In the current economic climate it has become more apparent than ever that you need to have a good financial plan. The Office for Budget Responsibility (OBR) reported on Tuesday (14th April) that the UK economy could shrink up to 35% this spring, and that unemployment could soar by 2 million. This would result in an unemployment rate of nearer to 10% verses the current 3.5%. The OBR has also forecast that growth for 2020 as a whole will be -13%.
All this will have a very real impact on jobs, people incomes and financial security. It is therefore highly important that we have a plan in place to deal with this crisis.
Create an essentials only budget
You should already have a budget in place allowing you to track you income and outgoings accurately, if not this is a perfect time to start. Having a budget will allow you to see exactly how much money you have coming in and where you are spending it, thereby allowing you to optimise you personal finances.
An essentials only budget is exactly what it says on the tin, you should only be spending money on things you would consider to be an essential. So you should be spending money on your rent/mortgage, utilities, food and essential supplies; only spend money on what you need to live. This is somewhat made easier currently with the lockdown being imposed removing opportunities to spend money on luxuries.
Add to your emergency fund as much as you can
Your emergency fund is there in the event that the unexpected happens. Hopefully you will already have some money set aside in your savings. This current crisis highlights the importance of having a well funded emergency fund to fall back on if suddenly you have no income coming in.
Once you have completed your essentials only budget above, any left over money needs to be saved into your emergency fun. If you are still earning money, at this time it is never a bad idea to add some extra to your emergency fund just in case.
For more about emergency funds click here.
Negotiate with your creditors
The government announced schemes of the past few weeks aimed at helping those with mortgages or credit card debt. This means that you may be able to take repayment holidays with your mortgage or credit card provider. Personally, I would only recommend this if you really cant afford to keep paying, especially credit card debt; providers will probably still apply interest even during the holiday period.
Where possible pay off as much debt as you can, especially credit card debt. This will improve your financial security and allow you to put more money towards your emergency fund.
If you find yourself in extreme financial difficulties make sure you contact your provider as they may be able to work out a more flexible repayment plan. Don’t just stop paying your bills as this will have a detrimental impact not only on your finances but your stress and wellbeing.
Have a back up plan for work
Hopefully you are in a job that is still paying you during this crisis, however it doesn’t hurt to have a back up plan. In the event of you job suddenly being made redundant you need a plan to find another job as soon as possible.
Start looking at your local jobs market so you know what is available currently, and look at your CV to make sure it is up to date. Make or update your LinkedIn profile and start looking at jobs there. Also look at your qualifications, are there any courses that you could benefit from doing that would enhance your skills and employability. Now is the time to make yourself as indispensable as possible, or if needed, the prime candidate for a job.
For courses I would recommend looking at Reed Courses (here). You will be able to find courses are highly discount prices or even for free. Also it might be worth looking at the Open University’s Open Lean (here) for short courses to enhance your knowledge.
Look for ways to make money now
The more sources of income you have, the more stable your finances will be. Now is a great time to explore alternative ways of making money. If you are still working you can explore passive sources of income e.g. dividends, bonds etc. If you have been furloughed you might still be being paid but have lots of time on your hands. Explore money making opportunities such as YouTube, writing and other internet based sources. Alternatively, shops and other business may be hiring to cope with increased demand on a short term basis.
None of the content in this article should be considered financial advice, I am not a financial advisor and you should always do your own research prior to investing. These are my opinions only.