There is a lot of anxiety around economic the impacts of COVID-19 – and rightfully so. The UK economy, which was already slowing down as we entered 2020, was devastated by the lockdown measures. According to experts, the economy shrank by a shocking 20.4 % during the second quarter of the financial year. We are officially in recession.
Times are truly uncertain, and it is beginning to seem like COVID-19 might be here to stay for a while. Recently, the authorities confirmed that we have been hit by a second wave of the virus. As the cases rise, there is talk of stricter lockdown measures that may deepen the economic scars.
There is no doubt about the fact that these are tough times – but there is some good news too! This time, we are definitely more prepared. We may not realise it, but the lockdown has taught us vital lessons about managing our personal finances and saving up.
Learning from prior experiences is a great way to minimise uncertainty and be confident about the future. Plan smartly and include the following lockdown takeaways into your routine to take control of your finances:
Budget Every Month
The lockdown has drilled home the importance of budgeting. Whether you have had a budgeting diary all your life or you just started in the lockdown, it is useful to streamline your expenses by making a budget – and following through with it.
Budgeting is a great way to understand your finances. Once you know how much money is coming in (your income after taxes) and how much is getting spent (your expenses), you can plan ahead with a sure footing.
In a nutshell, budgeting serves as a spending blueprint for your money. Making a monthly budget is a practical way of ensuring that you have enough money for your needs and wants – and then some more (savings) for emergencies. It will also keep you from getting into debt. If you are already in debt, a budgeting plan can help you work your way out of it.
Prioritise Your Expenses
Some expenses are non-negotiable while others you can afford to put off for a little while. That is why it is vital to prioritise your expenses. Understanding your financial priorities can make planning a hassle-free process.
Some household outgoings are absolutely essential – you need them to survive on a day to day basis. You should always prioritise expenses such as rent or mortgage and council tax payments. Similarly, car insurance should always take precedence over non-essential expenses because failure to pay it on time can lead to hefty penalties and fines.
Prioritise the rest of your outgoings and non-essential expenses according to your lifestyle, needs, and preferences – and try to stick to your priority chart.
The lockdown caused a huge disruption in our lives, but it also gave us an opportunity to re-evaluate our spending habits. This trying time made us realise the benefits of living frugally – and the budget-friendly habits we have picked up along the way are worth keeping.
Learned to plan your meals and prepare them at home? Continue doing so. Not only is home-cooked food healthier, but it is also the perfect way to cut on food expenses and save up. When we go out to eat or even order in, we end up spending a fortune on food without noticing it.
Similarly, counter any unhealthy cravings with homemade snacks instead of buying packaged snacks on the go. Also, if you know how to make your own beverages, do it! Brew your own coffee, pour it in a flask, and take it with you. That £2.50 you spend on coffee while commuting to work every morning may sound negligible – but it can total up to £564 per year.
Make a Rainy-Day Fund
Savings are important when external circumstances are uncertain- and we cannot stress this enough. During the lockdown, a lot of people realised that job security is a flimsy notion and began to save up.
In fact, two out of every five people in the UK managed to save up a bit. According to a study, the average UK household was spending 29% less in lockdown compared to regular days – and this roughly totals up to an average saving of £171 per week.
If you want to be financially secure, begin saving up and create a rainy-day fund for yourself. Rainy day funds can protect you from a lot of stress and hassle during emergency situations. Moreover, you are less likely to get into debt if you are prepared for such inevitabilities.
Savings are good for you regardless of how much you have saved. Even a small amount goes a long way – but financial experts recommend that you set aside at least 3-6 months’ worth of wages for your rainy-day fund.
Get Help with Debt
Having debt is stressful enough but having debt during a recession can cause more anxiety, especially when you are unsure about your job. That is why now is the right time to deal with any debt problems you have or seek debt help.
If you have any high-cost debts like credit card bills, catalogue debts, or store cards prioritise paying them off first. This will give you some peace of mind and allow you to save up.
Use Online Financing Tools
Make things easier for yourself and stay on top of your finances by leveraging the power of app-based banking. Using a mobile banking app has many advantages; you can track your expenses and withdrawals easily because you will get a notification for every transaction, your balance statement is only a few taps away. Some online banks even offer better rates than brick and mortar banks, so make sure you consider them.
Audit Your Finances
Auditing your finances is especially vital if you are furloughed and not sure if you will resume work as usual, under the same terms and conditions.
Since the authorities have categorically clarified that the furlough scheme has ended, you should immediately begin preparing for the future. Begin your audit by assessing the redundancy pay you are entitled to and identify career opportunities that you can easily move into in case the situation becomes worse.
Renegotiate Your Mortgage
This is a great time to reassess your mortgage since borrowing rates have hit an all-time low. Make the most of this situation by renegotiating your mortgage for a better rate.
Go for a fixed rate instead of a variable rate to get the most out of low borrowing rates. Reassessing a mortgage is an ideal option for people who are nearing the end of their existing mortgage term.
Find Better Deals
Find time to look for better deals to lower your household expense. Review everything from your phone and internet bills to utilities such as gas, electricity, and power.
Check your tariffs and see if there is any service you are paying for that you do not need. You should also compare power quotes to make sure you are not overpaying on energy bills. In case you are, you can lower your living expense by switching providers.
You do not have to request quotes and compare providers all by yourself if you do not want to. You can use a price comparison website like Uswitch to find a better deal.
Look into Benefits
Preparation also involves being aware of all your options. If you are struggling financially, it’s a good idea to find out if you are entitled to any benefits like universal credit, child benefits, and tax-free childcare.
Don’t Hesitate, Ask for Help
If you are having a difficult time managing your finances, understand that you are not alone. We are in the middle of a financial crisis and the economy is devastated. So, many people are struggling with money issues.
If your financial situation is getting worse and you are worried about it, do not hesitate and talk to a professional expert. If you are having problems repaying your debt, seek debt help from an impartial money specialist. They can go over your financial situation, offer guidance and help you select the right debt solution for you.
Note: If saving up seems impossible right now and you are struggling to make ends meet on a day-to-day basis, it could be time to reach out for support. Get in touch with our friendly and impartial specialists for resources and timely support. Give us a call on 0800 056 6820