How to Cope with Debt after Covid-19

How to cope with debt after Covid-19

 

The coronavirus pandemic has caused disruption around the globe for months. Whether that’s medical, emotional or financial stress, this pandemic has brought new challenges to us all. Money worries have been particularly prevalent in recent months, employment rate is at an all time low, job losses are higher than ever, yet the rent and the bills still roll in. It’s completely normal to feel stressed and anxious if you are struggling with financial hardship, but know you are not alone, especially at a time like this. Here we will lay out some tips for coping with Covid-19 related debts.

 

Emergency funds & household goods

If you are experiencing extreme financial hardship and are unable to afford basic household necessities such as food, you should always reach out for help. Your local council will have initiatives in place to apply for emergency funds, or for the provision of household supplies. Don’t suffer if you are unable to support yourself and your family, there is always help available. There are also numerous debt and poverty related charities to help with essential household items.

 

Identify and deal with priority debts

Priority debts are those which can lead to serious consequences if not dealt with in the short term. Be sure to identify these first and note them down. These include:

  • Rent arrears
  • Council tax arrears
  • Bills, including gas, electricity, phone or internet
  • Court fines
  • TV license

Once these have been dealt with, you can move your focus to the ‘lower priority’ debts. Paying off these high priority debts should provide a massive relief, and will certainly get you on track to living debt free.

 

Deal with non priority debts

These may include:

  • Credit card payments
  • Family and friends
  • Unpaid parking tickets
  • Unpaid water bills (your water cannot be switched off)

Leaving some of the above unpaid may result in the business taking you to court. Keep this in mind. For family and friend related debts, be sure to let your loved ones know about your other debts, and they will most likely understand and not request the funds right away.

 

Check your credit report

Your credit report can be checked online for free using a variety of websites such as experian.co.uk and clearscore.com. This will show any accounts where you have taken out credit including loans, credit cards, mortgages and any other credit agreements you have made.

 

Payment holidays

Financial ‘holidays’ are available during the covid-19 period from mortgage, utility, car and banking companies. Here is what’s available:

  • Mortgage holidays: apply before 31st October
  • Loans and cards: you can apply for a three month payment holiday
  • Car finance - apply for a three month payment holiday before 31st October

Reduce your outgoings

Many people have more outgoings than necessary, for example video streaming services, music streaming, unnecessary subscriptions and more. To begin with, unsubscribe from any you don’t use and can live without, this will help save money over a longer period of time.

Try to then minimise other unnecessary purchases like clothing, beauty products, eating and drinking out and more. Purchases like these can quickly add up week by week, and £5 here and there could soon land you in further financial trouble. When you do a food shop, ensure you have meals planned for the week to avoid the temptation of getting takeaways or eating out for dinner.

Many grocery shops such as Sainsburys and Tesco have reward programmes, like the nectar card and clubcard. Be sure to get your local supermarket’s equivalent, as the points acquired can often be used to offset the cost of a later grocery shop, saving you money.

 

Budgeting

There are always ways to cut down on your weekly and monthly spends like your groceries, bills and other non essential purchases. If you’re in money troubles, budgeting should be a priority. There are many good apps to track your spending, or banks which assist with this such as Monzo or Yolt. Give yourself a weekly budget, factoring in food, bills, transport and any other necessities, and try your best to stick to it.

Government assistance

There are several schemes which allow those on low household incomes to claim extra financial help to assist through hard times. Here is what’s available:

  • Employment and support allowance
  • Jobseeker’s allowance
  • Income support
  • Universal credit
  • Council tax support

 

Work towards having savings

Once you are debt free, it’s a good idea to begin a saving plan to ensure you have an emergency fund for future times of financial hardship. When you have a stable income, set up an automatic monthly payment into a savings account, start small and increase it as your income increases. This will give you a stable, increasing pot of money to use in case of emergencies.

These are some ways to help prevent, or reduce debt during this difficult period. If you need support during this time, don’t hesitate to contact MInd Allies.