The situation is not good anywhere. The Covid-19 pandemic is not showing any sign of disappearance yet. Hence, life is also not getting back to the normal mode. According to the BBC, almost 2.6 million people filed for unemployment benefits in March, April, and June in the UK. Pay cuts are rampant, contracts are not being renewed, and a pay rise is stalled for this year. So, what will you do?
Well, you have only one option. You have to manage money like a pro. You have to generate free cash to survive the next few months with a reduced income.
Financial experts have suggested the following tips to combat the income shortfall and survive the economic turmoil triggered by the pandemic.
1. Prioritize your expenses based on your needs and wants
Cut down your expenses wherever you can. Look at your bank statements, credit card statements, and Apple Pay expenses. Sometimes, the small recurring expenses eat up a good amount of money. But, we don’t realize it. Cancel your gym memberships and online games. As far as food is concerned, eat healthy and cheap meals at home. There is no need to cook expensive meals just because you are dining out. Remember, every penny counts. Don’t waste food as that is a waste of money. Prepare the menu based on what you have in your refrigerator.
Spend money only on your essential needs. Forget about what you want this year.
2. Build your emergency fund to survive the dry months
You need liquid cash to survive in the next few months.
How much liquid cash do you need? To be honest, you need 3 to 6 months’ worth of living expenses, which include groceries, medical expenses, utility bills, childcare, etc. Do you have this amount of liquid cash in your hand? If not, then watch out for ways to build an emergency fund that would last at least six months. Look at all the receipts and bills. Check how much money you are spending every month. Are you spending more than what you ought to spend? Make adjustments to your expenses accordingly to generate free cash for your emergency fund.
3. Stay away from fraudsters during this time
Online scams are rampant, especially after the pandemic. So beware of spoofed emails. Don’t click on any link embedded in a website if you have the slightest doubt. Don’t transfer funds to any investment company without verifying all the information.
4. Make a plan to manage your debts and insurance
Call your creditors, banks, utility bill companies, mortgage lenders, and ask if a payment freeze option is available. There is no place for procrastination. Negotiate with your creditors for a lower repayment plan or request them for a payment freeze. These are the 2 effective debt repayment strategies available to you.
Inform your creditors that you are in financial hardship due to Covid-19 and can’t make payments right away. Most creditors will offer you repayment plans based on your debt and payment history. This allows you to save money through forbearance and deferred repayment plans.
Insurance premiums are fixed payments. You can’t defer them. So, the best option is to look for inexpensive auto, health, and home insurance plans. If you are staying at home, then you don’t need expensive auto insurance coverage.
5. Stay away from payday loans as much as you can
Even if you are facing financial hardship and you need money desperately, you should avoid borrowing a payday loan during this uncertain time. The loan term is usually between 2 months and 12 months in the UK. So, you will get the money fast. However, the biggest problem with payday loans is their high-interest rates. The interest rates are simply unaffordable. As such, it is best to avoid taking on a fresh financial burden on your shoulder.
6. Ask for a refund for the unused services
You can ask for a refund for the unused products and services during the lockdown. You can get a cash refund from the gym club or restaurants for the subscriptions you have paid. All you need to do is claim it. It is your right.
What if the restaurants and gym owners refuse to give you a refund? Well, in that case, you can then file a complaint with the Competition and Markets Authority.
Where can you get help?
- StepChange Debt Charity – Call 0800 138 1111 to get free debt advice in the UK.
- National Debtline – Call at 0808 808 4000 for debt information.
- Business Debtline – Call at 0800 197 6026 when you need debt advice for any small business.
- AdviceUK – This organization offers debt advice for minority communities and individuals with disabilities.
- Citizens Advice – You can get essential financial details on debt and other financial subjects from here.
- Money Advice Service – Call 1800 138 7777 to get in touch with a money expert and get financial advice.
- Financial Ombudsman Service – Call 0300 123 9123 for resolving any loan-related disputes.
Source – FCA
You can contact these organizations if you are lagging behind your bill payments. These organizations will help you manage your household bills and other loans. Prioritize your debts so that you can select the ones that should be paid off first.
If you’re still looking for a job or an extra income, then it’s the perfect time to sell your old smartphone, smartwatch, computer, gadgets, clothes, accessories, and other generic items through resale websites like eBay, Facebook Marketplace, thredUP, etc.
I hope you got your cue from here. So, explore all the rooms of your home and find out the things that you don’t need. Make a list of those things and sell them through resale websites and apps within a few clicks. This is an excellent way of making money during the pandemic.