This is the best time to look at your finances
During the lockdown, many clients have had time to sit down and look at their finances. This isn’t just the mortgage but other areas such as bank charges, direct debits, memberships and life insurance. We thought it would be a good idea to touch on all these areas as many of our clients have been furloughed so are managing on 80% salary or less.
Direct Debits – One area that always causes surprises when we arrange mortgages is when we ask clients what certain direct debits are, some are obvious and essential, but others take a little more thought or even investigating. I had a client recently who thought they had been paying a mortgage that had been repaid for 2 years. Now we have a little more time this is a great time to go through your bank statement and make sure all the direct debits are essential.
Bank Charges – As you go through your bank statement add up the number of charges that have been deducted. This may surprise you especially if you have your bank account with Halifax. Banks have recently changed the way they charge for overdrafts and these can range between 15% and 40% APR (annual percentage rate). If you have an overdraft you should compare the overdraft interest of your bank against others in the market to make sure you’re getting the best deal.
If you are consistently in an overdraft position, then there may be better ways to manage your finances. Using a credit card for your everyday purchases then repaying in full is an efficient method. You won’t be charged any interest if you repay the card debt in full each month and your cash can stay in your bank account for the full month. Using a credit card also improves your credit score so a double win.
Memberships – If you are looking to reduce your outgoings take a look at your memberships or subscriptions. We have seen clients who have so many TV subscriptions with Netflix, Amazon, Sky and then they tell me they don’t watch much TV !!!!! If you have not used a subscription service whilst in lockdown you should question if you need it.
Have you protected your family?
We have seen more enquiries this month for life insurance than any other time in the last 12 months. With the shocking death rates because of COVID – 19 many have thought about how to protect their family.
Take the time to consider how much money your loved ones might need to maintain their living standards if you were to pass away. This might include costs such as bills, mortgage repayments, school fees and any other debts you might need to repay. Basic cover is very affordable so it’s worth reviewing your cover whilst we have time. It may be the amount saved monthly on your direct debits and bank charges could pay to protect your family.
Income Protection is an area many don’t think about; however, this is probably the most important area of all. If you cannot work due to illness or disability how would you cope financially? Most employers will pay for a period but not for the long term. A simple income protection policy can dovetail your sick pay and cover 60% of your income until retirement or until you go back to work.
Are you struggling with increasing debt?
Debt problems are expected to surge in the wake of widespread economic and social disruption caused by COVID-19. Direct cash support to affected households, an immediate suspension of debt collection and bailiff visits, and widespread payment holidays sound like drastic measures – and they are, but they are needed right now.
Individuals and businesses emerging from the lockdown are likely to find pressure on cash flow not just from reduced income but also the need to start paying back deferred debt and expenses.
Fortunately, there is a reasonable rescue culture in the UK for both individuals and businesses struggling with unaffordable debt. This includes voluntary arrangements, IVA’s for individuals and CVAs for companies. They provide for affordable monthly contributions to be paid into the arrangement which is then distributed to creditors and as long as the arrangements are completed successfully, the balance of the unpaid debt is written off. IVA’s can also be based on a one-off payment paid into the IVA – full and final IVA rather than monthly contributions.
Other options for individuals include informal debt management plans, full and final settlements, bankruptcy and Debt Relief Orders.
If you or your family or relatives do find yourself struggling with debt issues, please do pick up the phone. We work with a caring FCA regulated debt solution practice that can offer advice on all options for both individuals and businesses.
If you have any other questions, please call our helpline 0800 035 2989 or book a Zoom appointment with one of our advisers. Just click the Ask us to call you and book the time and day and we will call you.
Keep safe Stay at Home