HOW DO YOU SURVIVE THIS CRISIS WITH JUST SPARE A WEEK?

Family budgets have been slashed to the barest minimum as the economy’s ground to a halt. So...

MILLIONS of households are wondering how they will cope with a big drop in income because of measures prompted by the Covid-19 crisis.

Exclusive figures for Money Mail today reveal that the average family will be left with little more than £1 a week to spare if they don’t adjust their spending habits after a 20 pc pay cut.

The analysis, by insurer Royal London, shows many households could soon be relying on overdrafts, credit cards and loans unless they take action. The average household disposable income in the UK is £733.75 a week — or £38,155 a year — according to the latest figures from the Office for National Statistics.

The Government has pledged to cover 80 pc of the wages of workers furloughed in the coronavirus pandemic. But a 20 pc pay cut means that the average household income would be reduced to £587 a week.

That is just £1.40 more than the average household spending before the crisis of £585.60 a week.

Worse still, many families face an even steeper fall in income because they are not covered by government support packages, or earn more than the maximum of £2,500 a month that workers can claim under the jobs retention scheme.

Becky O’Connor, personal finance specialist at Royal London, says: ‘There may be no avoiding debt for some people in coming months as households find it hard to live on 80 pc of their earnings.

‘There will be a natural decline in spending in some areas, such as holidays, petrol and eating out.

‘However there will also be some spending increases to take account of in the coming weeks, such as home energy and possibly food bills, particularly for families whose children were receiving free school meals.

‘While there is some inevitability to personal financial struggles for millions right now, there are ways to prevent this emergency from plunging households into debt that could take years to recover from.’

Money Mail has spoken to a cross-section of personal finance experts from financial firms such as Royal London, AJ Bell, Defaqto, Hargreaves Lansdown, Moneyhub and money.co.uk to provide you with tips on how to cope with a pay cut. Here is our mustread guide on what you should (and shouldn’t) sacrifice when money is tight . . . 1 BEfORE you do anything, you need to know where you stand. So draw up a budget of everything you’ll have coming in and everything that you’re spending.

2

LUxURIES should be the first to go. Normally you can only end subscriptions after a certain period — but these are not normal times, so expenses such as gym memberships, cinema deals and TV sports packages can be paused immediately.

3

MAKE sure you are on the lowest interest rate possible for credit cards and personal loans. Many of those with an outstanding balance on their credit card could save hundreds by transferring their debt to another deal with a lower interest rate or no rate at all.

4

If yOU haven’t shopped around recently for a new gas and electricity, broadband or mobile phone contract, you could save by using a comparison site or automatic switching service to get the best deals.

5

HOWEVER, if you need good broadband for work at home, don’t switch if the compromise on speed would cause problems.

6

CONSIDER either trading down to a budget supermarket or switching to own brands and essential ranges.

7

STOCK up the cupboards and try not spending anything more for a week — this puts you on the front foot financially and helps you identify the spending you don’t really miss. If you can keep it up for a month, there is the opportunity for some aspects of this frugal lifestyle to turn into better habits, too.

8

IF YOU have a travel season ticket and are having to work from home, you should be able to get the unused part of it refunded by the firm you bought it from.

9

RENEWING your home insurance? If you are not going out, you may not need personal possession cover outside the home, which comes as standard with some policies. But check whether an admin fee would wipe out any saving.

10

USE websites such as Topcash back and Quidco to earn cashback for buying online. The sites pay out on everything from renewing car insurance to opening an Isa.

11

ASK lenders to pause your credit card and personal loan repayments if they could become unmanageable.

12

If YOU have paid in advance for nursery fees or exercise classes, for example, you may not be entitled to a refund — but you could ask if you can have the money as credit for a later date.

13

If YOUR pay has fallen significantly, it may make sense

to take a mortgage holiday. However, it’s only worth using if you really need to. A three-month break from a £150,000, 25-year mortgage at 3pc would add £11 to your monthly repayments later.

14

IF YOU are struggling to pay rent because of the coronavirus situation, speak to your landlord about a payment holiday. If they have a buy-to-let mortgage they can arrange a payment holiday with their lender. (see page 43 for more details)

15

THE lowest Bank of England base rate in history at 0.1pc means rates on mortgages and credit are extremely low. Homeowners coming to the end of their fixed-rate mortgages should seize a new deal rather than moving straight on to their lender’s standard variable rate. Banks may also agree a lower rate for those struggling who are midway through their mortgage period.

16

A DROP in income may mean you are entitled to benefits including Universal Credit and Pension Credit. If your income has fallen below £60,000, you can claim a proportion of child benefit. Visit entitledto.co.uk.

17

DON’T be in a hurry to scale back pensions. If you are paying into a workplace pension, then your employer and the Government are paying in, too — so you shouldn’t be in too much of a rush to give this up.

18

TRY to keep some money aside for savings. The coronavirus crisis has made life less secure for millions of people and, if things get worse, you will be grateful for every penny you have managed to put aside. If you haven’t moved savings accounts in the past 12 months, it’s likely that you’re getting a paltry rate — so move it and bolster your income that way.

19

LOOK after the money that you do have. Scammers are exploiting the virus to con people out of their savings. Be vigilant and question any uninvited approaches that seem too good to be true.

20

LIFE insurance and income protection insurance premiums should be maintained, as these are designed to pay out if the worst should happen.

21

BEING furloughed does not mean you can’t continue to work. But before you take on new work, check that your current employer is happy, as your contract still applies in furlough.

22

IF YOU are working from home, ask for £6 a week in expenses from your employer. Failing that, HMRC will give you tax relief at £1.20 a week for basic-rate and £2.40 for higher-rate taxpayers.

23

VEHICLES that are not on the road don’t need to be insured. If you no longer need to use your car, you can apply for a Statutory off Road Notification (SoRN) to officially declare it ‘off road’ indefinitely (assuming you have somewhere to park it on private property). once it is certified, you no longer need to insure it or pay road tax.

24

IT IS also a good idea to review insurance products to make sure you are not paying twice for the same cover. For example, you may be paying for a motor breakdown service when your packaged bank account also includes breakdown cover.

25

YOU can keep home entertainment cheap by taking advantage of the free services currently on offer, rather than renting or subscribing to services. Shakespeare’s Globe is offering free plays online, while the Royal opera House is streaming performances every Friday on YouTube.