You can still build a bright financial future!
This has been a challenging time, but money expert Alvin Hall says that everyone – even if you think you’re ‘bad with money’ – can feel more secure
The economic impact of the pandemic means many of us are living on a smaller income, and we all worry about the future. We asked Alvin Hall, money expert and author of Show Me The Money: Big Questions About Finance for some advice. Here, he shares practical tips to help us feel more in control of our money now – and for good. “This is a very difficult time, and it’s easy to get caught in the trap of looking back and feeling angry and frustrated,” says Alvin. “That’s normal, as losing a job or fearing you will can feel like grief, but try not to get too caught up in that emotional trap. When you’re ready, start to be proactive.”
KNOW THE NUMBERS
“I lived through the 2008 crash. Business dried up, so I didn’t have any income for months. I learned to master the numbers, so I now know exactly the minimum I can get by on. I know how much my mortgage payment adds up to, the service charge on my apartment, and my five bills. Knowing exactly how much is coming out of my account puts you in control. Do the same.”
ALTER HOW YOU SHOP
“You may not be able to afford the lifestyle you had before, so think about what you spent money on that didn’t give you happiness. What did you do, prelockdown, that you don’t miss? I would often be running late and get a taxi. I haven’t taken one in three months. Yesterday I walked to my dental appointment. I knew it was a 45-minute walk, so I got up in time. I also made a rule to only buy fruit on sale. I’ve cut my shopping bills, and tried things I wouldn’t normally. Sometimes you discover new luxuries when you open yourself up to new habits.”
BELIEVE IN YOURSELF!
“Forgive yourself for the past. Everybody I give advice to says, ‘I’m not good with money. I never have been.’ People view their past mistakes with money as an indicator of the future, but you can change things. The first lesson is that difficult situations will sadly arise again. At another point, a traumatic event that you have no control over will happen, so you need to have an emergency fund, it needs to be in the bank, and you need to pretend that money doesn’t exist. Can you give up a habit that allows you to put £10 in the bank every week and pretend that money’s not there? I was raised extremely poor, but was taught to save. My grandmother would save £5 here, or £10 there, and it added up. She would only touch that money in an emergency, and that wasn’t someone asking for help, because that money was strictly for emergencies in our family.”
MAKE YOUR CASH LAST
“During difficult times, you have to make your money last longer, as cash in the bank saves you, not the things you spend money on. If you are struggling and don’t have anyone to borrow from, ask for a mortgage or rent holiday. If you have credit cards, look into delaying the payments for three months and freeze the interest payments for that time. You may need to tap into your overdraft, so ask if the fees can be waived
(if they haven’t yet), and find out what government programmes are available to you.”
STAY CALM, GET HELP
“Sometimes it’s very frustrating trying to sort financial issues, so if that’s the case, just do one thing a day. You might be trying to get a credit card payment delayed and it takes hours for someone to pick up the phone. Don’t try to do anything else – you’ll still be moving forward. Also remember – the nicer you are, the more people will want to help you. Keep interactions pleasant so people are on your side.”
IF FAMILY HELP, BE CLEAR WITH THEM
“If you’re lucky enough to have friends or family who can lend you money, explain you are living on the minimum, and tell them exactly how you’ll use their money. Think what you can cut back on, without drastically reducing your happiness. Anything that isn’t a big part of happiness needs to go – perhaps that Friday takeaway or ASOS shop. People will be happy to help, knowing you aren’t wasting their money.”
SAVE WHAT YOU CAN
“We used to say people should aim for three months of salary saved, but we’ve been in lockdown for three months, and we anticipate problems in
the economy for a long time, so having six months’ worth of money in the bank makes sense. As soon as you can put anything towards that, great. It’s why knowing how little you need to live on is important. Most people fund their lifestyle, but they need to fund the minimum to get by in times of crisis.”
START A PENSION
“Typically, we say you should put ten per cent of your salary to a pension, but there’s no set formula. If you’re starting, or you’re recovering from an economic situation, maybe five per cent is what you can afford. When things get better, instead of buying yourself a present, up what you put in your pension.”
PUT YOUR MONEY IN THREE ‘BASKETS’
“Basket one is what you need to live day to day. Basket two is things you know you’ll have to pay for in the near future – so buying school uniforms for your kids or attending a family wedding. Look at any money you know you’ll have to spend in the next two to three years. Basket three is your long-term savings, your pension, and your emergency fund. You can also ask a financial advisor about investing in an Index Fund, which tracks the stock market as a whole, rather than one company within in it. The value can fluctuate, but as you know the money will be there for seven, ten, or even 20 years, it can ride up and down with the market. If that feels too risky, just use a normal savings account.”
PLAN, BUT BE FLEXIBLE
“You need a plan, but it should be dynamic, as things change. You may have to suspend saving when times are tough, but when things get better, start again. I’m doing this myself now as the flat above mine has had a leak, so my whole flat needs repainting. It’ll cost thousands [Alvin lives in the US, so not covered by insurance]. I have some money in basket two, but it’s not enough, so I have to cut from basket one to put more money towards basket two. I’ve got some new work, but I won’t spend my earnings – I’ll live on the minimum, and it will all go in my second basket. Sometimes you just have to do that.”