I am one of the millions of self-employed people in the UK, and it’s fair to say this is an intensely worrying period for those of us who don’t have a regular income. And it feels just as uncertain for my friends with permanent jobs, which may or may not still exist in a few months’ time.
Whatever your status, it calls for some serious personal finance admin. So here are my tips on adapting your finances for the foreseeable future.
1. Work out your outgoings
I try to keep an eye on my spending in normal, more positive times, but if I’m honest, it can wander (to Netflix, for example). The thin silver lining of the moment is that it is much easier to keep tabs on spending because not much of it is going on. So this is definitely the time to do an audit of what you can cut back on and what you can’t.
Start by listing unavoidable essential outgoings (rent or mortgage, bills, basic food shop), and differentiating it from the spending you could adjust if necessary.
2. Look at debts first
Don’t forget to list debt repayments.
Ordinarily, if you have any savings, I’d recommend using them to repay expensive debts. The interest you are earning on savings will be nowhere near as high as the interest you are paying on loans. If you are feeling fairly confident that you can get through the next few months on earnings then this advice still applies: consider paying down credit card or loan debts at this time, so you’re making the most of every penny you have.
But if you are really struggling with cash flow, take advantage of the banks’ new promises to pause debt repayments. The Financial Conduct Authority is consulting on proposals which will mean all banks should offer 0 per cent overdrafts of up to £500 for three months, from April 9. They should also offer payment holidays on loans and credit cards, without affecting your credit score.
They can, however, still charge a “reasonable” interest rate during this period. This means interest will add up that you’ll still owe in the future, so only do this if you’re worried about how to make ends meet right now.
3. Review your bills
I’ve just opened a new joint current account with my husband, which, using the current account switching service, is less hassle than you might imagine. It will automatically move all our direct debits for household bills to a new bank, which we chose because it has a better app. This allows us to monitor more easily how much our bills cost each month, whether they vary and gives us a day or two’s warning of when they are due.
I’ve also been going over our bills, the kind of thing I normally don’t get round to, to see if I can shave some money off our broadband, insurance, my mobile phone etc.
4. Look at subscriptions
The same applies to subscriptions. If there’s stuff you signed up to when it was free or being offered for a discounted trial period, and then forgot about, now is the time to check in and decide whether you really need or want it.
Having said that, there are some subscriptions I am actively signing up to now, specifically because I don’t want them to die out once this pandemic is over. I’m paying for yoga classes via zoom, for example, even though I could probably find free classes on YouTube, because my teacher is brilliant and I don’t want her to be out of work. I have also subscribed to some magazines, and a brunch box delivery from a local cafe that I love, with bread and milk and – joy – eggs.
Most important to me right now is to be more clear-eyed about how I am spending money and where I actually want it to go.
5. Try not to completely ignore the long term
If you have a pension through work, try not to stop paying into it unless you are absolutely desperate for the money and can’t pay the bills or are in problematic debt. If you have an employer they’ll continue to top up your pension contributions, even if you are furloughed. If you are self-employed you still get a generous tax break for saving into a pension.
Try to shore up cash savings first, though. The traditional advice is three to six months of essential outgoings to cover you in unexpected circumstances, though no one guessed it would be these circumstances. For now I’m saving as hard as I can, fantasy online shopping only.
Laura Whateley is a freelance writer and author of Sunday Times bestselling book Money: a user’s guide. She has written for a wide variety of publications including The Times, The Guardian, Grazia, Refinery 29, Elle and Stylist Magazine. All views are her own.