Financial Survival Tips During Coronaviras
At the start of the coronavirus pandemic, jobless claims in the UK increased by over 69% compared to the previous month. If you are one of the millions of people out of work or dealing with a temporary furlough, you may struggle to pay bills and meet your financial obligations.
Use the following tips to survive financially and ride out the rest of the coronavirus pandemic without going further into debt.
Prepare for the Worst to Avoid Major Lifestyle Changes
The coronavirus and related lockdown restrictions remain unpredictable. When you cannot predict the outcome of an event, you may want to prepare for the worst. Consider the potential obstacles that may arise if new coronavirus cases start to surge:
- Extended furloughs
- Permanent layoffs
- Complete shutdowns
- Major recessions
Preparing for these issues may help you avoid any major disruption to your current lifestyle.
Set a Monthly Budget
Planning for a potential loss of income requires you to determine how much you spend each month. Assess your total current income and expenses. Do not leave anything out, such as the money that you typically spend on takeout.
Try to set a budget that allows you to end the month with more money than you started with. Use the extra money for additional payments on your debt or to start building an emergency savings fund. You may also need to start scaling back your expenses or consider ways to cut back on spending if you lose your income. Prepare to minimize your monthly bills by cutting out non-essential expenses.
Another way to reduce your monthly bills is to bundle entertainment services, such as phone, internet, and television. You may also save money by switching providers or choosing a lower-tier service.
Assess Your Current Debt
Create a list of your total debt. If you become unemployed and lose your source of income, paying off your debt will likely become the biggest challenge. Knowing how much you owe can help you develop a financial plan for paying down some of your debt.
If you have multiple sources of debt, consider consolidating the debt. Transferring the balance from one or more credit cards to a single card often makes the debt more manageable. The average UK household pays £1836 interest on loans and credit cards each year. By transferring debt from a high-interest credit card to a card with a lower interest, you save more.
Home loans are another common source of debt. If you have not refinanced your loan, now may be the time. Many lenders are offering historically low rates to continue opening new loans during the pandemic. You may even consider releasing some of your equity to consolidate your debt and eliminate credit cards with higher-than-average interest rates.
Assess Your Liquid Cash
Along with the money that you owe, you should assess the money that you hold. If you unexpectedly lose your income due to the pandemic, you may need immediate cash. This includes liquid cash that you can quickly access, such as money held in a bank or stored in your home.
Many investors have shifted more of their savings from stocks to less-volatile cash investments such as bonds or CDs. However, most bonds and CDs do not allow you to make early withdrawals without a major penalty. Transferring funds to a high-yield savings account or a no-penalty CD provides a more stable way to hold your money and ensure that you have access to it quickly.
Build an Emergency Fund
Most financial experts recommend that adults maintain emergency funds equal to at least six months of living expenses. If you do not already have an emergency fund, begin building one. When saving toward an emergency fund, avoid using money that is needed for paying down your debts. If you have extra money at the end of the month, prioritize debt over savings.
Explore Aid Programs
Community and government aid programs are available for those in need. However, the requirements for each program vary. The UK already extended a worker furlough program through October. If lockdowns resume and you lose your job, you may qualify for unemployment insurance and government funds.
Review Your Insurance Options
If you pay for life, home, or vehicle insurance, review your options and compare quotes to see if you can get a better deal. Many insurance companies offer lower rates when you bundle insurance products. Some insurance providers may also offer lower premiums if you pay a large amount up front. For example, instead of paying a monthly fee, you may save money by paying for an entire year of coverage.
With these steps, you should be prepared for any financial disaster caused by the pandemic. Hopefully, things will not take a turn for the worse and you will not have to use some of these methods.