Dealing with the financial impact of COVID-19
The Pentecostal Credit Union (PCU) celebrates its 40th anniversary this year. PCU exists for the sole purpose of improving the economic lives of its members - all of whom have an association with the Pentecostal Church Movement in Great Britain.
Here PCU's Head of Marketing and Communications, Elaine Bowes, shares some advice for dealing with the financial impact of COVID-19...
The coronavirus pandemic is changing our lives and affecting every aspect of it - not least the financial one.
What do you do when you find you no longer have a job, or that your income is substantially reduced? The first and natural reaction is panic. However, to deal with sudden financial loss you have to calm that anxiety and ensure that you don't make important financial decisions in panic mode. Instead you have to craft a plan. The very act of planning will instill calm, as you look clearly at how you are going to handle your situation.
So what should be in this plan and where should you start?
Start by drafting a revised budget that reflects your new financial situation, the amount and source of this income. How reliable is your income and is it subject to change because of COVID? Review your expenditure. Consider cutting non-essentials. Also remember that during the lockdown period, spend on clothing, outings, entertainment etc will be greatly reduced. Then do the maths - income over expenditure equals....? If the balance is a minus, how are you going to make up that shortfall?
Can you use your savings?
Next, look to your reserves or savings - if you have any. If you have savings - how long can they support you and your family? Where are your savings? Can you access them easily if you need to? Importantly, many banks are now allowing customers with fixed term savings accounts to gain instant access with no penalties.
If you don't have savings or they are insufficient to rely on over a longer period, you need to do two things.
Contact your lenders and creditors to let them know you will struggle or not be able to make payments, and ask if you can either establish new manageable payments or have a payment holiday. At the Pentecostal Credit Union (PCU), we ask members to complete an Income and Expenditure form so we understand their situation, and encourage them to plan so that they be equipped to handle the situation in the best way that they can.
Investigate the various financial packages that the government has made available to help those with financial challenges as a result of COVID-19. There are several agencies that can help you, including Citizens Advice Bureau and Step Change Debt Charity. The PCU is helping members by steering them through the various packages to provide support at this time.
Avoid adding to your debt.
It may not be possible to do this, and borrowing may be a short term solution in some circumstances where it is likely that your situation will enable the loan to be repaid. Ensure that you approach reputable lenders where you can attain a loan with good terms, including at a low interest rate. If you are a member of a credit union, approach them first. Borrowing should be a last resort.
You still have a job and your income has not been affected by the pandemic
If your job and your income has not been affected by COVID-19, it doesn't mean that you shouldn't look at your finances. Develop a 'worst case scenario' contingency plan. For example, when the crisis is over, you might not return to work on the same terms you had before the pandemic. Your role or the rate of pay might change. We are told that we are heading for a deep recession, with unemployment levels set to reach record highs. One thing that you can do now is increase your savings. Those clothing and entertainment expenses that you no longer have can now go towards your savings. It may also be good to cut unnecessary spending so that you can increase the amount that you can save.
Income from Investments and savings
For those people who rely on the interest from investments and savings as their income, the recent decision by the Bank of England to cut the base rate to the all time low of 0.1% is bad news. You should look to move your savings to a product that can provide you with an improved return. With fixed term accounts this move may incur a penalty, so negotiate with your bank about this. For information, The Pentecostal Credit Union are currently paying a dividend of 1% to its members - these are instant access savings accounts.
How the Pentecostal Credit Union are supporting their members through this crisis
Like many lenders we totally understand the impact COVID-19 can have on people’s finances and we have developed an approach to try to ease members financial responsibilities as well as support them through these challenges. We have also developed a resource page on our website dedicated to provide information about the government packages available.
We remain committed to providing the best service that we can to our members, which includes being as flexible and as compassionate as we can be, as we all cope with the challenges presented by COVID-19.
As a Christian organisation, we embrace particularly at this time the scripture Hebrews 11.1 ''Faith is the substance of things hoped for, the evidence of things not seen''.
A longer version of this piece first appeared on the Keep The Faith website.