As we slowly emerge from the Covid-19 lockdown, it is important you take the time to protect your financial wellbeing and any level of financial resilience you may have in place. While the health risks associated with Covid-19 have not gone away, neither have the economic ones.
Since nobody can predict with any certainty as to when a reasonable state of “normality” will return, we should plan according. The tips and tricks that boost one’s personal financial wellbeing in good times are doubly important when times are challenging, like now.
1 Be vigilant; phase your way out of your spending lockdown
As the national lockdown measures are eased, one may be tempted to relax their spending habits too! If that is the case, they should do so with a measure of caution. One proven method to spend strategically, where local communities can benefit and thrive is to take stock of one’s financial situation now.
The national lockdown easing will grant us all a little room to breathe again! However, as the ebbs and flow of easing the lockdowns and Covid-19 measures kick in, it is important to know exactly what your financial situation is. This will help you spend with confidence and to avoid spending in such a way that could cause hardship later.
2 Prioritise your expenses
Every household will have a different spending situation and some spending is more important than others.
If your income was reduced during the Covid-19 lockdown or if you availed of the special Covid-19 payment. Or, if you applied for and received a payment break on a mortgage or other loan, it is important to work out your most important bills and plan a path to take care of them once they start to become due again.
A current account statement is an excellent starting point as it will highlight the majority of spending by way of direct debits and also, debit card transactions. Using this as a guide, use it to question any expenses that may not be priority presently. If you can reduce non-essential spending, do so.
3 Keep up-to-date with what lenders are planning
Many lenders acted quickly to offer payment breaks. This provided a lot of financial breathing space to their customers. However, such measures are temporary in nature so it is important that people are aware of how a resumption of regular payments will impact them…and their household budgets.
Start planning to resume making mortgage and other loan repayments again. If you feel this could present a problem, make sure you have your financial affairs in order so that you are fully prepared to engage with your lender(s).
Don’t stop making payments to your mortgage or on other loans without first making contact with your lender first.
4 Free up extra money where you can
As part of building your financial resilience, look for ways to save up several months of day-to-day living expenses into an emergency fund to protect your financial wellbeing.
If you have access to credit or loans, use them wisely.
For example, when it comes to credit card balances, you will have a range of repayment options, including paying the entire balance in full, paying off a big chunk of the balance or paying using the minimum payment option .
If you have investments or even access to retirement fund tax-free monies you may wish to use them. While this is not ideal, it may be required at this time. In such situations, talk to your employer or pension administrator.
Where you may consider seeking support from family or friends, do so with caution. Some people may have very limited financial scope to extend financial assistance so don’t take a refusal personally.
For now, it is really important to remain safe and follow the advice of our medical experts as we begin the process of exiting the Covid-19 lockdown.
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz