As the latest Coronavirus lockdown slowly begins to ease, many of us will understandably be anxious to resume doing the things we were able to do before March last year.
Whether it’s going to bars, holidays, live sport or music or hitting the shops, it can be easy to forget how all these costs can mount in a short period of time.
Even just the cost of coffee and lunch bought from a shop near the office rather than made yourself at home quickly builds up.
So here are some key tips to help you keep control of your finances while taking advantage of the gradual return to everyday life.
Are you one of the millions of people who spent less on commuting, buying lunch or meeting colleagues for drinks after work over the past 12 months?
During the peak of the first nationwide lockdown between April and June 2020, households saved almost £55 billion, or just under 30% of their disposable income, according to figures from the Bank of England.
As lockdown eases, some experts predict that the amounts households will keep stashing away in savings will go down. While some may be looking to put down-payments on foreign holidays, others will simply be less able to save as absent expenses return.
If you’re in the fortunate position to be able to continue putting aside some of your disposable income each month into savings, there’s no reason to stop this good habit.
Experts suggest that it’s a good idea to keep an emergency fund of three to six months’ worth of living expenses in easy to access cash savings. This will help you to quickly deal with any unforeseen bills or events that prevent you from working for short periods.
Just as we became a nation of savers over the past 12 months, we’ve also reduced the amount we borrow on credit cards. Bank of England figures show that in February we borrowed 21% less on our credit cards compared to a year ago.
But there are two sides to this story. While those lucky enough to keep their jobs on full pay have been busy paying off their debts, those less fortunate have seen finances stretched - often turning to credit cards to bridge the gap between essential outgoings like rent and food, and their reduced incomes.
If your credit card bills are larger than expected due to the impact that the pandemic has had on household incomes, there are a number of quick ways to help you manage your card debts.
Shifting existing credit card debt on to a 0% balance transfer card can be a great way to help cut interest payments. Moving your debt on to a 0% card means that for a set period you will not be charged any new interest.
Think carefully about if this option is for you, and whether you can set a realistic budget for paying off your balance within the 0% period.
Take a look at top balance transfer credit card deals.
Before you apply for a card, you can get an idea of which cards you’re most likely to get with our eligibility checker tool. Using the tool will not affect your credit score.
If you’ve been cooped up at home for most of the past year you’ll want to take advantage of the opportunity for more time spent socialising out and about with friends and family. But make sure you do not let your enthusiasm cause you to splurge money you cannot afford.
A great way to take charge of your cash flow is to make a budget. This will help you understand how much you can spend on entertainment, trips and seeing friends over the next few months.
An online planner tool will be helpful for doing this. We have a free budget planner tool to put you in control of your spending.
You keep track of your pay, benefits and your regular outgoings in one place. You can save your budget plan and return to it at any time.
Tools like the one above are great to help you plan your spending. There are also simple ways of keeping track of what you’re spending day to day, on your phone or computer.
Here are some free tools that you can use:
These services pull in information from your bank account using a system called ‘open banking’. Read more about how open banking works.
Once you’ve compared the money coming in to what you want to spend, there are several ways that you can put together a budget.
One of the most simple and effective is an ‘envelope’ budget. This simply means separating your money out into pots, or envelopes, for spending on different things.
For example, you can create a pot each for household bills, food shopping and rent or mortgage payments.
If you’re comfortable doing most of your banking with your smartphone, you may find that your banking app lets you create these pots to separate out your money from within your current account. App-based banks like Monzo and Starling can offer this service.
You can read more about choosing the right current account for you here.
It’s always a good idea to check your regular household bills. Some companies, like energy providers, have been known to make mistakes when charging customers.
While the days are getting warmer, it’s vital to check that you’re being billed properly for the energy you are actually using.Now could also be a good time to see whether you can save money by switching suppliers. If you're on a variable rate tariff, you may be able to save hundreds by switching to a fixed tariff.
While this one may be a way off yet, there’s no harm in planning your commuting costs in advance.
