3 money moves to stay ahead of the game

BY TRICIA PHILLIPS THE need for a financial safety net has been proved beyond doubt by the Covid-19 crisis. And it’s especially important for younger people – the under-40s who have been hardest hit by furlough and job losses.

Financial wellbeing is vital. Money problems can damage our mental health and tear relationships apart if we’re struggling to live day to day.

Survival should be the first financial priority – aiming to be debt free with enough cash set aside so we can weather storms that come our way.

We’ve teamed up with financial education campaigner Rob Gardner for his tips to help younger people find financial freedom.

Rob, a children’s author and investment director at St James’ Place wealth management, said: “It may sound like a cliche to have a ‘rainy day fund’ but unfortunately many people don’t have one, and are caught short.

“The truth is, the bumps in the road are the road. Unexpected things always happen and you can only plan so much. The best way to think about approaching finances is like playing a video game – there are different levels and you should aim to complete each level before moving to the next.

“Too often people are focused on bigger goals – saving for a holiday, a house or retirement – when they haven’t set themselves up with the basics, and that is to be financially resilient.”

LEVEL 1: You have lots of debt and no emergency fund

The first thing to do, before setting up an emergency cash fund, is to make sure you’re clear of any debt. There’s little point saving for anything else when debts are mounting and you’re paying eye-watering interest that could be better spent elsewhere.

Credit cards and store cards should be tackled first, as these are a big drain on your cash.

If you are still earning and are able to repay more than the bare minimum each month – do it.

Check the interest rate you’re paying. See if you can lower this by repaying your card debt using a cheaper unsecured loan, or move it to a 0 per cent balance transfer card.

You may feel wary of taking out a loan when you’re already in debt but they can have much lower rates and offer a structured way to clear the debt. For example, a £1000 credit card debt at 22 per cent interest, paid off and replaced with a loan at seven per cent, will save you £150 a year.

If you’re in a more extreme situation with no income and debts mounting, you’ll need more drastic action to stop the situation spiralling out of control.

It can be easy to bury your head in the sand and ignore letters and calls from firms chasing debt.

If you haven’t done so already, explain your situation to them – the majority of lenders are being more flexible with customers during the coronavirus crisis.

The Financial Conduct Authority has asked banks to make current account overdrafts interest-free up to £500, so check this is in place with your bank. Also, “payment holidays” on credit cards, many loans, store cards, and finance options for cars, can reduce the pressure while you get back on your feet.

Most firms will give you breathing space of 30 days if you explain you’re in trouble and seeking advice from a debt charity.

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LEVEL 2: No debt and no emergency cash fund