Thousands of people have seen their incomes reduce as a result of coronavirus, and many are now worrying about how they’ll make ends meet.
Redundancies in September rose to their highest level since 2009, according to the latest data from the Office for National Statistics (ONS), with unions warning of further job losses as the furlough scheme comes to an end.
Managing your money when there’s much less of it coming in can be a real challenge, but there are some steps which may help, including reviewing your budget, and claiming any financial help you may be entitled to.
Here, we explain how to take control of your finances if your income has dropped and what support might be available if you’re finding it hard to cope.
Planning your budget
If your income has fallen, draw up a budget so that you know exactly how much you can afford to spend each month.
The best way to start is to write a list of all your regular outgoings, such as utility bills, Council Tax, rent or mortgage payments and food costs. Your bank statements will have details of all the payments coming out of your account each month.
Split your outgoings into essential payments, such as those listed above, and non-essentials, which include things such as magazine or gym subscriptions or daily coffees.
Lots of us don’t know exactly how much we spend each month, so writing it down can help you see where you might be over-spending. There are several free budgeting tools available which can help you work out how much you’re earning and spending – for example the Money Advice Service’s Budget Planner and the Citizens Advice Budgeting Tool.
Identify where you can make cutbacks
When you know what’s coming out each month, and how much you will have in income – you’ll be in a much better position to know how drastically you will need to reduce your outgoings.
Go through your list of the non-essentials you spend money on and see which things you can cut back on.
For example, do you pay for an expensive TV package every month which you could cancel? Are you forking out for memberships or subscriptions which you rarely use? Do you have more than one car when you might be able to get by with one?
It’s also a good idea to review how much you spend on food. Often when we do a weekly shop we stick to the same brands, but you might be able to cut bills by switching to cheaper alternatives, which are often supermarket own-brand items. It’s worth exploring ways you can pick up reduced items too.
Find out more about the different ways you might be able to reduce your outgoings in our article 17 ways to cut costs.
Take charge of your debts
If you’re struggling to meet your debt repayments because your income has fallen and you are worried about your debts spiralling out of control, it’s important to get professional help as soon as possible.
You may still be able to apply for a mortgage payment holiday or a break from credit card repayments, so talk to your lenders about the options which may be available to you. You can find out more about how mortgage payment holidays work here and what happens when any of your payment holiday breaks come to an end here. Front footing these conversations and acting proactively by speaking to your providers as early as possible can be hugely beneficial – if you wait until they contact you, it is likely you will already be incurring significant extra costs and penalty charges.
Charities StepChange, National Debtline and the Debt Advice Foundation all offer free debt advice and may be able to help you arrive at a manageable repayment plan with your creditors if you’re finding it difficult to reach an agreement with them. The sooner you act, the better your chances of finding a workable solution so don’t be ashamed about seeking help. Coronavirus has devastated so many people’s incomes, through no fault of their own.
It’s really important to prioritise your debts too. Those which could affect the roof over your head, such as your mortgage and Council Tax payments should take priority over unsecured debts, such as credit card payments. This doesn’t mean you can miss those payments though – as they will often come with penalty charges – get with your lenders as soon as you can (and/or speak to one of the specialist debt advice charities above) and see whether you might be able to pause or reduce payments until you get back on track.
Check if you’re eligible for financial support
As well as reducing your outgoings, you should also check whether you’re entitled to any government support and benefits.
For example, you may be eligible to claim Universal Credit, which is a benefit paid to people who are unable to work, or who are on low incomes and need a bit extra to make ends meet.
The amount you’re entitled to will depend on your individual circumstances and is means-tested, so you won’t usually qualify if you have £16,000 or more in savings.
The maximum monthly amount you can claim if you’re single and aged 25 or over is £408.89 a month, or £594.04 a month if you’re in a couple and both aged 25 or over. Find out how to claim Universal Credit here.
If you have a health condition which stops you from working, or limits the amount you can do, you might be able to claim up to £74 a week from the contribution-based Employment and Support Allowance, which you can get at the same time as claiming Universal Credit (although it might reduce the amount you get from Universal Credit). Find out how to claim Employment and Support Allowance here.
There are also job seeking benefits, that are not dependent on your level of existing savings – for example the new style Job Seekers Allowance. You can read more about other potential unemployment benefits here.
If you’re not sure how to go about making a claim, or are struggling to work out how much you might be entitled to, read our article on Five free sources of help if you’re making a benefits claim.
If you have no money for food, then you might also be able to use a food bank. You will usually need to be referred – it’s best to speak to either Citizens Advice or your local council about whether you could be eligible for a referral, and how to go about getting one. Once you’ve been referred, you’ll be told where the food bank is.
You could also try looking up independent food banks online – as you can access some of these without a referral. The Independent Food Aid Network has a handy online tool which you can use to search for independent food banks near you.
To find out more about using food banks, have a read of this guidance from Citizens Advice.
See if you’re eligible for a tax refund
If you’ve recently been made redundant, or have lost your job mid-way through the tax year, you could be eligible for a refund from the taxman.
Millions of people are out of work as a result of coronavirus, but many are not aware that they may have overpaid tax and be able to claim some of the tax back that they paid when they were employed. Especially if it takes you a few months to find your next role.
To see who might be eligible for a tax refund, and how to claim one, read our full guide here.
If you’re worried that redundancy could be on the cards, it’s also worth looking at our comprehensive redundancy section to find out more about your rights and how much you’re entitled to from your employer.
Consider raising emergency cash
There are reports that increasing numbers of people are also falling back on existing assets such as their home or pension to try and raise the funds necessary to see them through the crisis. Whilst this may help alleviate the short term pressure through these difficult times, none of these should be entered into lightly or without fully understanding the risks and consequences involved. For more information you can read our full guide on raising emergency cash here.
Are you currently living on a reduced income and do you have any other tips to share? If so, we’d be interested in hearing from you. You can join the conversation on the Money section of the Community forum or leave a comment below.