If you were not prepared financially for the first wave then that is understandable and you could be forgiven; but if you are not prepared for a second wave then things could get ugly. It is critical that you begin to prepare. Here are some tips that may help.
When the infection first reached the UK, the government was quick to step in and help people financially through various schemes. However, if another wave occurs we cannot expect the same level of treatment. The UK government has already spent £190bn to support public services, businesses and individuals, according to the Treasury. In order to provide this financial support they have had to take on a huge amount of debt. Unfortunately, there is only so much that the government can borrow. If they end up borrowing too much, then they risk not being able to pay back lenders. The furlough schemes which were covering 80% of our wages are no longer likely to be granted to us again. Any money we do receive will most likely be a lot less than the first time around. We may potentially not receive anything at all.
When many businesses such as restaurants, bars and shops were forced to shut it meant, for many of us, our spending decreased and, for some of us, we had extra savings left over each month. These extra savings can be put into an emergency fund, if you did not already have one. You should aim to be able to cover three to six months of living expenses. If you are concerned about losing your job, then you should aim for the six month mark. Building an emergency fund could prove invaluable if your income is affected during a second wave of Covid-19. Not only will it help cover your expenses, but it will keep you from turning to credit and going into debt.
Make sure you are tracking all your spending and allocate where your money needs to go each month. This will help prioritise your essential spending from your non essential and allow you to cut back and save money. Creating a specific budget for emergency situations, such as a potential second wave of Covid-19, is a sensible idea. This will allow you to decide how your money needs to be spent, in case of an unexpected reduction in household income. Now is the time to start saving on outgoings and avoiding unnecessary purchases. Put the money you save each month away into savings or an emergency fund. Just remember, the feeling you get from financial peace of mind will trump the short term burst of happiness you might get from splurging on a new designer bag or a trip to an expensive restaurant.
One of the biggest takeaways we can take from Covid-19 is the importance of obtaining financial independence. Unfortunately, in today’s environment, it is not just enough to save money; in order to grow our wealth we have to invest. Interest rates are at an all-time low and savings accounts will not help grow your money anymore. In order to build our wealth we must invest in income producing assets. This way we do not become dependent on a single source income such as a job or relying on the government to support us. Alternative investment solutions are all relatively low risk investment solutions that will not only help grow your savings, but also build and grow your wealth, and ultimately help you become financially independent. If you would like to learn more about investing, please speak to your financial adviser.
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