Our personal finances have changed a lot in the last few months so we’ve asked Laura Whateley, our Real Money Correspondent, to help us get to grips with what this really means for our money. In her first column, she talks about recessions on how they can change people’s financial lives
Money is a topic that the majority of us find uncomfortable, stressful, sometimes guilt inducing, often boring. Let’s be honest, it is usually easier, at least in the short term, to switch off from thinking too much about our spending or saving and shy away from discussing money with other people for fear of being judged. But in 2020, as we enter what has already been described as “the recession to end all recessions”, can we afford to continue to bury our heads?
Talking about our financial situation, and learning from others’ honesty, is often the first step to getting on top of and feeling better about it. That’s the belief behind Zopa’s Real Money Stories campaign where customers are opening up about what money means to them, and how this year has changed their priorities.
The impact of Coronavirus on people’s Real Money Stories
Luke, 30, who like millions of others has just been furloughed is concerned, after 12 years of finally getting out of debt and on top of his finances, that he doesn’t know how much money will be coming in over the next few months.
“There’s so much uncertainty about what we’ll get, how much it’ll be and if there’s anything we’ll have to miss out on. So at the minute the future looks bleak but I’m not going to let it dishearten me. We have a plan and if it takes an extra few months, so be it.”
In her Real Money Story, Cat, a theatre director from London, told Zopa that before the pandemic her relationship with money was healthy but the past few weeks have changed that.
“I am quite good at budgeting but my relationship with money now has become much more day by day. I work in an industry that has collapsed, the arts is not operating at the moment. I need to be extremely on top of how much is coming in and is going to have to go out at the end of every month. I don’t know what my financial future is.”
“The recession to end all recessions”
A recession is often defined as a period of two or more consecutive quarters of fall in growth in the goods and services produced in a country (measured in gross domestic product or GDP). The final week of the first quarter of this year, where we entered lockdown, caused the UK economy to contract. We are in the second quarter now, and while official figures are yet to be released, you can safely conclude they will look even worse, which means we are already in recession.
Since the start of the pandemic UK GDP has fallen “dramatically”, by 20.4 per cent in April, the largest fall since records began in 1997, according to the Office of National Statistics, which accompanied its June report with a graph showing UK GDP falling off a cliff. The monthly decline in GDP in April 2020 is three times greater than the fall during the 2008 to 2009 global downturn.
A recession usually means fewer jobs, lower wages and higher unemployment, which filters into the way we can spend and save in myriad ways. The consequences of this new period of economic uncertainty, for our jobs, earnings, housing, savings, pensions, credit scores and debts, are yet to be felt. At the moment we’re being kept on a sort of financial life support by the government, but we are starting to have to adapt to a “new normal”.
The Real Life Money Column
Over the coming weeks I’ll be writing a series of articles trying to help you think about how to make financial decisions in this new world of money. I’ll walk you through the help available, and what lessons we have learned so far.
My first article in the series will be looking at what is happening with the coronavirus job retention scheme now. What is flexible furlough, how does it work, and what are your rights while being furloughed?
I encourage you to share, using the hashtag #RealMoneyStories what you are most worried about, and let me know what would be helpful to read about in the coming months.
We have been avoiding the subject of money for far too long. Maybe the small sliver of silver lining from the financial fallout of this pandemic is being forced to address how we can finally take control, and talk honestly about our personal finances.
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.