Life under lockdown is asking questions of us all, not least concerning the state of our finances and financial plans. We look at some of the key considerations.

Financial planning under lockdown

Spring-clean your finances while you're in Lockdown

Naturally, during lockdown many people are concerned about their finances; perhaps because they've been furloughed on 80% of their income (often less for higher earners), or they may be worried about the possibility of losing their job. Alternatively, they could be a business owner whose income stream has dried up. If you find yourself in any of these categories, then before you panic, take a deep breath and follow the advice of a good financial adviser, which would be to review your current financial position and future plans.

  1. Begin by reviewing your finances. Review your recent financial statements and see your expenditure, especially during lockdown, and think about what is really essential to you for the next 3-6 months. Are you spending within your income? What if anything do you have in savings? What is your debt situation? How are you going to manage as the second half of 2020 approaches? Important questions, but it's essential to have accurate answers.
  2. Focus on the essentials. This almost goes without saying, but having carried out a review of your situation, then now's the time to cut down on discretional, non-essential expenditure if you need to make savings.
  3. Review your emergency fund. If you have one put aside, say 3-to-6 months' expenses, then it could either be under some pressure, or about to come into play. If you are able to call on your savings without seriously denting your long-term prospects, then you may wish to do so now.
  4. If you've got longer term plans, how will these be affected? When starting your savings, what specific goals did you have in mind - how will these plans be affected? From retirement, to renovations, to moving home; you need to think about what could change because of lockdown. Something that might be relevant if you've previously moved home, is to ensure you secure your share of the £20 billion in unclaimed pension funds* - that's the amount estimated to be lying untaken in pension pots, simply because savers have moved home and not updated their provider with their new address.
  5. Know the score. Your credit score. Banks are offering 3-month payment holidays on mortgages, and many institutions are also offering similar breaks on loans, credit cards and car finance. As part of your lockdown planning, it might be better to take an approved payment holiday sooner, as supported by government and the FCA, as that should have no impact on your credit score. Unapproved missed payments may have a negative impact on your ability to get credit and could increase the cost of your monthly mortgage, insurance and credit card bills in the future.
  6. Stay covered. Now's a good time to look at your Home, Contents, Car, Breakdown and Life Insurance, with a view to checking your coverage and seeing if you can make a saving. Comparison sites will be invaluable here, and you may even find your current insurer gives you a better counter offer. If you do move insurer, then make sure you are happy the level of cover continues to meet your needs.
  7. Hold your nerve. When it comes to investments, these are intended for the long term, and historically speaking, stock markets do eventually recover from major setbacks. Indeed, many markets have already recovered a little of their previous position, following the initial shock. People with widely diversified portfolios may be less badly affected than they at first assume. So it's probably best not to overreact to the daily news cycle, and consider investments for the longer term, as that's what financial planning is all about. But if you do want to change the risk profile setting for your investment portfolio, you should speak to a financial adviser.
  8. What will be your legacy? A surprising number of people die intestate - that is, without a will, leaving family in an uncertain position, so financial planning should include end-of-life planning, including a will and power of attorney in the event of incapacity. If you haven't checked your will for a while, then now's a good time to make sure it's up to date.
  9. Check and re-check your planning. In lockdown, taking a payment holiday, drawing on savings and using up an emergency fund may all affect your financial planning, so you may well find your medium-term and even long-term goals require some adjustments. Your approach to financial planning should be a dynamic one that reflects your changing circumstances and goals, where you are today and where you want to be tomorrow. Whilst life feels uncertain right now, a solid plan will help you feel a little more confident about the future.

* Source: ABI 2020

Important Note
Free2 Limited (trading as free2) is an Appointed Representative of RS Consumer Finance Limited (RSCF) which is authorised and regulated by the Financial Conduct Authority (the FCA). free2 is a credit broker, not a lender, and will only offer loans from RSCF – an offer of credit is subject to status and affordability. Example Loan: 60-year-old non-smoker, £30,000 over 10 years with fixed monthly payments of £344.56, interest rate 6.73% and an APR of 6.97%. Terms & Conditions apply.

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