financially-prepare-for-a-second-wave-of-coronavirus-13374532/
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