Tips for Navigating Uncertain Financial Times
Guest post by Danielle Herman
The economy has been up and down for Brits the last few years thanks to the uncertainty of Brexit. We have seen prices of condiments go up, dubious chicken alliances made and lots of dithering on whether we are actually going to leave.
This uncertainty has led to lenders being more cautious with larger projects, some larger building projects being paused and industries seeing work drying up.
These job losses and corporate downsizing have all taken their toll on the average joe’s income. While experts disagree on the recovery from Brexit or lack of, some households are simply trying not to go broke..
Helen Polozzo, a Mother of two from Muswell Hill, London, is experiencing the economy’s effects first-hand. As a self-employed single mother in the garment industry, Polozzo has watched her income plummet in the past year. She has received fewer and fewer contracts, and the contracts she did obtain paid less and less.
“I find smaller jobs, but have not yet landed a major contract like I used to be able to find,” Polozzo says. “Hourly rates are also down on a few years ago, so I’m doing less work and getting less money.” Polozzo’s ex-husband was also hit by the garment downturn, leaving her family in a fairly stressful situation, but she has managed to adapt.
Develop a Plan
Katie Hammer, Senior Director of development and communications for the Foundation of Financial Planning, a non-profit service offering confidential financial guidance, free consumer credit counselling services and debt management assistance, believes that families need to work together in order to remain solvent during times of financial difficulty. “It’s a family affair,” Hammer says. “Communicate openly with your family. Ask them to assist you in reviewing where the money goes and determining what areas can be trimmed. This keeps everyone involved and provides support during times of crisis.”
Hammer suggests that you stop spending money on anything but the bare necessities, and you may want to consider selling assets to keep afloat. “Assess your situation and set up a survival budget,” she says. “First, determine the amount of take-home income you can realistically count on. Then take into account your set monthly payments such as housing, vehicles and insurance, and then consider your current variable expenses such as costs for food, utilities and transport.” When setting up your budget, don’t forget to consider periodic expenses such as vehicle registration, insurance or school tuition.
“Stop charging and overextending yourself,” Hammer says. “You will not get out of this problem by attempting to get more credit. If you know that the income interruption is only temporary, then a small loan to tide you over may be appropriate.”
If you are falling behind on your bills, the most important thing you can do is to communicate with creditors. Let creditors know your situation. They may have programs to help you through the period of unemployment.
“Try to realistically determine how long your income will be reduced,” Hammer says. “Create a plan for repaying your debt to each creditor by determining a reasonable amount to pay each month. It is best to contact your creditors before they have to contact you.”
After Samantha Donovan’s husband lost his job, they realised that his unemployment benefit amounted to less than a quarter of his previous income. Economising became a way of life for the Donovan family. Donovan, the mother of two from Chingford, began shopping at discount stores and running errands all at once in order to save petrol money. Even their pets have felt the pinch as they bargain-shop for the cheapest dry pet food they can find.
Polozzo also had to dramatically reduce her household’s expenditures. “I cancelled the cleaner and tennis lessons first thing,” she says. “Then when it became clear things were not quickly picking up, I pulled the girls out of their after-school club. I cancelled any optional expenses and cut back as much as I could on services like NetFlix, Sky TV and lowered my phone plan.”
Hammer agrees. “Trimming luxuries such as satellite TV, mobile phones and dinners out can help make ends meet during tough times,” she says.
“I cut the food bill down drastically by careful shopping, and we never eat out,” says Polozzo. “We shop for clothing at charity shops and clearance racks about 90 percent of the time and buy fewer clothing items for sure. We use the library rather than the bookstore and look for free entertainment where possible.”
Don’t Eliminate All the Fun
While you may be cutting back on some of the entertainment your family is used to, don’t eliminate all the fun.
Though the Donovans have worked hard not to let their financial stress affect their family relationships, it isn’t easy. “We do have times when the kids want to do something or need something, and we have to postpone it or say no because of no money,” Donovan says. “They are a bit tired of hearing it, but are doing better at understanding.”
According to Hugh Duggley, a Senior Financial Planner for SimplePayday, an emergency cash lender in London, cutting back on entertainment doesn’t have to mean cutting out entertainment all together. Many local libraries now offer free movie rentals, and discount movie theaters are becoming more popular.
Duggley believes that family fun and togetherness is one way to keep the stress of cutting back from rupturing family ties. “Living on a budget and family fun can seem to be on the opposite end of a massive pier” Duggley says. “But if cash is too tight to mention. It’s super important to incorporate fun days out into the weekend or downtime, otherwise living frugally becomes a neck vice gradually getting tighter. Until you flip and blow the lot… down the casino, for example.”
Duggley also suggests that you re-discover the joy of taking walks together as a family. “Whether it’s taking a stroll around the block every evening after dinner or walking in the local park, it’s a great way to spend some time together and get a little exercise in the process,” he says.
Once you’ve weathered a downturn, Duggley suggests you plan for the next – just in case. Hammer recommends families begin investing in themselves, especially considering today’s economic climate.
“The safest place for someone’s money is in their own accounts,” Hammer says. “We recommend that people invest in themselves and their financial futures by building an emergency savings fund equaling three to six months worth of income. This can be the difference between survival and disaster in the case of unemployment, major illness or other financial hardships. The biggest mistake that families can make is not saving money for a rainy day. In those instances people often turn to emergency cash loans and lenders. By continuing to incur debt and limit savings, consumers are placing themselves in a precarious and vulnerable situation.”
The most important thing for families to remember is that no matter what the state of the economy, economising is a good habit that can always come in handy. And with careful planning, even the worst financial surprises can be survived and overcome.
5 Tips for Surviving a Financial Emergency from Foundation of Financial Planning