Written by 1:20 pm Money & Lifestyle

Lockdown 2.0: Everything you need to know about looking after your money

About 8 minutes to read

Lockdown 2.0. The sequel that nobody wanted. 

With the UK re-entering lockdown on the 5th November 2020 and currently projected to last into December, it’s fair to say that many of us are worried about what the future holds. 

The past year has been a tumultuous one. It’s moved in stops and starts; seen periods of huge community spirit as well as tragic losses and mounting frustration. Movements have burned bright. Innovation has been abundant. But at the same time, our levels of trust in government and scientists have wavered, our perception of risk has heightened, and our mental health has struggled under the weight of relentless uncertainty. 

Behavioural data shows that Britain is amongst the most anxious nations in the world when it comes to Covid-19. Around 80% of people who have been working from home say that lockdown has impacted their mental health. It’s amplified our health-related concerns and more than a fifth (21%) of people worry about how much they’re now spending online

However, for some there has been an upside to Covid-19. There was an air of novelty at the start that inspired us and brought us together. We learnt new skills – from coding to baking banana bread. 

As Nicola Thorp, actress and equality campaigner, told Metro, “Lockdown 1.0 felt useful, at times. Aside from personally slowing the spread of the virus by watching all the true crime series Netflix had to offer, I took time to reconnect with old friends and even with myself a little bit. I sought the silver lining and viewed the momentary break in my life as a welcome one.” 

Quite a few of us found positives when it came to our money too, especially in terms of saving. According to UK Finance, during the first lockdown people were able to save nearly 30% of their disposable income (more than double the previous record set in 1993 at 14.4%).  At the same time, further research revealed that 77% of people had changed their attitude towards saving since lockdown, with a fifth contributing to a new emergency fund and a quarter finding their new savings habit to be rewarding. 

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The fact is that the pandemic has made money an unavoidable consideration, even for the most comfortable of us. As we have discussed in many of our articles, it has forced us to think about our relationship with our money in a new and far more detailed way. It’s meant we’ve had to think about what we earn and how secure that salary is. It’s highlighted the need for a financial safety net. It’s emphasised the difference between essential and non-essential spending. It’s made us approach our investments differently, pay attention to the value of our properties and the long-term concerns of an increasingly unavoidable economic recession on our financial wellbeing.

So is it possible to hold onto those few positives and work through the many challenges of the latest lockdown? Can we take care of our mental and financial health as we set up for round two? The answer, we think, is yes. Here’s how. 

It’s time to practice self-care for you and your money 

It’s essential that if you’re struggling with your mental or financial health and you feel it’s disrupting your everyday life, you should always seek professional help. We’ve shared links for mental health support here and you can find links to financial support at the end of this article. 

But back in July, we wrote, “money and mental health are intricately and inextricably linked. It’s a cycle — financial difficulties can trigger mental health difficulties, and mental health difficulties can cause financial difficulties.”

This is absolutely true – and you are not alone if you’re finding things challenging. 

All of us can take steps to support our overall wellbeing. This is self-care: a holistic approach to your body, mind, and social environment. 

The mental health charity, Mind, says, “Self-care techniques and general lifestyle changes can help manage the symptoms of many mental health problems. They may also help prevent some problems from developing or getting worse.” It’s also fair to say that self-care aims to help us reframe the world so that we can find solutions to even the most challenging circumstances. 

At its most simple, self-care is about ensuring you give yourself what you need: plenty of water and sleep and healthy eating habits. It’s about carving out time for yourself and setting boundaries with others. It’s about setting goals and practicing coping strategies and self-forgiveness. 

Financial self-care works similarly – but alongside looking at yourself and your situation, it also considers the impact of your finances on your wellbeing. It’s about creating a process by which you can feel more in control of your money, learning to take a step back so that you have time to breathe, assess the situation, and take steps that best suit you and your personal circumstances. 

It is also something all of us can benefit from practicing in this latest lockdown. 

