Thursday 22 October 2020

Preparing Your Finances For A Second Lockdown

Pexels - CC0 Licence

As expected, the economy is due to take another hit this winter as a second Coronavirus spike rolls around. With half of the country in Tier 2 or 3 restrictions, it won’t be long before businesses go back to the March, April, and May way of working. Everything might be fine as you could escape furlough and work remotely until next year. Still, it’s a sound financial decision to get your finances in order just in case the worst happens.

If you’re not sure how to do it, don’t worry because it’s pretty simple. Here is a selection of top tips to help.

Build A Cash Buffer

Building a buffer doesn’t only mean adding to your emergency fund. If you can, great, but if you can’t, try and reduce your outgoings by paying off debts. That way, you’ll have fewer contributions and more disposable income to use in hard times. Of course, if your resources aren’t extensive enough, there are payday loans and credit card offers to help you out in a pinch. All you have to remember is that you should only borrow what you can afford. You’ll never regret having a rainy day fund as you can use the money for other things!

Apply For Benefit Schemes

There is more information about benefit schemes being released daily, so it’s essential to keep an eye on the news. Many of the benefits are grants that you don’t have to pay back. The only thing is, they are taxable and need adding to your return at the start of the new tax year. Still, it’s better to have the money now and pay a little more to HMRC down the line than struggle to make ends meet. The retention packages range between 70% and 80% of your wages up to £2,500, so they’re useful.

Tweak Your Pension

Considering you need around £30,000 for a comfortable retirement, you might have multiple pensions on-the-go. While this is smart saving for the future and commendable, it’s probably not your number one concern right now. After all, it’s easy to overpay during stable periods, which means you’re overpaying in a crisis until you tweak your contributions. Thankfully, you can opt-out for a specific amount of time or lower your pension outgoings until you’re in a position to restart. Alternatively, you can consolidate them into one place so that they’re easier to manage.

Try A Mortgage Holiday

Mortgage and rent holidays are designed to give you space, like this year’s tax break. It’s better to continue paying your bills in an ideal world as you’ll only have to tackle them head-on later. Still, if you’re worried about your finances, it could be healthier to set them aside from a couple of months and focus on more pressing bills. As long as you understand your arrears won’t be wiped off, a holiday can work well as it relieves the pressure and offers alternative options.

Are you ready for a second lockdown, socially and financially?