Tips for Managing Your Finances If You've Been Furloughed
Published Date: 2020/04
Many companies have decided to make use of the furlough scheme since it was introduced by the Government in late March. The scheme allows businesses to keep their staff on the payroll even if they are not working, with the aim of preventing mass unemployment.
Perhaps most significantly though, businesses can claim 80% of their employees' wages from the government (up to a maximum of £2,500 per person, per month before tax) meaning employees are still earning an income during these uncertain times.
It is the company’s discretion as to whether or not they top up 20% of their employees pay to provide staff with full pay.
Many businesses will not be in a position to top up their employees pay meaning people may now be concerned as to how they will survive on furlough income for the foreseeable future, particularly if other members of their household are facing loss of income.
We’ve put together some guidelines to help you to manage your finances if you’re in this position.
Review Your Outgoings
Take a look at all of your direct debits and collectively, as a household discuss what is essential and what could be cancelled or put on hold temporarily. With gyms and other venues being closed your membership is now redundant so put these direct debits on hold for now. You may find that more than one person in the house is paying for streaming services such as Netflix or Spotify so consolidate these. Be practical and stop any payments that you do not need for the foreseeable future.
Work out how much money you will have to live on once you’ve deducted your essential outgoings including bills, rent, phone payments and any other contracts you are legally bound to. With the Government guidelines being explicitly clear that we should be staying home unless absolutely necessary, there aren’t many other things to be spending your money on other than food so create a monthly budget, within your means and monitor it on a fortnightly basis. We’re not sure how long this crisis will last so save any money you do have left over at the end of the month so you are preparing for the future.
Consider Reducing Pension Contributions
There’s also the option to temporarily reduce your pension contributions as this will mean you’ll have more money to spend on other necessities at this time. Your employer will still be obligated to pay their contribution and you can choose to increase what you add to that when you have more financial certainty in the future.
Speak to Your Bank
The Financial Authority has addressed banks, asking them to ensure that any customers with pre-arranged overdrafts of up to £500 are charged zero interest for up to three months. In addition, many banks have relaxed the rules over accessing money in fixed-term savings accounts. These measures have specifically been put in place to help people manage their cashflow during the crisis.
Access Additional Support
If you find your finances simply wont stretch once you’ve done all of the above it could be worth looking into deferring larger payments. This could include mortgage or loan repayments. It is important to remember that you will still have to repay this money in the long term but it may help you in the short term. There is also other Government support depending on your circumstances which can be found on their website.
This is an uncertain and financially unsettling time for so many people. Remember that you are not alone and speak to someone if you’re feeling particularly anxious.
Some helpful budgeting tips can be found here.