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I don’t need to tell you about the absolute carnage COVID-19 has wrought worldwide. People are dying, and my boyfriend’s pushing-100-year-old-grandad even caught it (he’s fine now btw!). We all know people whose livelihoods are under threat, but what if you’re… you know, doing alright? Or maybe even better off?
Are you someone who’s worked all the way through the coronavirus pandemic, you’ve got a job in an industry that’s unaffected or has even done well out of all this misery? Or you’ve received a hefty refund for a holiday you were supposed to go on? You’re also not paying for a season ticket any more and have been socially distanced from all your expensive hobbies… and maybe your money is no longer disappearing on brunches, cocktails, meals out, mini-breaks, theatre trips, TK Maxx or beauty treatments?
You aren’t alone, and the stats are pretty surprising. Studies have shown that the average Brit is £900 better off because of coronavirus. According to UK Finance, credit card transactions were down 50% this April compared to April 2019, and Yolt released a statement saying the following: “On average, Yolt users put 48% more into savings accounts and 81% more into investments in April than in February of this year.”
Although my work life is consumed by creating content for people who’ve seen their income plummet, I’m actually doing OK, too.
But what’s next?
Pay off debt
I’ve heard from a few friends that they’re using what they’ve saved to pay down their overdraft and credit cards. If you have any debt that you’re paying interest on now, or will be in the near future, this is a great idea.
(NOTE: I don’t mean student loans, if you lose your job, you can stop paying them, and they’ll eventually be written off if you don’t repay them in full. No other debt is like this.)
At the moment the interest you’ll earn on savings is absolutely dire, so I’d wager any extra money you have would be better placed clearing some of those cards.
In the case of my friends, these debts are years old, and they’ve been slowly chipping away at the balance, being slowed down by the interest added each month. It’s kind of amazing how a few months of increased income (in one case) and smaller expenses have allowed them to almost totally wipe their debts.
I don’t write a lot about debt on this blog. Luckily, my own personal history with debt is pretty short, and I never want to co-opt experiences I don’t have.
This won’t be forever
Yes, you got money back from your season ticket. BUT, and it’s a big one… you’re going to eventually need to buy another season ticket.
My season ticket refund was less than the cost of a new season ticket (obviously) and my next season ticket loan payout isn’t until February. So I’m going to need to stump up an extra £600+ to cover the shortfall, and I won’t see the benefit until next year. I’ve worked out I’m going to have 6 months of “free” travel in 2021, but at the moment, this extra money can’t be spent in the meantime.
It’s the same for holidays. You’ve had your money back, but what happens when the airports start opening up again… You’re going to book another holiday, right? Will they be cheaper or more expensive by that time? Who knows. The smart thing to do is to start a sinking fund, you know these big ticket items are coming up, start saving now and it’ll be less painful when they do.
Make sure you keep those savings earmarked for this purpose somewhere easy access. You don’t want to lose out by investing your money over a short period of time. Unfortunately, interest rates on savings accounts are poor right now, but at least you won’t be going into minus figures.
One extra tip: if you have any refunds just sitting in your credit card account, take them out ASAP. It’s actually a negative on your credit score when your credit card company owes you money.
It’s a weird quirk, but an easy one to avoid falling victim to.
Pension
Got enough in savings for an emergency fund, plus sinking funds in place for those upcoming expenses? Here comes the sort of boring idea… put the extra money into your pension. Would you believe that the pension I transferred over into my SIPP at (maybe) the peak of coronavirus hysteria is already up 22%… and that was only in March. I’m 28, I won’t actually see that money until I’m in my sixties, there’s so much more time for it to grow.
Before you invest money in a private pension, make sure you’re making the most of any pension match offered by your employer. Even if you only add an extra few percent of your pay while you’re saving on your commuting costs, it will make a big difference when compound interest works its magic.
As always, I’m not a financial adviser so do your research before you lock money away somewhere you can’t touch it for 40 years.
Lifetime ISA
If you’re not a homeowner, but you’d like to be one someday – you’re unlikely to regret putting those extra savings into a LISA. It’s a complicated product, but long story short it’s a savings account just for first time buyers or retirement that pays 25% interest. Read my review of using a Lifetime ISA to get £6k towards my house, totally free.
Investing
Over 40 or already owned a property? Why not try out investing in a Stocks and Shares ISA? Find out the benefits in this blog post. If you’re worried about confusing jargon and choosing the wrong share, plenty of platforms give you a choice of risk then they do all the research for you. There’s a risk you’ll lose money, but it’s isn’t as scary as you think, I promise. I’ve started writing a lot about my teaching myself to invest, and you can follow my journey here.
As always, I’m not a financial adviser, so do your own research. Ultimately, as long as what you do with any savings will look after future you, there can be a silver lining to this situation. It’s always good to think, would me in five years time thank me for doing this? Buying £360 trainers, or turning that money into £450 towards your house deposit… it’s an easy pick for me!
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