Not only is the Covid-19 crisis a health-based emergency, it’s also a massive financial emergency. Most of us will have just experienced an unexpected drop in our wages and we will all have to, at some point, adjust our spending habits to bring them in line with lower income levels. The more you can do now to plan your finances for the future the better. Now is definitely not the time to bury your head in the sand and ignore your finances. So to assist you, here are some financial tips to help you get through this strange time:
Make an emergency budget
If you’re worried about cashflow, have a look at what income you have coming in, and everything you’re spending. Make a list of all your income (which of course may have been reduced recently) and a list of all your outgoings. This will illustrate exactly what your income is, and what you are spending your money on. You may need to cut back on certain things to get through the next few weeks or months. Make sure you know exactly where your money is going, and if you can cut back on any unnecessary spending then do it!
Use your savings
Do you have any savings? You could access your money if it’s in a fixed term or notice savings account – some banks and building societies are saying they’ll give access to savings accounts, with no penalties. Check with your bank or building society and see if they’re able to help.
Talk to your creditors if you think you’re going to miss payments
If you still think you’re going to struggle to pay essential bills once you’ve done your budget, make sure you talk to the people you owe money to before it becomes a problem. Don’t ignore your creditors or bury your head in the sand. It’s always better to let creditors know about your cashflow problems, they may be able to help.
Check your insurance policies
You may have insurance policies that 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 insurances are often offered with life insurance policies or mortgages, so it’s easy to forget that you may be covered. There is usually a minimum time period which could be several months before these policies pay out so you should talk to your insurer to find out more, particularly if you are worried about redundancy.
Problems paying your rent or mortgage
Something that is going to be hard to cover if you’ve got a sudden drop in income and don’t have access to savings is your mortgage or rent payments:
If you have a mortgage – mortgage lenders have announced support if you have to take time off work because of Coronavirus, including a repayment holiday of up to three months. This includes buy-to-let mortgages. Any decisions to offer this support will be made on a case-by-case basis. So, the most important thing is to talk to your lender as soon as possible to discuss your options if you think you could miss any mortgage payments.
If you’re renting – the government has announced emergency legislation to suspend new evictions from social or private rented accommodation during the coronavirus crisis. Your landlord will not be able to apply to start possession proceedings until you have missed rental payments for at least three months.
If you’re living in a buy-to-let property, your landlord will be able to apply for the three-month mortgage payment holiday if you are experiencing financial difficulty so they shouldn’t put any pressure on you to meet rent payments during this time.
If you’re unable to meet rent payments after three months, your landlord should take every step to ensure that you continue to stay in your home. They will be expected to take into account your financial circumstances and try and work an affordable repayment plan with you before they start any proceedings.
If you’re a social housing tenant, talk to your tenancy support officer or housing officer who will be able to support you and work out an affordable repayment plan.