In 2020, looking at how to manage your finances is probably at the forefront of a significant proportion of the population’s minds. People have most likely not thought this much about money, nor been this concerned about their finances, since the financial crisis in 2008/2009.
Unfortunately, we are in a position where millions of the population were placed on furlough with the very realistic possibility of being made redundant when furlough comes to an end. In the 3 months to September 2020, the Office for National Statistics (ONS) data shows 314,000 had already lost their jobs. With the country still feeling the pains of coronavirus, with lockdown measures still in place, finding a new job will not be easy for these people. Therefore, we thought that it would be important to put some tips together to assist people with managing their finances to get through the impact of the COVID-19 pandemic.
So, what can you do to manage your finances and get through the impact of COVID-19?
Have a budget plan
A budget plan can often be thought of in a negative way, with people often thinking of it as placing restrictions on their enjoyment. However, if used in the correct way, it can empower you for the future.
The importance of a budget plan is for you to keep track of what you have coming in and what you have going out in expenses. This can provide a picture of your financial position and if you have a surplus or deficit at the end of the month, and how big this surplus or deficit is.
When you budget, however, the most important tip we can provide is to be as thorough as possible. We are all guilty of picking up items here and there, without accounting for it in our head. Over the course of a month, these things can add up. Therefore, when budgeting, get out your old receipts, or go through your bank statement, as this will help you be as accurate as possible.
We recommend that you split your items of expenditure into the following categories:
- Essential Spending – these incorporate the bills that you have to pay, such as: heating, eating, mortgage or rent, transportation, insurance and unfortunately, tax
- Lifestyle Spending – the things that bring you joy, fund and pleasure beyond just getting by
- Discretionary Spending – this can be fulfilling dreams or anything else with what’s left over after the essential and lifestyle spending are taken care of
If you find yourself in a position where your outgoings are more than your incomings, please carry on reading.
We have a budget planner on our website, click here to go straight to the tool. We have a budget planner on our website, take a look and if you have a deficit, come back and carry on listening.
Save money where you can
Saving money or tightening your finances can be tough and even more so if you have children. However, it is important to keep the end goal in sight through this period, knowing that this is a process that can end your money worries and those sleepless nights.
These are some of the first areas that you can look to save money:
- Utility Bills – most households can save money in this area. We all fall into a pattern of not checking to see if we are getting the best deal when it comes to our utilities and can end up paying over the odds. Companies like Look After My Bills and Utility Warehouse can assist you in this area and save you money each month. Also, ask your energy provider for a smart meter so that you can keep track of what you are spending.
- Phone Contracts – if you are on a phone contract that includes the cost of the phone, you can very easily find that you are paying in excess of £50 per month. When you come to the end of your current contract, consider getting a SIM-only deal and keep your current phone. When looking at SIM-only deals, make sure you have one with sufficient data so that you do not get any unexpected bills.
- Home and Car Insurance – if you allow your insurance policy to automatically renew, you will most likely be paying far more in premiums than you could if you compared with other insurers. Unfortunately, companies do not reward loyalty these days. By using websites like Compare the Market and Go Compare, you could make a significant yearly saving.
- Unused Services – I’m as guilty of this as anyone. I have a gym membership but I cannot remember the last time I went if I’m honest, this is an instant saving that I will not even notice.
- Non-essentials – this is the area that will probably be most painful as it involves cutting back on the areas you enjoy. However, spending less on clothing, eating out and entertainment are areas that you can make savings very quickly.
Build an emergency fund
Once you have your budget plan in place and have surplus money each month, before you start spending this, let’s build an emergency fund.
An emergency fund is very important as it is a pot of money to fall back on should you either find that your income reduces, such as losing your job, or if you have to pay for something unexpected, such as having to replace your boiler.
A good rule of thumb for the size of your emergency fund is between 6 and 12 months’ essential and lifestyle expenditure. However, once you get to this stage, see if you can get to 12 months’ income to provide you with a great safety net for the future!
