As the corona virus rampages around the world, it could hit your personal finances as well as your health.
Yesterday evening, I was asked to discuss the issues live on LBC. This is a moving target, and no doubt today’s Budget will introduce new measures to tackle the impact of the virus. We’ve already seen the Bank of England cut the base rate this morning, from 0.75% to 0.25%, in an attempt to shore up the economy.
Looking ahead, anyone who doesn’t get paid if they don’t work could get hit hard, if they get ill, have to self-isolate or end up caring for kids while schools and nurseries shut. This puts workers on zero hours contracts and the 5 million plus self-employed right in the firing line.
But longer term, I suspect FlyBe won’t be the only struggling business to go bust, tipped over by corona virus issues. There are likely to be further job losses, especially in jobs related to travel or people going out. Plus prices of goods that rely on the Chinese supply change could rise, if producers are forced to turn to more expensive alternatives. Where money is already tight, price increases and job losses will only make matters worse.
Faced with a tough future, here’s a quick list of suggestions to protect your personal finances:
Put your spending on lock down
If you fear money could get tighter in future, don’t splash cash on anything beyond essentials, so you can build up emergency savings. Quarantine that credit card. Go through all your bills looking at where you can cut costs, switch to better deals and raise cash.
More on: How to slash your budget to the bone
Thinking of remortgaging?
Do it now, especially if your job might be in jeopardy. Mortgage rates are already super low, and may limbo even lower following today’s base rate cut. So cut your own bills by nabbing a deal while you still have payslips and a decent credit record.
Talk to your lenders if you’re having money problems
Big banks including Lloyds, TSB, RBS, Halifax and Santander have already started announcing measures designed to help, such as payment holidays on mortgages or loans, extending credit limits, or allowing people to access fixed-rate savings without penalty.
But don’t assume it’s fine to stop paying your debts! Normally, missing mortgage or loan payments would damage your credit score. If you’re likely to experience problems, talk to your bank first, and be prepared to explain your situation.
If you’re struggling to keep up with payments on credit cards, catalogues and other lenders, talk to those companies too, as many may be prepared to give payment holidays if asked.
If mortgage problems are likely to last longer than a two or three month payment holiday, then switching from a repayment mortgage to an interest-only loan could be a temporary fix to cut your monthly bills. I say temporary, because long term you will need a plan to pay off the balance.
Fork out for travel insurance
If you have holidays booked, buy travel insurance asap. Remember, policies won’t pay out for cancellations if you wait until after the Foreign & Commonwealth Offices warns against travel to that particular country. Make sure your policy includes ‘travel disruption cover’.
Plan ahead for self-isolation
I’m not suggesting panic buying. But topping up food you have in the house with some long-lasting essentials could be useful if you have to self-isolate. If your money will stretch, donate extras to your local food bank too. I’ve also ordered printer ink and paper to help with home working, checked my internet connection and renewed repeat prescriptions for my son’s asthma medicine. Talk to older relatives about how they might prepare, and what you can do to help.
Don’t check your investment or pension balances
Step away from the computer. Stockmarkets have plunged 20% since January – don’t risk being scared into selling out. Remember, you only make a real loss if you sell when prices are lower than you bought. Hold your nerve and hang on for things to get better, as historically stock markets do trend upwards.
Raid cash rather than selling pension investments
Drawing a pension, and rely on selling investments for income? The trouble with selling after prices fall is that you have to sell more investments to raise the same money – leaving fewer investments to grow, and raising the risk of running out of money. So try to cut costs and raid cash savings instead.
Write a will
Morbid topic, but channel fears about corona virus into something useful. Handily, over 55s can take advantage of Free Wills Month during March. Otherwise, you’re looking at paying a solicitor about £150 to write a basic will. Here’s an article I wrote for Royal London about why it’s so important.
Check your life insurance and income protection cover
Again, bleak prospect. But how would your nearest and dearest cope if your income stopped? Is your only life insurance ‘death in service’ tied to your employment? The younger and healthier you are, the less you’ll pay for life insurance. Income protection is likely to be more expensive, but it’s worth checking your options with a decent broker, such as LifeSearch.
Profit from falling oil prices
I’ve been scraping around for a silver lining to the corona virus. At least plunging oil prices mean it is now cheaper to fill your car with petrol, or top up any heating oil tank. So commuting costs might fall – just as people are encouraged to work more from home!
More on: How to cut the cost of heating oil
Consider snapping up cheap investments
This only applies if you are fortunate enough to have spare cash and nerves of steel. Some brave souls are taking advantage of stock market falls to buy more investments will prices are cheaper. Personally, I’ve put more into my pension, because the top up from tax relief makes further stock market falls feel slightly less painful.
However, bear in mind that the markets will get worse before they ever get better, and no-one can forecast how long it will take for things to pick up. As always with investing, don’t invest money you can’t afford to lose, and only use money you can set aside for at least 5 years and ideally longer.
Now – over to you. Are you doing anything to protect your finances in the face of corona virus? Do share in the comments, I’d love to hear.