I’ve been writing about family money for the past 30 years and this is the hardest time I’ve had to find the right tone and approach.
When NHS employees face tremendous stress every day and put their health on the line, other vital workers struggle to provide us with food, and many face the prospect of losing jobs.
But while many of us struggle with reduced income, ironically, others are better off having had to cut social lives or pay commuting.
Therefore, I would like to address some of the issues raised by those eager to help families and the wider community, as well as ideas on how to best use the extra time we will spend at home.
Many of us may struggle with a lower income, while others, ironically, are better off because they have had to cut social lives or pay for commuting
IT’S TIME TO GET YOUR BILLS ORGANIZED
If you usually commute or socialize a lot, you may have several extra hours on your hands. Instead of vegetating for Netflix, why use a little of that time to get your bills under control?
Make a list of organizations that you pay regularly, such as energy, telecom and broadband companies, TV companies and credit and shopping cards, then set a goal of picking one out every week.
An important item should be your energy bill. The clocks may have progressed, but if your family is at home all day, your energy bills are sure to rise.
If you don’t have a permanent contract with fines, use a switching service such as Energyhelpline, Which? Switch or Uswitch to find the best deals.
And if your kids are marching to the tune of Greta Thunberg and demanding that we reduce greenhouse gases, now is a good time to let them practice what they preach by turning off lights, computers, and TVs when they’re not using them, and a sweatshirt in instead of turning up the heating.
Check if you really need those complex TV packages that you subscribe to. Remember that the core channels like BBC 1, 2 and 4, ITV 1,2,3 and 4, Channel 4 and Channel 5 are all available through a normal TV antenna at no cost on Freeview or with a satellite dish on Freesat.
Many additional sports channels have a monthly ongoing contract, so you can disable them and restart later.
IF YOU FLUSH FINANCIAL
I hate talking about it, but while some are struggling, others will find they have extra money – especially the young ones.
If you usually eat and drink several times a week, you may find that your bank balance looks fairly healthy.
If you usually eat and drink several times a week, you may find that your bank balance looks fairly healthy
So what can you do with this money? I would suggest starting with paying debts on store cards and credit cards and then tackling your overdraft.
Check which interest rate each charges and start with the most expensive.
If that’s not a problem, start a fund for rainy days that you can dive into if your financial situation worsens.
DO NOT PAY THE LOAN PAYMENTS
Mortgage interest rates are falling.
That’s not much comfort if your income has gone down, but if it remains the same, consider telling your lender that you don’t want your monthly payments to be cut.
Paying extra every month on your loan will shorten the time you need to borrow, meaning you pay a lot less interest in the long run.
More than this, it will help build a buffer if you ever need to cut payments in the future.
HELP CHILDREN WITHOUT TAX RIGHTS
A recurring theme in my email inbox is older people who want to help their children and grandchildren but are concerned about tax rules.
While the over-70s may have been advised to lock themselves indoors, many will not see their income drop significantly – although some will have to either quit work or lose money in the stock market.
Here’s a typical question: “My wife and I are both in our 80s and have three grandchildren we want to support while the coronavirus restrictions are in place.
We have a modest amount of savings and can afford to send money to them. “According to the tax authorities, I can earn up to £ 3,000 without fines.
“If I donate over £ 3,000, I will owe tax up to seven years after the donation.”
With inheritance tax you can give as much as you want to your children and you personally will not receive a tax assessment
Let’s take away some myths about inheritance tax (IHT). There is an annual fee of £ 3,000 that you can give away every tax year (April 6 to April 5) without affecting your inheritance tax position.
You can wear this for over a year. So if you didn’t make a donation in the 2018/19 tax year, there’s just enough time to make use of it.
Most importantly, you can give your children as much as you want and you will not get a tax assessment personally.
If you die within seven years of making a large donation, that amount may be deducted from the zero-rate group IHT on your estate.
This bond costs £ 325,000 per person and can be shared between married couples and legal civil partners.
IHT is charged 40 percent higher. So if you give away £ 50,000 today and die in a year your zero zero rate band will be reduced to £ 275,000. (Although you could offset some with the £ 3,000 gift fee).
If you are a homeowner and your estate is less than £ 2 million, you will receive an additional subsistence allowance as long as your home is left to children or grandchildren; this includes adopted, foster or stepchildren.
