Staying on top of your finances is not simple at the best of times, so during unprecedented situations, the task is even more difficult. With the economic impact COVID-19 had in 2020 expected to be felt for the foreseeable future, many people’s finances have taken a sharp downturn in fortune, whether it be due to business closures, being furloughed or not being able to support your essential outgoings.
Here are some of the ways financial independence has been impacted by the pandemic.
Those looking to borrow money in the aftermath of the pandemic may have found doing so difficult, even from lenders they would normally have no problem using.
Many of the largest financial institutions pulled back on lending activity due to uncertainty caused by having to close high-street stores and furlough staff. This meant borrowing anything from a personal loan to credit cards and overdrafts was few and far between.
There were still other alternative options available for those needing money quickly in a crisis, such as payday loans that helped people resolve an unexpected or urgent bill with flexible repayments. The traditional lenders not being able to help meant borrowers had to look elsewhere or rely on their savings to help temporarily. However, for those losing their jobs or on a reduced income, their savings may not have lasted long.
Whilst some people were able to continue working from home during lockdown restrictions, many others had jobs that could not be done remotely. This meant many companies took advantage of the furlough scheme to help offset the costs of paying employees that could not work, helping them maintain their essential outgoings.
However, before schemes like this came in, many companies acted quickly to unfolding events and redundancies and job losses were seen. Even some that were furloughed eventually lost their jobs due to ongoing uncertainty as well as businesses, like those in retail, seeing permanent closures and downsizing.
To counter the widespread loss of income that many experienced, some lenders offered repayment holidays on mortgages and loan products to help. Those previously with enough income to cover all outgoings and who felt financially independent were soon in need of these types of schemes to avoid deeper financial difficulty.
With a reduced income, many people turned to their savings to help make ends meet. However, for those who were not in a healthy saving habit, this resource was either non-existent or only able to help for a short period. Savings accounts in general were impacted by the pandemic, with interest rates lowered meaning very little being earned on savings.
Those who invested their savings into stocks and shares to help them grow found that the value had reduced overnight. Many people went from being financially secure to suddenly having very little to rely on. However, for those that were still earning during the pandemic, some were able to boost their savings.
Working from home meant reduced travel costs to a workplace. This money was then able to be put to one side considering lockdown restrictions closed many things people spent their money on. Those who managed to curb their online shopping habits were able to start saving much more than before.
A renewed focus on the importance of savings and having financial independence became apparent for many people, with the likelihood this will continue post-pandemic high. As people realise just how quickly things can change in a crisis, taking financial independence for granted going forward is something best avoided.
Interesting related article: “What is Personal Finance?”