Many people are worried about the impact of Covid-19 on their finances. And the uncertainty of where things are heading may be daunting. But now is a good time to assess your financial situation and plan how you can best manage your money to get into good shape for life after the coronavirus pandemic.
1. Evaluate your existing budgets
One of the first things you should do is assess your current expenses and identify where you can make reductions. Make a list of your outgoing expenses and work out which ones are necessities and which you can get rid of.
If you’re subscribed to services you haven’t used frequently in the last few months – and don’t see yourself using anytime soon – think about cancelling them.
Similarly, if you have any paid apps on your phone or laptop which you haven’t used, consider deleting them and switching to free alternatives.
You might also try the 50-30-20 budget rule – but with a twist!
The rule states that you should put:
- 50% of your monthly salary toward necessities – rent, utilities, food
- 30% towards wants – non-essentials such as dining out, holidays, and other luxuries
- 20% towards savings.
However, in a Covid-19 world, you might find that due to restrictions on social and leisure activities, you spend less on wants.
Therefore, you could tweak the rule and put:
- 30% towards savings and
- 20% towards wants.
If you’re really worried about potential future financial problems, you can continue to increase the amount you put in your savings and decrease your ‘wants’ funds further.
Alter the rule to reflect your needs and situation.
2. Pay off debt
If Covid-19 has affected your finances and you’re worried about paying off credit card bills, banks are offering three-month payment holidays. You have until 31 October to apply for one.
However, you’ll still be charged interest and may end up paying off more overall. So, check:
- how much interest you'll be paying and
- whether it’s possible to switch to a credit card provider with a lower interest rate or a 0% interest rate.
You could also speak to your bank about exploring the option of a partial payment holiday. This is more suitable if you can’t pay off the full amount of a bill, but can still to contribute to part of the payment.
Although you will still get charged interest , less interest will accrue.
3. Look at your savings
Saving money can be difficult even under normal circumstances, let alone during a global pandemic. But it could be a smart financial decision to open a savings account.
Currently, base rate cuts haven’t had a drastic impact on rates of savings accounts, but we don’t know how long this will last for.
Usually with fixed rate savings accounts, you have to pay a fee to access your money before the set time period. However, due to Covid-19, some banks are scrapping these fees for existing customers who need to access their savings to pay for living costs.
For some people, the pandemic has resulted in saving more than usual, due to going out less or not spending as much on travel.
If this applies to you, ask yourself how you can continue to save consistently post-pandemic too. It may be worthwhile looking into National Savings & Investments (NS&I).
Some NS&I savings products are free from income tax and capital gains tax. And, as they are backed up by HM Treasury, any investments and savings through them are guaranteed to be secure.
4. Learn how to manage money
Whether Covid-19 has impacted your finances or not, staying financially aware will prepare you for any unpredictable changes.
Our free financial education resources can teach you more about managing your personal finances. You can learn more about tax, savings, borrowing and more. And at the end of each topic you'll find activities and suggestions on how to explore the subject further.
Find out more about our free financial education resources