COVID-19: Looking after your financial health in these uncertain times

Feeling stressed about your finances in these uncertain times? Here are some nifty tips that could help you stay in control of your financial future.
COVID-19: Looking after your financial health in these uncertain times
Reading time: 5 mins

Needless to say, what we’re currently going through is unprecedented. At this time of uncertainty, it’s very easy to get stressed about the future, especially if you’re dealing with financial implications, due to the impact of coronavirus on society and businesses alike. If you’re worrying about money, here are some tips that could help you keep control of your finances during these difficult times.

 

Don’t hesitate to ask for help if you need it
With COVID-19 likely to impact the economy over the long-term, the government has taken exceptional measures to help the country and the people who will potentially face financial struggles. For instance, the government has committed to offering loans to business owners so they can keep paying their bills, wages, and suppliers. So, if you own a company that’s being hit by the global pandemic, and are struggling, then it may be wise to consider looking into the government’s loan scheme. Also, if you’re the owner of a small business and need to close for some time, you may be able to get a loan of up to £5 million through the ‘business interruption loan scheme’ that has been implemented in the latest UK budgets1.

Employers can also apply to the government to pay 80% of individual’s wages if the staff cannot work and are place on furlough. Similarly, self-employed people could apply for a taxable grant worth 80% of trading profits, up to a maximum of 2,500 a month – note that conditions apply, so it’s worth checking with HMRC if you’re eligible to receiving this grant2.

What’s more,all mortgage lenders have been asked to provide three-month mortgage holidays to those who need it. Again, consider looking into this  if you’re struggling with your mortgage payments. The UK also passed an Emergency Coronavirus Bill which provides protection for tenants who are facing eviction due to financial hardship. Banks and credit card providers have also been asked to freeze payments on loans and credit cards for customers who are in financial distress due to coronavirus.

 

Make sure you get the refunds you’re entitled to
As a response to coronavirus, many countries have gone into a lockdown and closed their borders. This means that many holidaymakers have needed to cancel their trips suddenly. If you had to wave goodbye to your flight because of COVID-19, you may be entitled to a refund. Make sure to check your travel insurance policy. If you don’t have any insurance, you could also contact your airline or credit card provider, who may issue a refund for your cancelled flights.

 

Think about your emergency fund
All of us are encouraged to stay at home to help ‘flatten the curve’. And although self-isolation may not sound like fun, it could be a great opportunity to save money. Indeed, by not going to pubs or restaurants, you could find yourself with a healthier bank account than usual. And you could choose to put some in your savings account if you want to. Now more than ever, having money put aside is vital. As a rule of thumb, it could be a good idea to tuck away around three months’ worth of expenses. If you’re nowhere near this, now could be a good time to start.

 

Use some of your time to create a budget
Staying at home for a long period of time can quickly get boring, so make sure you’ve got enough to do to keep yourself busy. Whether it’s reading books, or binge watching all the crime documentaries streaming sites have to offer, there’s loads to do. But if you’re looking to be more productive with your days at home, then it could be worth creating a budget. Start by setting your financial goals and think of all the ways that could help you reach them. Try to be realistic when drawing up your plan – it should be challenging but not unfeasible.

 

Don’t panic buy
It’s normal to feel stressed by the pandemic but try not to let the panic control you. Even on lockdown, you’ll still be able to go to the supermarket to get what you need. And be honest, do you really need 20 toilet rolls, or 10 packs of pasta? It’s important to be sensible and think about others. The more you take, the less other more vulnerable people can get and the more you spend. And if you don’t use everything you’ve stocked up on then it’s money down the drain. So, when you go shopping, try to limit your purchases to what you really need – it’ll probably be enough.

 

Try not to touch your pension
Just like you shouldn’t touch your face, try not to touch your pension. Whether you’re 30 or 60, it’s important to look at the bigger picture and think about the long term. It’s never nice to see the value of your investments go down, especially when this is money put towards retirement. But for example, if you move your pension now, when markets are falling, you will likely make your losses real. Say you put £10,000 in your pension pot, and now that markets are dropping, you’re down to £7,000. If you transfer now, you’ll only be able to move the money you’ve got, namely £7,000, meaning you will effectively lose £3,000. Now say, you leave your pension alone for the time being. If markets start going up, your investments will likely follow and rise again, and your plan may go back up to £10,000.

 

Consider investing
The impact of the coronavirus on stock markets is forcing central banks to cut interest rates in the hope it’ll stimulate the economy and help markets recover. At the time of writing, interest rates are down to 0.1%3. Whilst this is good news for borrowers, this is very bad news for savers. When you save you’re guaranteed to get back what you initially put in, plus a bit of interest. Typically, the higher the interest rate, the better. Low interest rates mean that your savings won’t be working as hard as they could. Even worse, if the interest rate you get from the bank falls below inflation, the value of your money will decrease. In other words, if you were to take your savings out, you’d quickly realise that you can’t afford as much as you could before. To enjoy real growth, your interest rate needs to increase at least at the same pace as everything else. And a good way to achieve this over the long-term could be investing, but before you get started, it’s important to check your financial situation first.

If you’re in a strong position financially speaking, have enough money saved in a cash account and are looking for better returns over the long-term, it could be worth opening an investment plan, or alternatively you could transfer your Cash ISA to a Stocks and Shares ISA. We’d understand if you may not want to invest right now – after all markets are going down, so who would want to become an investor in the current market? Well, our answer may surprise you, but right now could be a good time to enter the investment world. Falling markets mean that investments are cheaper than usual. So, by investing now, you could potentially grab some bargains, and if markets recover, you could make some profitable gains with your cheap investments. Of course, we can’t predict the future, but historically markets have eventually bounced back, so there’s every chance we see better days come our way.

Also, one thing to note, although nothing is guaranteed with investing, there’s potential for inflation-beating returns. In fact, the longer you stick with your investments, the more likely you are to see positive returns. For example, people who invested in the FTSE 100 over any 10-year period between 1986 and 2019 have had an 89% of making a gain – and this is a time frame that includes the financial crisis of 20084.

 

References:

1https://uk.finance.yahoo.com/news/coronavirus-uk-releases-unprecedented-set-financial-measures-to-tackle-covid-19-economic-impact-172250683.html

2: https://www.forbes.com/sites/advisoruk/2020/04/08/coronavirus-covid-19-what-support-measures-are-in-place-in-the-uk/#5a9e03115419

3: https://www.bbc.co.uk/news/business-51962982

4: Data from Bloomberg

 

The tax treatment depends on your individual circumstances and may be subject to change in the future.

 

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

 

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