With many of us experiencing income shocks right now, our money worries have, understandably, escalated.
Nearly a third of people in the UK have already seen their household incomes hit by the coronavirus pandemic, consulting company Kantar recently found, while a separate survey from Hargreaves Lansdown revealed a quarter (26%) of people in full-time work are worried about losing their job.
It also found that a fifth of people aged 35 to 54 are worried about not being able to pay their debts or bills. And around one in 10 (11%) are worried about spending all their savings, rising to one in five (19%) 18 to 34-year-olds.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, says: “There’s so much we can’t control at the moment, but we can protect ourselves from financial disaster with the right preparations and planning. There are some simple steps we can all take to put ourselves in the best possible position if our worst fears become a reality.”
Here are some common financial fears for households highlighted by Coles – and her suggestions for tackling them…
1. Losing your job
It makes sense to plan for what happens if you lose your income. Try to build up as much of a savings safety net as possible while you’re still working, so you have something to fall back on.
An online benefits calculator will help you work out what you’d be entitled to, so you know what you’re preparing for. And some firms may still be hiring, so consider keeping an eye open for other jobs, or at least updating your CV so you’re prepared.
2. Paying the bills
Many people have seen their income fall in recent weeks.
The faster you take action, the better. This should start with a budget, so you can see how much of your spending needs cutting. Cut out luxuries, shop around for cheaper essentials, and see where you stand.
If that still leaves you unable to cover bills, talk to everyone you owe money to. Firms such as mortgage and credit card companies are offering flexibility, so they should work with you to find a solution.
But that doesn’t mean you should take up all the payment holidays on offer, because you will be putting off debts you have to repay later. Consider just how much you need to cut and the best way to do it.
3. Tumbling investments
Stock market falls mean investments have been declining in value – including pension funds.
If you’re investing for the longer term and have a diverse portfolio, the best approach might be to sit tight and focus on your end goal.
However, if you’re drawing from your pension, you need to be aware of where you stand. You may not be able to draw the same sums from your pension without having a disproportionate impact on the cash you have available later in your retirement. So, it’s worth understanding whether you need to cut your costs in order to draw less from your pension at the moment.
4. Spending all your savings
The situation right now is exactly what emergency savings pots are designed for. It’s still vital to cut your costs, so you work through savings as slowly as possible, but you shouldn’t feel guilty if you need to use some of them.
Once the crisis has passed and your income has returned, it will be vital to build up savings as quickly as possible, but for now, try not to feel bad. Many providers are allowing people to access fixed savings pots early without penalties – so check what yours says.
5. Not being able to buy what you need
The good news is that after the initial shock, supermarket stocks have been getting back to normal.
If you can’t get to the shops, your neighbours may be able to help. Many communities have also set up local hubs, with people living nearby offering to collect shopping and prescriptions. You may receive a leaflet through the door, or you could check with social media groups.
6. Working from home
Many people working from home will have faced various teething problems, which may have been overcome by upgrading to faster broadband or finding desk space.
For some, the biggest challenge is that children are also home, needing hands-on care. It may be worth seeing if you can change your working hours to manage childcare more easily.