Managing finances during COVID-19

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Health Assured team

12 January 2021

Managing your finances can be difficult at any time, not least following the effects of Covid-19, which has highlighted the importance of understanding your finances. Two national lockdowns and the current tier system have put businesses under a lot of pressure. Employees are finding themselves with reduced incomes and many are unfortunately facing redundancies. There is wide ranging support available through the Government, employers, and third parties to help individuals through these testing times.

Furlough scheme

The furlough scheme was introduced by the government through the Coronavirus Job Retention Scheme (CJRS) in a bid to help employers across the UK retain their employees. The scheme allows employers to place their employees on temporary leave from work with the help of government funded support. The scheme is accessible to those that were employed and being paid through the PAYE on or before the 30th October 2020.

Debt advice & budgeting

Those on the furlough scheme may find themselves in financial difficulty as the 20% deficit from their pay will affect monthly outgoings and their ability to save. This could lead to some individuals falling into arrears and quickly becoming overwhelmed. It is best to implement a budgeting plan to prepare for any potential changes, seeking support at the earliest opportunity can ensure that concerns are tackled head on.

Planning a budget

  • Add up your income: knowing how much you earn each month or week can help you determine your potential savings and disposable income
  • Determine your essential expenses: include anything you will always need to pay for such as utility bills or groceries
  • Calculate the non-essential expenses: include services you have joined that are not essential for running your household such as a TV subscription. Any money spent on non-essential expenses are taken from your disposable income
  • Analyse your spending, savings potential and remaining disposable income: you may determine that you are spending your disposable income on unnecessary products or that you are not saving as much as you thought
  • Create your budget: try to be realistic with your budget and ensure you are not spending more than you earn. Your budget should account for some savings each month and not be completely restrictive. For example, if you have takeaway coffee five times a week, you could reduce this to once per week. If you stopped getting coffee altogether you may save a little more but are less likely to maintain the change in the long term.

The Covid Payment Plan (CVPP)

The CVPP is a plan designed to help individuals manage their finances whilst their income is reduced. The scheme allows you to make reduced payments to some creditors such as a personal loans or credit cards for up to 12 months. The plan is designed as a short-term solution whilst your income is temporarily reduced and may be suitable if:

  • You can pay more than 33% of the standard payment throughput the plan
  • You reasonably believe your income will improve within 12 months
  • You can repay missed priority payments within the next 12 months such as mortgage arrears.

Step Change are a leading debt charity offering financial support. They work with creditors to input a CVPP, arranging for the interest and charges to be stopped or reduced. They can also discuss alternative options and plans that may be suitable.

Telephone: 0800 138 1111 - Monday to Friday 8am to 8pm, Saturday 8am to 4pm.

Website: www.stepchange.org/

Benefits advice

As you may not be receiving your full pay or may no longer be working you may be entitled to access benefits. These can include universal credit, Pension Credit or the new style Job Seekers allowance (JSA) which could help with any financial deficit.

  • New style Job Seekers Allowance (JSA) may be available if you usually worked less than 16 hours a week when you were employed, if you are under the State Pension age and have made National Insurance contributions over the last three years
  • Universal Credit may be available, if you have less than £16,000 savings and are under the state pension age
  • Pension credit may be available if you are of state pension age or over and have a weekly income of less than £173.75, or both you are your partner are of state pension age and have a weekly income of less than £265.20.

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