In the midst of a global pandemic, it can feel as if the world has been turned upside down. The modern world has never faced a problem like this and there’s seemingly no end in sight, so there’s never been a better time for being money wise.
Thankfully, the ways to be money wise are largely the same as they ever have been; our advice can help you with your personal finance during this crisis, but it can also be utilised during any bout of economic uncertainty.
Things to keep in mind during these uncertain times:
- Don’t panic
Panic can take many forms at a time like this. From a personal finance perspective, panic might involve indiscriminately selling investments, buying investments, or spending lots of money in a hurry to ‘stock up’ on home goods. Panic can even manifest as simply ignoring finances altogether and hoping it all works out.
Panic, though, rarely works out well as a strategy – whether that strategy is intentional, or unintentional. These are challenging times, but before you make any significant decisions about money, be sure to step back, and make sure you’re not making them in panic mode.
- Take stock of your reserves
Being money wise is all about having a sound personal financial strategy in place and having some funds in reserve. Ideally, this should form an ’emergency fund’ that provides enough cash for a few months of living expenses.
Whether or not you have an emergency fund at the ready, now is the time to figure out just what you have available, and where that money is stored. In the best-case scenario, you won’t need to use it, but with businesses of all types reducing hours, reducing services, or closing altogether it’s vitally important to know exactly what you have available and where those funds are.
- Revisit your budget
There’s never a bad time to check in on your budget and reduce unnecessary costs, but right now is the perfect opportunity.
As it is not known know how long or how deep the crisis around the pandemic will last, by reducing expenses where possible, you can ensure that available funds stretch. You may even be able to eliminate come costs altogether, meaning more money to set aside.
- Be wary of debt, but also be smart about it
In general, it’s best to avoid borrowing, especially in the case of high-interest debt. In many cases, being smart about budgeting and spending can help avoid the need to incur debt, but this is not always the case.
If borrowing is likely to become necessary for you, the best thing that you can do is to consider your options early. Borrowing at the last minute means that you are more likely to end up relying on high-interest credit-card debt or payday loans.
For those with good credit who are concerned that short-term borrowing may be necessary, one possibility is to consider a 0% purchases credit card. These cards can provide a year or two of interest-free spending, and since they typically don’t have an annual fee, you can take one out ‘just in case’ and not be penalised for not using it. Bear in mind though, that this is truly a ‘just in case’ option, and not a good reason to take on debt. After all, 0% interest or not, the money has to be paid back.
You can also review the credit cards you already have and other current borrowing options, so you know what’s available to you. For your current credit cards, check the Annual Percentage Rate (APR) on the card. In most cases, borrowing on a credit card that doesn’t have a 0% promotional period isn’t a good idea. But some cards do have especially low rates that could be considered for very-short-term borrowing. Alternatively, you could explore where you might be able to turn for a personal loan or to take a home equity loan.
Again, this is advanced planning to be prepared, your best option is to make prudent use of your current resources and not take on new debt.
- Use a bad situation to your advantage
When financial markets get panicked, there is often overreaction. That can create an opportunity for investors who are focused on the long term.
Here it should be ensured that any money considered for investments is money that is not needed right now, or in the near future. Markets are going down now and may continue to for some time, but remember that there are no guarantees.
What to invest in will certainly mean different things to different people. For many, investing in a simple, low-cost index fund, a fund that tracks a major stock-market index like the FTSE 100, may be the right idea. For others, looking for especially good share bargains could be savvy.
Furthermore, you may wish to consider taking advantage of declines in the share market and the tax advantages of a stocks and shares ISA at the same time.
It’s always a good idea to save, whether it’s for a holiday or just for a rainy day – and here are some of the ways to save your hard-earned money:
- Switch bank accounts
Some banks offer incentives for you to switch accounts and save with them instead. There are a lot fewer of these than there used to be during the coronavirus pandemic as banks have been focusing on existing customers rather than tempting new ones to join, but it’s always good to keep your eye out.
- Switch phone and broadband provider
You can use websites to compare prices of phone and broadband providers. Make sure you search more than one comparison site as there will be some differences in the companies that they list and the deals that they offer.
- Split your train tickets
Instead of buying one ticket for your journey, you can book separate tickets for parts of the same journey to save some money off your fare. There are even online tools that do all the work for you.