Life, love, lockdown: What covid-19 has done to our personal finances

Are we really all in this together? Coronavirus, and consequently lockdown, has impacted a lot of people in different ways, but what’s been the impact on our personal finances?
Live, love, lockdown
Reading time: 8 minutes

This probably isn’t what Kanye West had in mind with his 2008 hit, ‘Love lockdown’, but here we are in 2020 with the world seeming like a very different place. Things we once took for granted, like quickly popping to the shops or going to the pub with our mates, now seem like distant memories.

But these restrictions aren’t just physical, they’re also changing our outlook on personal finances as well.

Life’s impact on finances
Social life, work life, it’s all been changed. We swapped pubs for Zoom calls and commuting to the office for early morning yoga or more time in bed. There’s no more going out to enjoy live sport, and we can’t even watch the soaps at the same rate as we used to.

Theoretically, this mean there’s less for us to spend our money on, but surely with online shopping being as prevalent as it is, we aren’t seeing that much of a reduction? Well, the facilities are there but not going out has meant that we’re not buying as much. For example, in April, the UK public bought more than 50% less clothes than we did in March – and March had already fallen by nearly 35% compared to February.[1] That’s a lot of money that we’re not spending!

And it’s not just a result of not going out. The very nature of lockdown is unusual, and for many, it’s a stark change from how we’re used to living – whether you’re a social butterfly or not. As the pandemic unfolded and lockdown continues to extend, there’s been a large increase in the number of anxiety cases, with around half of us being affected. And one of the biggest worries – household finances.[2] It’s really important to look after your financial health during covid-19, especially if your work life has also been impacted.

With this in mind, now could be a great time to take a good hard look at your household’s finances. There’s lots that you can do, regardless of your current situation, which could help give you a better understanding of where you stand. Here are five quick and easy things that you could try:

  1. Go through your direct debits – if there’s anything you don’t recognise or use, then maybe think about cancelling it. With so many companies switching to subscription models, this could save you a nice little sum each month.
  2. Start a budget – if you don’t already have one, creating a budget could be useful to ensuring that your income makes it through to the end of the month and it can even help work towards your savings goals.
  3. Compare your bills – there are dozens of services out there designed to make this easier for you, and yet less than 10% of people switch their energy supplier each year. [3] Simple things like this have the potential to save hundreds every year
  4. Talk about money – money still seems to be a taboo subject to many, but by being open about your finances can not only reduce your anxiety but can also make managing your household budget much easier. If you’re cohabiting then pulling your resources together for household bills can help make things like groceries, utilities, and council tax more affordable.
  5. Think about saving – if you have any money spare, whether it’s earmarked in your budget or left over as the result of not splurging on clothes, then it could be worth tucking it away. It could be a good idea to have an emergency savings pot handy, just in case you urgently need to pay for something, for example if your washing machine goes wrong.

So, that’s how the changes to our lives has impacted our finances, but what about closer to home? What about love?

Love’s impact on finances
Those of us who are locked in sheltering at home with our loved ones will know that it’s been a tricky couple of weeks. There’s only so many times you can ask “what’s for dinner”, or “do you fancy going on our daily walk”, and how your sourdough bread is doing can only take up so much time.

If you were in a settled relationship before lockdown started then you may have found out new things about your partner, but what about singletons and new couples who are used to going out on dates a few times a week?

Well, with pubs, restaurants, museums, theatres, sports, and movies all out of the question, a lot of people have been turning to ‘Netflix and chill’ and even Zoom dates. So, instead of spending £3.75 for each pint of lager in the pub[4], we’re pocketing that spare change.

In a recent survey, it was discovered that the average single Brit will spend £1,350 a year on dating – that’s £112.50 a month! [5] If you’re lucky enough to find the love of your life during lockdown and committed to putting £112 a month into a Stocks & Shares ISA instead, then in just 5 years you could have £7,194 invested [6] – and if you kept going for another 5 years then you may have £15,679 in your account. There’s the honeymoon sorted!

Continuing good habits after lockdown
If you’ve been lucky enough to be able to form good financial habits during lockdown, then you may want to start thinking about how to continue things once lockdown is over. The truth is, it’s likely to be a lot harder when things return to the ‘new normal’, but if you’re prepared for the challenge then the world’s your oyster.

Try to stick to your budget, but don’t be afraid to adjust it. That may sound contradictory, but if you created your budget during lockdown then you may not have factored in some of your regular expenses like commuting, lunches, or coffees.

Once you’ve built a decent savings pot, it may be worth thinking about investing to make your money work harder. Having money that’s readily available is great, but in the long run it could lose its buying power if your interest rate is less than inflation. If you open an Investment ISA, then you could invest up to £20,000 a year tax-free, and give your money more potential to produce better returns than a traditional savings account.

It’s worth noting that, just like creating a budget, starting to invest isn’t as difficult as it sounds. Actually, with Wealthify, it’s simple. You choose how much you want to invest – whether that’s the £112 a month you’ve saved by not dating or the £3.75 on beer – then decide which of our investment styles is right for you, Cautious to Adventurous, or anywhere in between. Our team of experts will do the rest, from monitoring the markets to buying and selling on your behalf. You can track your performance and see what you’re invested in at any time, online or through the app.

 

  1. https://www.ons.gov.uk/businessindustryandtrade/retailindustry/bulletins/retailsales/april2020
  2. https://www.theguardian.com/society/2020/may/04/half-of-british-adults-felt-anxious-about-covid-19-lockdown
  3. https://www.ofgem.gov.uk/data-portal/number-domestic-customers-switching-supplier-fuel-type-gb
  4. https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czms/mm23
  5. https://www.independent.co.uk/life-style/dating-apps-relationships-adults-uk-plenty-fish-romance-a9007116.html
  6. This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £6,369. If markets perform better, your return could be £8099. Values correct as of 28/05/2020
  7. This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £13,051. If markets perform better, your return could be £18,717. Values correct as of 28/05/2020

 

Your tax treatment will depend on your individual circumstances and it may be subject to change in the future.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

 

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