As the UK continues its gradual easing out of lockdown, we are repeatedly being told that there is no need to deviate from the roadmap set out by the government back in March 2021. Of course, the move back to what can be described as normal, or at least almost normal, is to welcomed but what of the impact of the last 12 months or so on people’s finances? We have all faced our own unique challenges, whether that has been balancing work with homeschooling, furlough, redundancy, or even extended periods on paltry sick pay.
People in the UK reported a mixed bag throughout the first lockdown in 2020. Around 28% of household reported a loss in income. Perhaps this is understandable given just how the economy nosedived. On the flip side though, there was an increase in what people were saving. The UK saving ratio increased year on year from 6.8% up to 29%. So, what now? Whether you were one of those that saw a reduction in income or one of those who managed to increase their savings, how do you move out of lockdown and take steps to repair or protect your financial position? We have a few things worth considering!
That savings habit
While many have managed to stow away cash during lockdown, economists predict that we were all going on a spending splurge over the next few months. Reportedly online spending increased at a phenomenal rate during the pandemic, but we have all missed what an actual shopping experience brings so we are all set to spend, spend, spend. For those that have managed to save, it is understandable why they may be inclined to blow the lot. With the Bank of England base rate being at an all-time low, savings accounts are delivering appalling rates of interest. A typical savings account now offers just 0.12% whilst a high-interest account that locks your money away is still under 1%, offering around 0.55%-0.95%. Does that mean we should be ignoring savings though?
Savings aren’t just about ploughing funds into a savings account. Given that some have developed a habit of putting some money aside each month, now is the time to consider the alternative places that you can put it. This could be investing in stocks and shares, cryptocurrencies, or more specialist savings accounts. Knowing that you can comfortably commit to a minimum amount over a long-term period gives the best chances of a healthy return. There are even useful calculators that explain how interest is compounded and exactly what returns you can expect by maintaining your habit.
Start a side hustle
Saving money is great but of course, that depends on whether you actually have money to spare. While some would advocate cutting back on spending so that you can save for your future, there is another way! Whether you are working a full-time job, are balancing a part-time job with other commitments, or a full-time mum, there are plenty of side hustles that you could explore that will let you increase your income. Regulars to the money shed will know that we are huge fans of matched betting. This is a way that you can take advantage of the offers that bookies put out there on a regular basis and turn them into cash for you. This can easily see people increasing their monthly income by £400-£1,000 month in month out.
There are a whole host of other ideas that you could explore and they would all lead to an increase in your income. Whether you choose to treat yourself, have a more comfortable life, or develop that savings habit is down to you, but here are a few ideas:
- Start a shop on Etsy
- Have a clear-out and sell items on the likes of eBay and Vinted
- Create a low content book and sell it on Amazon
- Mobile apps that pay you for visiting retailers and taking photographs
Prioritise your spending
There are people who are coming out onto the other side who have had it rough, to say the least. 2.5 million households took advantage of payment holidays on their mortgages while around 450,000 have fallen into rent arrears. While mortgage holidays were a lifeline for many this has led to facing a mortgage term being extended by 6 months to a year whilst those in rent arrears face the realistic prospect of losing their home. While it may be suitable to seek advice from a suitable charity, there are certain things that you can do to start getting back on your feet.
The majority of people in the UK have some level of debt and this usually involves paying back on a monthly basis. Part of recovering from a reduction in income is looking at what absolutely has to be paid and what can wait. Those that have to be paid are referred to as priority debts and these include:
- Secured loans
- Utility bills
- TV licence
- Court fines
These are the type of debts where, if ignored, can have significant consequences. On the other hand, there are non-priority debts. Whilst debt should never be ignored, these are ones where if you fall behind, the consequences are far less serious. They include:
- Credit cards
- Store cards
- Water bill arrears (they can not cut you off)
- Unsecured loans
- Debts to family and friends
The biggest step that you can take if you are struggling is to talk. Most companies tend to have a degree of understanding and will actually agree to give you some breathing space. This is the case even more so since COVID so take the bull by the horns and talk to the companies where you are struggling to meet your repayments.
Prioritising your debts will buy some breathing space and reduce your stress, even if temporarily. Use that time to look at ways to either reduce your outgoings over the long term or to increase your income.