Topic: Personal finance September 28, 2020
Author: Neil Cubley

How to manage your money during Covid-19

Bank of Ireland Personal Finance How to manage your money

6 MIN READ

Staying on top of your finances isn’t easy at the best of times. It’s especially challenging during a global pandemic.

But whether you’re struggling, just about managing or even doing okay, here are some tips to help you manage your money.

What to do if you’re struggling to manage your money during Covid-19

When money is tight, you need to know exactly where every cent goes each month.

To do that you need to create a budget.

1. Create a budget and stick to it

Gather up your most recent bank statements, bills and receipts then use our budgeting sheet to jot down your income and your expenses for a month.

The sheet will automatically add everything up to give you a snapshot of your finances.

If you’re regularly spending more money than you have coming in, you need to see where you can cut back.

There are lots of reasons that prevent people from making a budget even (or especially) when they are under financial stress but taking action will help you to feel more in control of your situation.

2. Make sure to check your spending regularly

Making a budget is a great start but you need to keep checking how much you’re spending at least once a week during tough financial times so you can react quickly if things change.

Look for small savings wherever you can.

We can all have money ‘blind spots’.

Things we keep overspending on even when we know we should really stop.

Start challenging these blind spots to stick within your budget.

Even small savings add up over time.

3. Make a list of all your debts and loans

As you make your budget, write down what you owe on any outstanding debts and loans.

If you can’t avoid missing a payment, contact the lender as early as possible and try to work out a realistic repayment plan.

“Taking action will help you to feel more in control of your situation”

Your credit rating will be affected if you miss a payment and this may make it harder to get credit in the future.

4. Prioritise your bills to protect your wellbeing

Remember to look after your physical and mental health and wellbeing .

Cut back on your spending where you can but don’t cut out essentials such as medical expenses, heat and light.

Make it a priority to keep making payments to your gas and electricity providers to avoid getting disconnected. You might want to check with your energy provider and find out whether you qualify as a vulnerable customer*.

Your rent or mortgage payments are also high priorities.

If it looks like you might not be able to  pay your rent, mortgage, get in touch with your landlord or lender, in advance, to discuss your options.

5. Be aware that Pandemic Unemployment Payments are reducing

If you’re getting the Pandemic Unemployment Payment* (PUP) which is available for employees and the self-employed out of work due to the Covid-19 pandemic, it’s important to know that PUP is reducing over time.

The amount reduced first in September 2020 and it will go down again in February 2021.

Currently, payments are set to continue until 1 April 2021 then stop altogether.

After that you can apply for Jobseeker’s Benefit*, Jobseeker’s Allowance* or Jobseeker’s Benefit for the Self-Employed*.

You can find out more on the Citizen’s Information Covid-19 Pandemic Unemployment Payment* page.

6. Make a note of when your Covid-19 mortgage payment break ends

If you are on a Covid-19 mortgage payment break, make a note of the date when it’s due to finish.

If know you think you’ll struggle to start paying your mortgage again, it’s important to contact your mortgage lender before your payment break ends.

The Banking & Payments Federation Ireland* has more details on mortgage payment breaks including a Guide to Coming off a Covid-19 Mortgage Payment Break*.

7. Get advice on dealing with debt from MABS

If you are struggling to manage your money and are worried about getting into debt, consider speaking to the Money Advice and Budgeting Service* (MABS).

They have been helping people deal with debt for over twenty years offering free, independent, confidential advice.

“You don’t have to tackle debt on your own, get free advice from MABS”

You can call their helpline on 0761 07 2000, Monday to Friday, 9am to 8pm, and meet an advisor at 60 MABS offices, nationwide*.

What to do if you’re just about managing to stay on top of your finances during Covid-19

If you’re just about managing to pay the bills during Covid-19, here are some tips to help improve your financial wellbeing.

1. Cut your biggest bills by using comparison sites

You might want to use a comparison site to check that you’re getting the best deals for your electricity, gas, broadband, and mobile phone.

If you have stuck with the same supplier for years, you might be able to save money by getting a range of quotes and switching.

Many discounts last for 12 months only so if you switched suppliers a year ago, you might want to consider switching again before prices return to normal.

Here are more tips to staying on top of your personal finances.

2. Create a rainy day fund to protect against future shocks

The sudden shock of the pandemic highlighted the importance of having some money set aside.

A rainy day fund helps protect you when life’s little emergencies strike.

Whether it’s a costly repair to the car, a roof that starts leaking or an unexpectedly high energy bill, we could all use an emergency fund, from time to time.

Experts suggest having enough money saved  for at least 3 months of basic, day-to-day expenses.

Sound like a lot?

Start by saving €250 into your fund then set yourself the challenge of saving €500.

Keep setting achievable saving goals like this until you have built up your rainy day fund.

3. Check your credit rating

Your credit record is used by lenders to decide whether to approve you for various types of credit.

