How to Budget Money – Four Lessons Learned from the Covid-19 Pandemic

Can you remember life before the Coronavirus crisis? Sure you can, but it feels like we’ve come a long way in a short time doesn’t it? Many of us have experienced a steep learning curve over the past few months; learning valuable life lessons about how to budget money along the way. 

We are finally starting to emerge from the worst of the crisis and many of us are getting back to work and seeing our incomes return. We thought it would be a good time to talk about the top four financial lessons that we can take with us into post-lockdown life.

Budgeting in a post-COVID world 

Back in March 2020, when life in lockdown first became a reality, lots of us lost our jobs. Others took pay cuts due to being furloughed or working fewer hours. Some of us were running businesses that no longer made any money. One thing we all had in common though, was that our experiences came with little or no warning. 

That is, perhaps, the most challenging thing about the Coronavirus Pandemic, it all happened so suddenly and we have met these new and unprecedented challenges head-on and with no preparation or rehearsal. As a result of this, most of the top lessons below reflect this overall theme: expect the unexpected.

Top Four Lessons Learned About How to Budget Money Post-Lockdown

1. An emergency fund is essential

I think we can all agree that if we’ve learned anything from the COVID-19 crisis, it’s that building an emergency fund into our household budget is extremely important. We’ve written plenty of budgeting guides for our customers before, but even our experts here at Moneyboat have previously under-valued the importance of building an emergency fund. 

How to create an emergency fund

Tips for building and maintaining a savings account for a rainy day

  • Open an easy-access savings account and assign some money to it each month
  • If you take advantage of COVID crisis measures such as mortgage holidays, put the money saved into your emergency fund
  • Add to the fund when you can over a number of months or years until you have enough to cover basic expenses for a 3-6 month period
  • Make a clear list of scenarios in which you would allow yourself to spend from your emergency fund
  • If you have to dip into the emergency fund, don’t forget to build it back up again
  • If you’re tempted to spend it on non-essentials just think back to March 2020!

2. Making the most of COVID crisis-specific financial help can help you re-establish a household budget

There has been a whole range of temporary financial help available over this crisis. Most mortgage lenders will enable customers to apply for a mortgage holiday if they have been impacted by Coronavirus, and some bills have also been paused for a number of months, allowing customers to spread the cost over a longer period. You can apply for help paying your Council Tax under the COVID 19 Hardship Fund allocated to local authorities to help financially vulnerable residents.

Most of us will already be aware of specific help being offered by the government in the form of the Self-Employed Income Support Scheme and the Coronavirus Job Retention Scheme, but it’s worth reading up on these, as well as Universal Credit, if you are struggling financially

How do these measures help you to budget?

Practical steps for ensuring temporary COVID-19 measures boost your bank account in the long-run

  • Taking advantage of a bill payment pause can help boost your cash flow when you need extra cash to pay for increased household expenses
  • Increased cash flow also means more money for your emergency fund 
  • Taking a mortgage holiday means that you have more protection if you’ve lost your income due to COVID-19
  • Having increased cash flow can help you to continue to budget your money in a similar way to how you did pre-COVID

3. You don’t need to spend as much each month

One of the most interesting things we’ve learned over the COVID crisis is that we don’t need to spend a fortune to have fun. We’ve all discovered the simple pleasures in life that we took for granted and under-appreciated before lockdown. Suddenly, we were all forced to live a simple life and make the most of our homes, our gardens, the outdoor spaces around us and the people we live with. 

Grocery bills may have increased, to begin with, but then we found time to make food go a little further and reduce our food spending. We stopped using the car and cut out commuting costs. No more taxis, no more unnecessary and expensive meals out. And in some ways, this made many of us a little happier. 

 

How to carry lockdown savings into normal life?

There’s no need to spend more post-lockdown

  • Save eating out for special occasions and put the money saved into a savings account
  • Remember to keep things simple when making weekend plans. Do you need to get in the car? 
  • If you enjoyed free activities like cycling and walking in lockdown, keep these hobbies going and make them central to your leisure time and fitness routine. Do you still need that gym membership?
  • Host friends at home instead of meeting for expensive meals out
  • Drinking at home is far cheaper than going out – and you can put the money saved in the bank!

4. You can save a fortune working from home

Working from home has become the new normal for so many of us. It’s been a wake-up call to big businesses everywhere: employees CAN work effectively and efficiently at home, saving everyone precious time and money. 

No-one likes commuting. Before COVID, so many of us were spending an hour or two each day in our cars or on cramped trains, trying to block the world out with our headphones or newspaper. And all of this simply to get to our desks and start the working day. Already, it seems a bit crazy, doesn’t it? Major firms, including Twitter and Fujitsu, have said that they will make working from home a permanent policy for their employees and past studies have suggested that productivity increases by around 13 per cent off the back of home working. It’s a win-win from a financial and lifestyle perspective.

How to make working from home a long-term option

Steps to help you adapt to a new life working from home

  • Invest a little upfront in a decent chair, laptop and desk
  • Research local hot-desking offices or WiFi cafes for alternatives when you need a change of scene
  • Shut your laptop down after the working day is finished and close the door to your workspace if you can
  • Allocate the money saved on your commute to another area of your household budget so you can see and enjoy the benefits
  • Meet regularly with team-mates if possible and build exercise into your daily routine.
  • Make sure your internet connection is decent

Nothing about the spring/summer of 2020 has been easy or predictable but our Moneyboat customers have adapted to their financial challenges in remarkable ways. Let’s not forget what we have learned about how to budget money during the COVID crisis so we can continue to reap the benefits over the coming months and years.

What do most people use a pay day loan for?

If, having read the above, you are still interested in taking out a short-term loan, there are a range of uses for this type of lending. Most people only tend to seek out payday loans when they are in need of quick cash to cover a cost they will be unable to cover until their next payday. If you don’t have a regular income, are unemployed, or have a history of poor credit, you may struggle to be accepted for a pay day loan of any kind.

Common uses for payday loans:

  • Covering the cost of getting your car fixed
  • Getting a household appliance fixed
  • Covering the cost of other domestic repairs
  • Covering unexpected costs, such as:
    • a dentists bill
    • medicines or prescription costs
    • a school trip or meals
    • essential clothing, such as coats and shoes

Despite APR being a poor measurement for payday loans, luckily, consumers can find out everything they need to know through provider websites, online loan calculators and comparison sites. This research will help you, as a borrower, to find the right loan at the right rate, for you.