Your basket is currently empty!
Covid-19 is not only a health crisis, it has also caused the economic floor to collapse. With physical and mental health as top priorities, financial challenges only serve to exacerbate and compound current pressures. Many people are feeling a real sense of hopelessness: anxiety over the unknown, the uncertainty of the future in a world now changed beyond recognition. Our new normal will be the biggest test of our collective resilience and a time to improve your finances.
As governments worldwide attempt to flatten the curve, and contain the virus, significant efforts have also been made to stimulate the economy, with fiscal packages to help individuals and businesses recover. While we wait it out, looking forward to when restrictions will ease, it is of the utmost importance to put into place a roadmap to protect our finances and insulate ourselves from future knocks.
Cutting costs can make getting through the current situation less stressful. Before you can do that, you need to understand your spending habits. Start with your fixed expenses. This includes every monthly cost necessary to maintain a basic standard of living i.e. housing, utilities, food, insurance and any childcare bills. Then, make a second list of variable expenses, including discretionary items, such as clothing, hobbies and entertainment, personal care, dining out etc.. Also write down any quarterly or annual payments such as the dreaded TV licence or your AA subscription. Be honest with yourself, try to eliminate any nice-to-have items that are non-essential. The goal is to trim as much fat as possible from your budget to preserve as much of your income and savings as possible to improve your finances.
Take a close look at all your outgoings and cut back on any non-critical spending. Put any money you are saving from limited travelling, eating out and other events into your Emergency Fund. Having emergency savings is crucial at all times, but it is especially important during times like this. Ideally, there should be enough money to cover three to six months of essential living expenses. If you are still working, use your wages to bolster your savings. If you have been made redundant, transfer as much as you can to your fund – treat yourself, but do not splurge.
If possible do not borrow, even from friends and relatives. We are all struggling, so asking family for money is insensitive. Try not to take out additional loans at this time, unless it is interest-free and required for a real emergency. If money is really tight, consider selling something of value for a quick injection of cash. We all have things lying around that can be sold. Remember, this is about weathering the storm and you can always buy it back or get something better later.
Seek new opportunities to work and do something outside of your usual 9 to 5 to improve your finances. A crisis is a time to figure what is now required in this fast-changing economy. How can you monetise your skills? Are there relationships that can be beneficial to you? What other income streams are available? If you only focus on what you currently do, you will miss the new ‘new’ that will emerge as the crisis dies down.
Just like our lives have become more precarious, the markets have never been more volatile. Tempting as it might be to divest and cash out investments, you would be wise to leave it be. Just as world leaders are relying on science to inform their decisions, we too have to be forensic with our analysis. Remind yourself that if you sit back and ride things out, the stock market is likely to recover in time. Now is also a great time to invest in quality companies whose stock is on sale, so if you’re good on the emergency savings front, you can use your spare cash to add to or diversify your portfolio.
Mortgage providers are offering a three-month payment holiday to anyone affected by Coronavirus. Speak to your lender to find out more. It is worth noting that if you take a mortgage holiday you will still be charged interest for the time you are not making payments. If you are renting, the government has brought forward emergency legislation to protect you from eviction for at least three months, if you cannot keep up with payments.
Having access to extra money is crucial, so if you are low on emergency savings but own a home, it is a good idea to apply for a home equity line of credit. That way, you are not borrowing money you immediately accrue interest on. Moreover, if you have a store or credit card, car finance, an overdraft or other personal loans, you can ask for a temporary three-month payment freeze. The Financial Conduct Authority has suspended its credit card persistent debt rules, which means providers cannot cancel your card until October, at the earliest. This will give some relief to those relying on credit for everyday living costs. This is subject to approval by the lender, but if the payment freeze is denied, your lender should work with you to discuss other options. Taking advantage of a temporary payment freeze will not affect your credit rating.
Most people have life insurance. Read the policies and see if you are covered if you lose your job or sales in your business dries up. Check whether you have insurance policies that would cover your mortgage payments or replace some of your income. For example: payment protection insurance, mortgage payment protection insurance, accident, sickness and unemployment insurance. These types of insurance are often offered with life insurance policies or mortgages, so it is easy to forget you have cover.
Make creative efforts to improve your finances. Keep questioning your purpose and your contribution. Not just during this crisis but there afterwards. Your relevance to the world around you is tightly woven into what you bring to the table. Be sure you are solving problems, saving resources, enhancing efficiency, and making a difference, in as many little ways as you can. Now is the time – get your creative juices flowing, exercise your ingenuity, think laterally and outside the box – don’t let the current situation limit your self-belief.
Author: Uchechi Eke is the Founder of Meeting of Minds, an online community changing the way women of African descent connect and collaborate. With 56K+ followers across social media, the platform seeks to redress the lack of authentic spaces that equip women towards political, social, economic and cultural advancement. Uchechi is also a Management Consultant, working with national clients to achieve their growth ambitions. Through Business Development activities she provides 1:1 advice, delivers workshops, writes commercial and public tenders, and authors applications to grant making trusts. Over the last 12 years, she has won £70M+ for her clients. To find out more about Meeting Of Minds, go to the website.
Main image: Adobe Stock