A history of missed repayments may reduce the amount of credit available to you in the future.

The Central Bank* has said that a lender agreeing a Covid-19 payment break should not report payments as missed, past due or restructured to the Central Credit Register but advises people to check with their lender.

If you have missed repayments on a mortgage, loan or credit card or you were not able to pay back credit in full, you may want to check your credit record.

“Your credit rating is your most important financial profile”

Find out how to check your credit rating to see your record and learn how to apply to have any genuine mistakes corrected.

4. Make sure your car still suits your needs

The pandemic has changed the way many of us live and work.

If it looks like you might be working from home permanently, you might want to check if your car still meets your needs.

If you used to need two cars because you and your partner had to drive in to work separately, you might consider selling one car and saving money.

Alternatively, if you are now driving to work, you might need a reliable car for the journey.

Either way you might want to work out the full cost to buy and run a car.

5. Invest in your home office

If it looks like working at home is going to become more long-term for you or for other members of your household, you might want to make some home improvements to create a more comfortable working space.

This might mean converting a bedroom or attic space into a home office or even adding a garden office.

And, if you are spending more time at home during the day, you might want to make sure that it is more comfortable and lower your heating costs by making your home more energy efficient.

6. Make sure you get tax back when working from home

Working from home?

You might be able to claim tax relief* on the higher bills you’re paying for light, heat, phone and using the internet.

If you’re not getting an allowance for these expenses from your employer, you can claim tax relief at the end of the year.

“Make sure to claim back tax if you’re working from home”

And even if your employer does pay an allowance, you can still get up to €3.20 a day from them without paying tax, PRSI or USC on the allowance.

Find out more about e-working and tax relief* on the Citizen’s Information website.

How to manage your finances if you’re doing okay during Covid-19

If your income has remained steady during the pandemic and your outgoings have reduced then you may even have more money available.

1. Create a budget to get the most from your money

However big or small your income, you need to budget if you are going to make sure that you are getting the most from your money.

A good way of organising your finances is to follow the 50-30-20 budgeting guidelines which divide your income between needs, wants and savings.

Using the 50-30-20 rule, you try to limit spending on essential needs to a maximum of 50% of your income.

You restrict your spending to a maximum of 30% on your non-essentials – the wants.

And you save at least 20% of your income regardless of how much you have coming in each month.

2. Pay down debts to reduce spending on interest

If you have a loan, a high credit card balance or any other outstanding bills then now is a good time to reduce them or pay them off altogether.

Make a list of your debts and make a note of the total cost of credit that you are being charged for them.

Start by reducing your most expensive credit with the aim of getting rid of it before tackling the next most expensive debt.

“Start paying off debt beginning with the most costly debt first”

If you can’t pay off the whole amount of a specific debt, right now, spread your payments over a number of months.

3. Use this time to get mortgage-ready

If you plan to buy your first home or move home in the near future, start getting mortgage-ready by saving any extra income towards a mortgage deposit.

Under the Central Bank’s Loan to Value mortgage measure*, first-time buyers need to provide at least 10% of the purchase price of a property while non-first-time buyers need to have at least 20%.

So the sooner you start saving for a deposit the better.

If you’re a first-time buyer, familiarise yourself with the mortgage process to understand how to get a mortgage and gather together the paperwork you’ll need to submit your mortgage application.

Here are the answers to 10 frequently asked questions from first-time buyers.

4. Overpay your mortgage to reduce repayments or the mortgage term

If you already have a mortgage, overpaying will help to reduce mortgage interest charges.

If you have a variable rate mortgage, you can overpay using a one-off lump sum or by increasing your monthly repayments.

Even customers with fixed interest mortgages may find that their lender allows them to overpay – usually by up to 10% a year – but check the terms & conditions of your mortgage to avoid any early redemption charges.

5. Arrange cover in case the worst happens

The pandemic has highlighted that, unfortunately, the worst does sometimes happen.

But you can put protection in place, in advance, to reduce the impact of unforeseen events.

If you are the sole earner in the family, you might want to consider life insurance especially if you have young children.

You might also want to cover illness and accidents with critical illness or permanent health insurance cover which will continue to pay you an income if you fall ill.

For all insurance cover, you should check what happens in the event of coronavirus.

6. Set your long term goals

Use the pandemic as an incentive to plan or re-plan your long term goals.

What do you want to achieve over the next 3 years, 5 years or 10 years and what will it cost to achieve those goals?

“Take some time to make think through the future”

Are you planning to buy or move home?

Have you started to work out what your children’s education will cost?

Have you done any retirement planning in order to ensure you enjoy your lifestyle when you retire?

Now is the time to start making plans to achieve your goals.

Find out more

Take our 2-minute financial health check to find out how healthy your finances are

*clicking on this link takes you to an external website. Bank of Ireland is not responsible for the content of external websites.

Topic: Personal finance September 28, 2020
Author: Neil Cubley
Tags: Budget tips

Related Posts