Getting the train to work
With most forms of public transport it tends to be cheaper to buy travel cards rather than pay for individual fares. However, the cost of a season ticket for your rail or bus journey can seem like a lot of money to pay up front.
Sites like Commuter Club may be able to offer you better value for your commute. You may also want to speak with your employer to see if they can offer you an interest-free loan to cover the cost of a season ticket.
If this kind of scheme is not available to you, then you might look at buying your season ticket with 0% purchase credit card and paying it off in monthly instalments. If you choose this option, remember to pay off the cost in full before the introductory interest free deal comes to an end.
It’s also worth investigating new options being launched in response to the pandemic. If you’re only going back two days a week, a season ticket might seem redundant, but the new options set to offer 5 return journeys at a 15% discount could work well if you’re only going in one or two days a week.
Cycling to the office
For those able to cycle to their place of work you may be able to take advantage of government-backed Cycle to Work schemes designed to make it cheaper for you to commute by bicycle.
The scheme helps you save money by spreading the cost of a bike used to travel to work over monthly tax-free instalments.
Your workplace registers with one of the scheme providers. You then choose the bike you want and your employer pays for it. You then pay your employer back in monthly chunks taken out of your salary, before any tax is deducted.
Whether you’re an employee or you work for yourself, there are ways you can claim back costs against your tax bill.
If you’ve had to work from home due to Coronavirus restrictions, even if only for one day since 6 April last year, then you can claim tax relief for the whole year to 5 April 2021.
Depending on your tax band, you may be able to claim up to £6 a week back tax-free.
For full details on claiming tax relief on your job expenses log on to the GOV.UK website.
If you’re self-employed and have been working from home due to coronavirus restrictions, there are a range of costs that you may be able to claim against your tax.
This could include part of the following bills:
To work out how much you can claim for, you’ll need to work out how much time you’re using your home as a workplace.
If you work from home for more than 25 hours a week, you might be able to use HMRC’s simplified expenses system for working from home.
You cannot use this expenses system to claim internet and or telephone costs - you’ll need to work these out yourself.
Claims are submitted when filling in your self-assessment tax return, so make sure to keep good records of your costs.
If you work through a limited company, the rules for claiming business costs against your corporation tax will be different. Log on to the GOV.UK website for more information.
When the first nationwide lockdown first hit in March last year, many people scrambled to cancel payments for services like gym memberships, as they would not be able to make use of them.
Now it might be worth taking another look to see if you’re paying monthly fees for services that you began using as a result of lockdown, but now decide you do not need.
Maybe that extra streaming service subscription you took out to keep yourself entertained during the long weeks stuck at home will not be used so much any more?
Perhaps you paid for some home exercise classes that you’re not going to have much use for now that you can attend classes with your friends at the gym again over the next few months?
Whatever your situation, take a good look at your bank statements over the past few months to see if there are some regular services that you’re not going to need and cancel them as soon as possible to avoid getting charged again.
Over the pandemic a lot of people have changed their spending habits - as well as take bigger steps including moving home, starting families and embarking on home improvement projects.
All of this could impact your credit record - even paying off a debt will change things - while people taking on tailored support from lenders after coronavirus payment holidays expire could also see that reflected in their score.
If you have not already explored your credit file, there are some easy, free ways to do it. There are three main credit referencing agencies (CRAs) - Equifax, Experian and TransUnion.
These firms compile great swathes of information about you to build a picture of your financial history. Banks, utilities providers and lenders also report into these agencies with information about your finances before making a decision about which products to offer you.
You can sign up to a range of free services to check what is on your credit record with a credit reference agency, including:
*These services offer access to your credit report free for 30 days, before charging for a monthly subscription
Although shops, bars and restaurants are slowly opening up again, this might not be much comfort if you’re struggling financially.
If you’ve been building a budget, you might find that you have upcoming bills that you’re going to find it hard to meet. It’s a horrible situation, but there are places you can turn to for help:
PayPlan is an independent provider of free DMPs