Let’s start with the most important point. Staying healthy and helping to flatten the Covid-19 curve is the reason behind the current lockdown, and this is where our focus needs to be. We’re doing this for ourselves, our families, our cocooned loved ones, and the wider population. This is the most important focus for all of us.
At the same time though the world doesn’t stop turning, albeit on a slightly different axis. Loss of jobs and income has unfortunately been an outcome of the current crisis for many people, who now have financial pressure heaped on them too. We would like to set out a few thoughts on how you can emerge from the current crisis in the best financial shape possible whether or not your income has been affected.
You’re Not on Your Own if Your Income Has Been Affected
Some people have unfortunately seen their job disappear for good, others are facing a period of temporary lay-off. Many more people have seen a reduction in their household income. Each of these events needs immediate attention. It’s also important to remember that this situation has not been caused by you or your employer, and so there are supports in place to help you through this period. Start by establishing what is available to you in terms of income support and start claiming it immediately. Also establish what other social protection benefits may be available to, such as rent supplement etc.
Build your Family Budget
There are a few steps to this. First of all, examine every euro of your spending currently, the purpose of which is to understand where your money is going and where there is unnecessary spending. Then set this against your income levels – this will reveal whether you should have surplus money each month, or whether a drop in income means you don’t have enough to cover all of the bills.
If your income exceeds your expenditure, you should be saving money and adding to your pension fund. While the lockdown means there is less opportunity for frivolous spending, put your surplus cash to good use.
However, if your new income level doesn’t cover the bills and you don’t have a financial nest egg to call upon, now is the time to get tough on the big expenditure items. Conserve whatever cash you can. Talk to your mortgage lender about break-in mortgage payments to help you through the next few months. Negotiate with the likes of energy suppliers and home entertainment providers. Do you need two cars on the road? Look at all other discretionary costs that may not be absolutely necessary over the coming months.
For everyone, now is a good time to review your impulse spending – takeaways, treats, etc. Can you change your habits here that will help you financially in the future when all of this is over?
The Importance of a Nest Egg
Many of you have listened to our advice over the years to build up a cash emergency fund. If your income has reduced and you have a nest egg, now is the time to put it to good use – this is that emergency that you prepared for. Where possible, tap into surplus cash that you have in the bank as opposed to cashing in investments. The reason for this is that now is probably not the best time to cash in investments, because of the recent fall in markets caused by Covid-19. Use actual cash first.
If Possible, Keep Saving
There are many people whose income has been unaffected by the current crisis. For them, there is the bonus that they are probably spending less money too while in lockdown. This is a great opportunity to bolster your emergency fund and to keep saving money into any regular investments and your pension plan. As markets have fallen, you can view the current state as a temporary sale as you are buying assets at depressed prices. So rather than just hoard cash, keep topping up your investments and pension.
We also recognise that your specific circumstances are different to everyone else’s in these changed times. We are experienced in helping people to manage their money better and to make the most of their financial resource. As your Financial Broker, we are always willing and happy to have a chat with you about your situation – whether that’s in relation to specific action you need to take or whether you just want a wise second opinion in relation to your personal finances. Feel free to pick up the phone to us.
Let’s all stay healthy.