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Coronavirus has meant that many of us are dealing with challenging financial circumstances. How can we keep a handle on our finances during so much uncertainty? Rachael Revesz speaks to three experts.


If you are dealing with difficult circumstances, like losing your job, taking a pay cut or being furloughed, there are some specific government support packages available, such as the Self-Employment Income Support Scheme and the CBILS and BBLS loans for business owners. In addition, Universal Credit has been expanded. There are also practical, positive things you can do to keep control of your finances – in fact, a lot of them are habits that would be good to maintain, whatever the circumstances.

Set a budget

There is another way to be vigilant, and that is taking a very close look at what you spend each day, week and month. Budgeting is very important, especially if you’ve taken a pay cut.

Marlene Outrim, founder and managing director of UNIQ Family Wealth, advises clients to write down everything they spend and see what they can cut out or cut down. “It could be you’re still paying for things but not using them now, like gym memberships. This is a good chance to see whether you can make some changes,” she says.

The results might surprise you. While some of us are saving money on the commute, and we’re not buying clothes, holidays or socialising, other bills have sometimes gone up, like household utilities and the food bill.

Being your own boss

If you’re self-employed or a small business owner, it can be harder to set a budget as you don’t always know what you’re going to earn or what revenue you will make.

It is worth noting that not only are benefits like Universal Credit more accessible during the pandemic, but the government is awarding cash grants to self-employed people who made most of their money over the last three years from freelance work and can provide a 2018/19 tax return.

Support for small businesses in the form of loans, grants, rate relief and furloughing staff is also on hand. Martin Bamford, director of client education and chartered financial planner at Informed Choice, added that one of his small business clients believed he was not eligible for any government support, until they worked out that he could qualify for rates relief on his business premises.

Get a better deal

Another way to save money is to find better deals for your utilities and broadband, and even your credit card provider, mortgage or bank account. That doesn’t mean you always need to jump ship – companies are normally keen to offer customers a deal if they ask for one. Marlene says, “I’ve seen people go to credit card providers directly and explain what they can afford to pay to see if the provider accepts that.”

Various credit card providers are offering repayment holidays for several months – meaning you might not have to make your usual payments during that time. But you do need to make sure that’s agreed first and just remember that interest on your debt will still add up.

Another option may be to consider transferring your debt to a 0% interest card. If you are really struggling to pay your debt, it’s a good idea to get in touch with the Citizens Advice Bureau or a debt charity such as StepChange or the National Debtline.

Insurance

It’s also worth considering what insurance you have, as some providers are offering payment holidays or refunds, including some car insurers.

However, Martin warns his clients not to halt paying premiums for their life insurance policies, just so they can save some money in the short term. It could be a long-term mistake, he says, especially if you have dependents who rely on you.

Focus on saving for stability, not return

Of course, it is not always easy to save money if you are dealing with difficult circumstances. But a good goal is to build an emergency fund that helps provide you with some security.

“Before Covid, I recommended a minimum of three to six months’ of outgoings in a fund to cover your mortgage, bills, car payments, and anything else you absolutely have to pay,” says Eve Obasuyi, co-founder of millennial money management platform Money Medics. “Now, I’d recommend at least 12 months’ worth of outgoings, just in case.”

Twelve months may be unrealistic in some cases - but the goal is to get to a place that offers some security.

Interest may be very low on savings right now, but you still need to save. Shopping around online can show you the best savings accounts, and sometimes providers will offer you a better interest rate or cashback. You should do plenty of research and also talk to your bank about other types of accounts on offer.

Set up a direct debit – ideally for payday – so saving becomes a routine. Starling also provides customers with its ‘Goals’ function, allowing you to save up for different goals without opening different accounts.

Be alert

Now more than ever, beware scammers. During every period of vulnerability, unfortunately there will always be people who try to take advantage - perhaps through tricks like scam emails from HMRC, asking for your bank details. They might not be able to come to your door, but they can still get in touch by phone or online.

Martin says, “A lot of people are trying to prey on those who are scared – I’ve seen texts and emails purporting to be from government officials, so be hyper alert. Everything is not always as it seems.”

The Starling blog has more advice on how to stay safe from coronavirus scammers.

Stay invested – if you can

Out of Martin’s 500 clients, only two have become so spooked by the pandemic that they decided to sell out of their stock market investments. Martin and the other financial experts agree it is generally a better idea to stay invested in a diversified portfolio for the long-term, as global stock markets tend eventually to regain their losses, although it can take time.

“Always invest for the long term,” says Marlene. “Anyone invested in the stock market should know that markets don’t go up and down in a straight line.” If you decide to invest, she adds, make sure you have built up that rainy day fund first and that you won’t need the investment money back for at least five to 10 years.

It’s always important to remember that the value of investments can go up and down, and that there is no guarantee they will go up.

Housing options

If you’re a homeowner or renter, it would be totally normal to worry about how you’re going to manage paying your mortgage or rent.

There are several options. Residential and buy-to-let mortgage holders can apply for a repayment holiday directly with their lender. Remember, as with other repayment holidays, what you owe is simply deferred and you still have to pay it back. If you do want to take a repayment holiday, you can calculate what your future payments might be via a mortgage payment holiday calculator. Some providers are offering to waive certain fees, or let customers switch to a better deal or make reduced payments.

It is worth noting that while taking a repayment holiday does not affect your credit score, the Financial Conduct Authority has said that taking a repayment holiday could potentially affect any future applications you make for another mortgage. This is because mortgage providers can check your bank account to see whether you’ve temporarily stopped making payments or increased your debt due to the interest accruing during the holiday. The full extent of this impact won’t be known for a while, according to reports, and each provider’s process for assessing applications is slightly different.

For renters, laws have strengthened since the pandemic struck to prevent evictions during the virus, until June at least. Common guidance is to talk to your landlord to work out a reasonable repayment plan, or get advice from Shelter.

More on this subject is available in the blog article help for homeowners and renters.

Invest in yourself and your future

With so much uncertainty, is there any point in making plans or setting goals right now? The experts seem to think so.

While Marlene says being furloughed, for example, could give you time and space to update your CV and LinkedIn, Eve Obasuyi says it’s important to set goals, otherwise some of our daily activities may feel pointless.

“Time feels on pause for a bit but doesn’t mean our life is,” she says. “This could be an opportunity to decide what you want your future to look like – but you do need wiggle room for whatever life brings you.”

A lot of things in life are free – especially now. This includes the government’s ‘skills toolkit’, providing free classes on everything from getting confident online to learning maths. Many companies and institutions provide a selection of free courses, such as the Open University’s offering for small business owners. On financial education, websites such as The Money Charity are packed with free information and resources on everything from debt to financial products. Iona Bain’s Young Money blog is another useful, independent source.

If you can, why not take this time to learn something new and take stock of what is truly important to you?

Stay connected

Many people are going through difficult times, and it’s important to know what potential support is available, whether from the government or elsewhere. Talk to friends and family to keep connected to the outside world, as well as share tips and resources to support each other.

It is also important to beware fraudsters, set a budget and put as much as you can aside. Shopping around can land you with a better deal, or try to talk to your credit or utility providers to see if you can negotiate new terms or payment schedules.

In the meantime, keep checking the government’s website for the latest updates on support available, whether you’re a salaried worker, freelancer or business owner.

The above is intended as general information and does not constitute advice in any way. You should take independent advice if you have any questions about your specific circumstances.

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