How to deal with a reduced income due to coronavirus

Whether you've lost your job, reduced your hours, been furloughed or are unable to work due to illness, if your income has decreased there's help available.

Whatever your situation, it's important to make sure you're receiving the right amount of money each month. More information about how coronavirus is affecting benefits can be found here. You can also use our benefits calculator to see what you could be entitled to claim.

The Financial Conduct Authority (FCA) has announced plans to require creditors to offer further support to those with overdrafts, loans and credit cards.

This support includes:

• Interest-free overdrafts of up to £500 for up to three months
• Payment holidays on loans, credit cards, store cards and catalogue accounts for up to three months
• Changes to the new overdraft rules introducing a flat rate of interest on all overdrafts to make sure nobody is worse off as a result of the changes
• Ensuring customer credit ratings won’t be affected if they use a payment holiday or an interest-free overdraft

The proposals have now been approved, and came into force on 9 April 2020.

Your creditors may also be able to:

• Reduce or delay your mortgage payments
• Reduce or delay your rent payments
• Reduce or delay your unsecured loan repayments
• Allow you to access your savings early
• Offer you more credit
• Reduce or pause your gas or electricity bills
• Reassess your energy arrears
• Pause or reduce your car finance payments

You can find more information on what creditors are doing to help, here.

Not all creditors have announced what they're planning to do for their customers if their finances are affected by coronavirus. However, you should contact your creditors to discuss your finances as soon as possible if your situation changes. They may be able to help.

Most creditors are willing to be flexible and supportive to anyone who's affected by coronavirus, to try and prevent them falling into financial difficulty. It's important that you get in touch with them as soon as you can.

A cash crisis could be caused by anything from delayed benefits to job loss that leaves you severely short of money that you need for essentials like food. If you find yourself in this situation, help is available.

If you're in a cash crisis situation and urgently need money for food or other essentials, you can find advice on getting the help you need here.

To take control of your finances, you need to know how much debt you have and what you need to focus on paying first. This isn’t just the total number of debts, but the balances owed on each one, including interest.

Many people find this daunting. We appreciate how difficult it can be, but you’re taking a huge step towards understanding your finances.

• Open your letters
  Search through letters you’ve received recently for your most recent statements from your bank and from your creditors. If you use your mobile to manage your accounts, open your app or internet banking and search through the last few statements. You’re trying to find out how much is owed to each of your creditors (the balance), and what you pay each month (the repayment amount). Write these figures down every time you spot one. You’re looking for the likes of your mortgage or rent payments, credit or store cards, catalogue accounts and personal loans, among others. Don’t worry about the amount of debt at the moment.
• I don’t have the detail. What can I do?
  It’s possible to get up-to-date balances on your debts by checking your credit file with credit reference agencies. There are three main credit reference agencies: Experian, TransUnion and Equifax. They can give you online access to your current balances. It’s worth checking your credit file with all three credit reference agencies. Some creditors will use one agency but not the others, and you don’t want to miss any important information.
• Deal with any urgent paperwork straight away
  There are lots of types of debt, and lots of different types of creditor. Some bills are classed as priorities because the consequences of not paying them are greater than the consequences of not paying others. If you’re trying to pay different creditors, it’s important to understand the priority of each. You can work out which bills to pay first here.

Add together all the income you get each month. Make sure you include everything, whether it's wages, benefits or pensions. If some of your income is paid weekly or 4-weekly, you’ll need to turn these figures into calendar monthly ones.

To do this you need to multiply the weekly figure by 52 and then divide this by 12. This will then give you a calendar monthly figure to include in your budget.

You need to include amounts for things that you only pay for once a year or less often, such as Christmas, car repairs or vets bills. To do this you need to divide the yearly cost by 12 to give you a monthly figure which you can include in your budget. You can then set this money aside until the bill is due.

If you’re not sure what you’re spending your money on, try writing down everything you buy over a month. This will give you a clearer idea of your regular spending.

If you're not sure you can afford to pay your bills, we can help you make a budget.

Use the information you gathered in steps five, six and seven to see where your money's going, make sure you've got all your essential spending covered, and spot where you can make savings. You can find more guidance on how to make your budget here.

If you're still worried about your finances after making a budget, we're here to help you.

We offer advice to help you deal with your debt. You can get advice online 24/7, and where appropriate, we'll recommend a practical debt solution to help you pay off or write off some or all of your debt. We can advise you on all available solutions, and make a recommendation that best fits your circumstances.

You'll also receive a reference number to share with your creditors, so they know you’re getting help from us. Our online service allows you to save your progress, so you can complete your debt advice session at your own pace.

Get debt advice now

When you listed out your outgoings, you might have spotted obvious areas where you could easily save a little money each month. However, if you didn't and you're already cutting back, there may still be small changes you could make that could add up to significant savings over time.

Saving on food, and housekeeping

• Plan your meals for the week, along with cooking them in batches and freezing them, to save you time and money
• Use multi-purpose cleaning products, or natural products such as lemons, distilled or white vinegar, or baking soda to clean around the home

Personal costs

• Use up your toiletries before you buy new ones
• Use a bar of soap instead of shower gel, as it lasts longer
• Use the correct amount of toothpaste (the size of a pea) and shampoo (a 50p piece for long hair, less for short hair)

These small measures can make your toiletries last much longer.

Saving on utilities

• Use a price comparison website to see whether you could be getting your gas and electricity from a cheaper supplier, and switch
• Switch off your electric appliances at night. Having them on standby costs money. Unplug phone chargers when you don’t need them
• Limit your washing machine and tumble dryer use where possible. Rather than doing several small loads, wait until you have a medium load. Hang up your clothes to dry and save using a tumble dryer for towels and bedding

Our energy customer guide can help you deal with rising energy bills.

Saving money on communications

Communication is now more important than ever, so make sure you're not driving your bills up when keeping in touch with friends, family and colleagues.

• Check to see if you can get a better deal on your phone or internet contract
• Use wifi to save money on phone data
• Use webchat apps when calling friends and family, especially if they live abroad. The cost for using these will come out of your broadband or data package, avoiding the added expense of a separate phone call

Not knowing what's going to happen can be very stressful in any situation, so in times of uncertainty like this, it's natural that you might be feeling worried and anxious.

However, just because it's normal to feel this way, doesn't mean you shouldn't seek help or tell someone about it. We encourage you to get the help you need as soon as possible, whether it relates to your finances or any other part of your life.

To help take control of your financial future, try:

• Thinking of your long-term goals and how you can achieve them
• Taking the difficult lessons you’ve learned so far and use them to flourish financially
• Enjoying quality relationships with those around you
• Seizing opportunities to improve your health, career and overall happiness in life

If you're feeling particularly stressed and anxious, there are a number of organisations to help. Why not get in touch with MIND or Samaritans for a chat?