This supplement will increase the total IHT tax-free allowance from April 6 to £ 500,000 per person – so £ 1 million per pair.
Most importantly, there are no tax rules that prevent you from giving as much money as you want to your children or grandchildren now – and you don’t pay tax on the money you give.
There may even be an advantage, because as long as you live seven years, you have lowered the final IHT account on your estate.
There are a number of things to keep in mind. The first is that you should be on your guard if you expect to need care soon.
There are rules by which your council can try to recover assets that you have recently given away, if you cannot afford to pay for your own care and they think you have donated the money to avoid contributing in healthcare costs.
Age UK has an excellent fact sheet online at ageuk.org.uk. The second concern is whether a lump sum from you could impact the benefits they already receive. If you are concerned, contact your children first.
KEEP PLAYING, KEEP PAYING
If, like me, you have booked theater, event or cinema tickets, as long as you can afford it, don’t rush to claim your money back.
Many places hope to move events. My local independent cinema runs on a small budget. I have deducted the cost of the purchased tickets.
Small, independent places in particular need breathing space. By not demanding your money, you can help pay someone’s wages.
Personally, I’d rather lose the cost of a few movie tickets and a night out at the Bootleg Beatles than see these places go bust. The same goes for deposits at small restaurants.
If you have booked theater, event or cinema tickets, as long as you can afford it, don’t rush to claim your money back
Give them a chance to reopen and deliver the meal they want, or you may not get to eat there in the future.
Do you have a cleaner or other help at home? If you can afford it, you should try to pay at least part of their normal money.
The same goes for those who attend private lessons, whether they are sing-alongs, Zumba or a foreign language.
Many are trying to run these online, so if you can afford to keep paying and joining, do so.
LEARN THE YOUNG ON FINANCING
Many parents teach children at home. I would like to make a plea for personal financial education.
There are a number of brilliant resources on the youngenterprise.org.uk website. But you can go further. Why not involve your children in your family budget?
Show them how you struggle to make ends meet. Introduce them to the idea of seeing how much things cost per year – we’ve gotten so used to getting monthly prices.
Few of us, especially the young, ever look at how much things will cost over a whole year. Show them some of your credit card accounts, especially if you pay interest.
And, again, show how much that is over a year.
Explain that every pound paid to a bank with interest is a pound you don’t have to spend that month.
GIVE GUARANTEES THE BOOST THEY NEED
Many of us may want to do something about charities that struggle to help those in need. If you are giving money, try using the Gift Aid scheme.
This increases every £ 1 you give to £ 1.25 because the charity can reclaim the tax on your donation. All charity needs are your name and address with a statement that you are a UK taxpayer.
Those selfish shoppers who had stacked their carts before the closure likely ignored the boxes supermarkets issue for food banks.
When shopping, don’t forget to buy something to donate. Many more people will count on help from these brilliant operations right now.
WHAT ABOUT INVESTMENTS?
The shocking declines in the stock market have wiped out 20 percent or more of many people’s savings.
More traps may come before we bounce back. Either way, if you believe in the Western way of life and the market economy, you have to believe that stock prices will rise again.
I remain committed to regularly invest in declining markets and increases. I recently bought more shares in soft drink company Fever-Tree when the price dropped to £ 10 per share from previous highs of over £ 30.
Time to invest? If you believe in the Western way of life and the market economy, you have to believe that stock prices will rise again
I do not claim any special insight. I just don’t think this has suddenly become a bad company.
Although people cannot drink in pubs and clubs, they can drink at home. And when this is over, I suspect the partying will go into overdrive.
I also recently bought more shares in the Scottish Mortgage Investment Trust, which invests in solid companies such as Amazon, the Chinese equivalent of Alibaba, Tesla, video game company Tencent, and Illumina, a DNA sequencing company.
I avoid buying in the style of an investment fund known as an open-end investment company (Oeic) because they use forward pricing.
This will see all transactions made in the afternoon the day after you placed your order to buy. In times of volatility, the price may increase a few percent between the time you place your order and when it is executed.
Then it could collapse the next day. I want to know how much I pay, so mutual funds and exchange traded exchange tracker funds are my preferred options.
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