Covid-19: Your key financial concerns addressed
TRICIA PHILLIPS advises you to stay calm, make plans and use the help that’s available
THE health crisis has had another awful side-effect – it’s left millions of people lying awake each night worrying about what’s going to happen to them and their families if they fall ill or lose their job.
Over the coming months it’s going to be really important to look after your mental health – especially when you’re self-isolating. In some cases this has to mean letting go of worries about things we can’t control.
However, it can also help hugely if you have plans in place that will kick in if your biggest fears become a reality – so it’s worth calmly considering your concerns now.
We’ve teamed up with Sarah Coles, personal finance analyst at investment firm Hargreaves Lansdown, to answer some of your questions.
Don’t try to do this all at once. If you start to find it overwhelming, take a break and do something to help you switch off. Right now it’s important just to do whatever you can manage.
WHAT WILL I DO IF I LOSE MY JOB DUE TO CORONAVIRUS?
THE good news is that this is looking less worrying than it did last week. The Government has announced that instead of laying people off, companies can keep them on the books and the state will pay 80% of their wages (up to £2,500 a month).
This means that even if the business closes its doors while things are tough, you can still be paid.
If you’re still at work, and worried about the future, you can take steps to protect yourself. It will be much easier if you have an emergency savings safety net in place, so if you don’t have much set aside, it’s worth cutting your spending to the bone and saving the difference.
I HAVE ALREADY LOST MY JOB SO HOW WILL I PAY THE BILLS?
DON’T assume nobody is hiring, because many companies are crying out for all sorts of workers – including delivery drivers, warehouse workers and supermarket staff.
Many of them are advertising these roles on LinkedIn and on their websites, and while LinkedIn is not the most exciting social media site out there, it’s well worth signing up to so you can see what’s available.
Seek help sooner rather than later. If you’re unsure how to apply for benefits there’s an awful lot of information from
Citizens Advice (citizensadvice.org.uk), Turn2Us (turn2us.org.uk or 0808 202 2000) and Stepchange (stepchange.org or 0800 138 1111).
They will be among the first to know when councils are ready to distribute cash from their hardship funds, too.
You should also work hard to cut your outgoings to the absolute minimum today.
That’s not just ditching luxuries, but also talking to any company providing the essentials you’ll struggle to pay for.
Mortgage lenders have been instructed to give mortgage holidays for the next three months, utility companies have pledged to be flexible on bills, and the Government is passing laws to stop tenants from being evicted in the short term.
Get in touch with anyone you pay bills to and ask them to be flexible. It’s in their best interests to find a solution.
It’s worth knowing that there are likely to be much longer waits than normal on phone lines, so you will need to be patient. Hanging on hold can be stressful, but at the other end of the line there will be someone working hard to do their best in a tough situation.
WHAT IF I DIED AND LEFT MY FAMILY VULNERABLE
THIS is an incredibly upsetting thing to think about, but if it’s playing on your mind, it’s worth knowing that your situation may actually be much better than you probably expect. If you have a mortgage, you should already have life insurance in place to pay that off if anything was to happen to you. Most people also have protection through work, so it can ease some of your worries to check the paperwork you got when you started your job, or ask HR about life cover and death benefits to see what you have in place.
One of the best ways to protect your family is to have an up-to-date will, which will ensure you protect those who need it most after your death.
WHAT HAS HAPPENED TO MY PENSION INVESTMENTS?
IN recent years we’ve automatically been put into a pension when we start work, and that will partly be invested in the stock market. Investments have taken a beating recently and the value of your pension will have dropped.
However, we have been through major stock market crashes before, and have always come out the other side. As long as you’re investing for the long term there will usually be time for your investments to recover, and by continuing to pay into your pension at this stage your money goes a bit further as stocks are lower in price.
I’M TAKING MONEY OUT OF MY PENSION AT THE MOMENT. AM I DESTROYING IT?
INSTEAD of getting an annuity to turn pension pots into a monthly income for life, it’s now far more common for people to draw money flexibly, straight from their pension fund. If you are doing this, you need to think carefully about the amount you are withdrawing.
Some people aim to draw just the income that is generated from their investment – at around 4%.
If this is your approach, check what income you’re actually getting. A number of companies will be cutting their dividends during tougher times, and you may need to take less. Other people will be nibbling into their investment each month.
If you do this when markets are down, you’re taking a larger proportion of a smaller fund and, even when the markets recover, you will have eaten away more of the pot than you had intended.
In either case, you need to do everything you can to try to cut the amount of cash you draw. If you have other savings they will be incredibly valuable at this stage.
Otherwise, it’s worth looking at any way to cut your costs to the bone – ditching luxuries, shopping around for essentials and considering more fundamental lifestyle changes at least for the short term.