The government just recently announced that lockdown would be imposed for another few weeks. While most are already aware of their position in terms of job security – be it furloughed or otherwise, many are still incredibly uncertain when it comes to their financial situation.
The Covid-19 pandemic has affected everyone, and while some may be lucky enough to still be working and earning their full wages, what can you do if your wages have been temporarily cut short?
Well, below we share a little information on what “furlough” actually means, and a few tips that might help you save a little or make a little extra cash during these unprecedented times.
If you have been furloughed, this means you will be eligible to receive 80% of your normal wage, up to £2500 per month. It’s part of the Coronavirus Job Retention Scheme (or CJRS) which aims to ensure employees remain employed even if companies are unable to operate. It is up to your employer if they wish to make up the final 20%, but as most companies have been temporarily shut down, they might not be making any money in order to offer this.
The income they use to calculate the 80% is currently under a little controversy. A lot of people whose wages are bulked up by overtime or commission may be wondering if the 80% is calculated using their basic salary only. As it stands, it would appear that if you earn a compulsory commission (that is, commission that is outlined in your contract, such as sales commission) your furlough pay will be calculated using the higher of either your average total earnings for April 2019 to March 2020, or the total earnings for the same month in the previous year. For example, if you earned a total of £1500 in March last year, including compulsory commission, then you will be entitled to 80% of £1500 this year (£1200).
If your salary is made up largely of overtime, then similarly, your furlough pay will be made up of your average monthly earnings including any past overtime worked.
While the Coronavirus Job Retention Scheme does not cover everyone at the moment, talks and reviews are in place to attempt to reduce the number of people without support during the lockdown, so keep an eye on the news to see how you might be affected.
If you have been furloughed, the thought of all your normal monthly bills can suddenly seem quite daunting. It’s important to remember that while your pay might be reduced, your usual outgoings may also be reduced.
The first thing, as always when dealing with finances, is to maintain a calm and rational outlook. It can be very easy to get paranoid and panicky about money because it’s so important to our livelihood, but you won’t make sensible decisions if you’re not in the right state of mind to do so.
Once you feel ready to tackle the challenge, grab a sheet of paper and a pen, and write down your income for the next month. At this stage, there’s no point looking further ahead than that as we just don’t know what’s going to happen.
Then, in another column, write down your priority expenditure. This is made up purely of your mortgage or rent payments, your utility bills (gas, electric, water) and your food shopping.
Your priority expenditure is the money you must spend in order to live. Unfortunately, it doesn’t include things like Netflix or Amazon Prime, but you can factor that in when budgeting. Add up your priority expenditure: if it is less than your reduced income, then you know you will be able to meet your repayments over the next few weeks without getting into serious arrears.
If your reduced income doesn’t cover your priority bills, then you may need to get in touch with your supplier to discuss your options. They will probably require some form of documentation to demonstrate that your finances have been affected as a result of Covid-19, but usually official letters from your employer should suffice.
If you have been furloughed, it means you aren’t actually allowed to work. This means that travel expenses and work lunches suddenly don’t need to be factored into your monthly budget. You might find that you actually have a larger disposable income than you normally would. If this is the case, then it might be worth putting the money aside into a savings account just in case something goes drastically wrong while still on lockdown (or even just as an investment into your future finances).
If you have a remaining disposable income – that is the amount that’s left over after you’ve paid your priority bills, then you can do a monthly budget to see how best to spend this income.
If you can afford it, you should consider putting a part of your disposable income into savings to help you tackle future cash flow issues – this goes for every month budgeting, not just for your lockdown budget. However, we know that as you are stuck inside your house right now, there’s nothing wrong with spending a little of that disposable income.
If you have young kids, subscriptions like Netflix or Disney+ are probably a good stream of entertainment once they’ve finished their schoolwork for the day. Investing in other things like puzzle books, colouring books and pens may also be a good idea and although a lot of delivery services are delayed, they are still operating so you should be able to order online.
And, although it might be tempting to do a whole load of online shopping because there is really little else to do, just remind yourself that you currently have nowhere to go so most purchases are completely unnecessary right now – it hurts to hear, we know, but it could save you a whole lot of money! Other than your priority expenditure, you shouldn’t really have too many other outgoings at this time.
If your disposable income is smaller than usual, and you’ve already factored in the fact you are no longer paying for travel or spending money on work associated items, then it may be time to think about how you can use all this spare time to top up your furloughed wages or even just reduce your usual expenditure.
One way of feeling like you’ve got more money is to reduce your expenditure elsewhere. Now that you’ve got the time on your hands, why not do a few comparisons on things like energy bills and internet subscription prices.
You can sit down and properly research whether you are getting the best bang for your buck. You’ll probably even have the time to read the reviews of each site, so you know what you’re getting into in terms of customer service and potential future hiccups with the service itself.
Your broadband speed has probably never been more important – especially with so many people now working from home, so why not check that out too: where can you find a better deal for your internet and phone bills?
Now is a really great time to do all that clearing out that you’ve been putting off for months. Start with one room in the house, and slowly work your way round until you emptied and restacked every drawer, shelf, and cabinet. It sounds arduous, but you’ll feel better for it afterwards – especially if you benefit from the tidy house, tidy mind mentality.
Any clothes or shoes that are new or near new can be sold on market platforms for a little extra cash, or at least be put aside for selling in the future. Any older clothes and shoes can either go to the clothes bank or the charity shop. While you can’t meet up with friends and family right now, you could always ask if they would like any of your hand-me-downs and arrange to deliver them once lockdown and quarantine is over. As there are a lot of families who are currently uncertain about their future financial situation, some spare kids’ clothing might not go amiss.
And finally: bank accounts. While we know banks are offering very poor interest rates on saving accounts, a few banks are still offering money if you switch – and if you could really do with an extra £100 or so, it might be worth looking into.
Lockdown can be a scary thing for many people, but your health is what’s most important right now so make sure you are staying home and only travelling when completely necessary – really, you should only leave the house if you are going food shopping, or if you are an essential worker and you are travelling to or from work.
If you have any serious concerns about your finances, get in touch with debt advice services such as StepChange, National Debtline or the Citizens Advice. All of these charities can give you advice tailored to your circumstances.
If you have a few creditors, get in touch with them directly as well. Most of the finance industry is under new guidelines during the Covid-19 pandemic and so just getting in touch with your creditor to find out how they can help you at this time might relieve some of the stress you are feeling. Stay home, stay safe.
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