How to practice financial self-care for Lockdown 2.0 

  1. Understand your money situation – What do you earn? What do you spend? What are your must-haves – bills, groceries, rent or mortgages? What are your nice-to-haves – takeaways, new clothes, subscriptions? What do you have going towards your future – investments, savings, debts? As we discussed at the start of April, the first thing you need to do is work out your incomings and outgoings, categorise them, and understand your financial priorities. With Lockdown 2.0, take time to review what you spent and saved the first-time round too. You’ll have learnt a lot from those early months, so take heed of those lessons and think about which ones you might want to apply again now.  
  1. Spend time on self-reflection – Money is emotional, so consider how different money decisions make you feel. Take time to reflect on what makes you feel good when you spend money and why, as well as your emotions when you save, invest, pay off your credit card and so on. In usual times, you might find it helpful to think about times where you’ve felt pressured to spend or any purchases you’ve made and regretted. But in this case, you may prefer to focus on the decisions you took in March / April and think about the impact of those choices. For example, if you found saving more helped give you a sense of control or certain lifestyle cutbacks were too much. If it helps, make notes or jot these experiences into a money diary. This will help you when it comes to setting goals and budgeting because you’ll know what decisions best help you feel positive and in control of your money. 
  1. Set a goal – One of the most powerful things you can do as an act of self-care is to set an intention. This gives you a sense of direction and purpose even in the midst of a pandemic. This could be specific – for instance, if you finessed your saving routine through the last lockdown, you may decide that this time round you’ll work on building up your emergency fund. Or it could be more general – such as setting up a framework for your money that’ll support your future self (see our tips on how much to save for your age). 
  1. Make a budget – We come back to budgeting a lot at ikigai, but it’s like keeping a journal or having a weekly planner. It offloads some of the cognitive burden of your finances, helping you keep track of your spending, saving and investing. In lockdown, you may find it helpful to do this on a week by week basis so you can track exactly where your money is flowing and therefore where you can save extra here or there. Ultimately, having a budget is one of the most powerful acts of financial self-care because it truly details our circumstances and allows us to see everything in one place, tracking, monitoring and keeping us in control. 
  1. Adopt mindful money habits – Lockdown has put huge pressure on our mental health, but mindfulness reminds us to step back and assess our values and priorities, recognise our triggers, and enforce our intentions. This time around is different, but even if the original fear of the unknown is diminished, concern for the future still abounds. Set aside some time each week to reflect on your money and how you’ve progressed – consider the things you’ve enjoyed and the things that have brought you any stress, reflect on what you could have done differently and accept that it’s a learning curve, not something to self-flagellate over. Read more about mindful spending here.  
  1. Contribute towards your future self – Lockdown 2.0 will come to an end. Whether it’s December, January or many months from now, it will one day be over. The pandemic will be under control and we’ll find a new normal. Plan for that future. Put money aside for your emergency fund. Pay off your credit cards or personal loans where you can. Invest in a course to learn something new or donate to a cause that matters to you. Look into investing and work out how your wealth can work for you. And think about what treats you might want to give yourself too – perhaps you can save into a holiday pot or a festival fund – you can and should absolutely look for meaningful ways to reward yourself and contribute to your future. 
  1. Talk to someone – Connecting with friends and family is essential to self-care and when it comes to your money, talking with people you trust can be just as powerful. It helps you to feel more confident, give you a different perspective and help you work through the frustrations and stresses. Maybe you can use Lockdown 2.0 to challenge yourself to speak to someone new about money or to find a community where you can read and talk about personal finance, investing or saving. We’ve shared some social media accounts that can get you started and you can also share your questions with us. Get in touch and let’s take on Lockdown 2.0 together. 

What other help is out there for Lockdown 2.0? 

Of course, self-care can only go so far. If you need financial support, then there are options out there. Many of the schemes that have been available through the first phases of lockdown are continuing or being extended or amended into new forms. 

Furlough scheme extends until March 

Announced on the 5th November, Rishi Sunak has extended the furlough scheme until the end of March 2021. Having originally been due to end in December, this is a positive move from the government to help preserve jobs and will mean that those on furlough will continue to receive 80% of their usual salary for hours not worked, up to £2,500 per month. You can work part-time on furlough and it extends to employees on zero-hour and fixed-term contracts too. The scheme will be reviewed in January. 

Self-employed Income Support Scheme for November, December and January 

SEISS has been extended for a third time, following the latest lockdown announcements. This grant will now be worth 80% of trading profits for three months, capped at £7,500. Applications will open on the 30th November and will cover from the 1st November to 31st January. The eligibility criteria remain the same as the first time round, so it’s worth checking the requirements here. Business owners can also look at the Bounce Back Loans and Coronavirus Business Interruption scheme for support. 

Payment and Mortgage Holidays 

According to the FCA, borrowers who have not yet taken a six-month payment holiday will still be able to under the new measures. This applies to mortgages, personal loans, credit cards, motor finance, rent-to-own, buy-now-pay-later, pawnbroking and high-cost short-term credit. However, for those who have already had a six month ‘holiday’, this cannot be extended without it being recorded on your credit file. Currently, borrowers have until the 31st January to request a payment deferral. Those who can resume their payments are encouraged to do so, whilst those still experiencing financial difficulty are recommended to speak to their lender to talk about their options or to visit the Money Advice Service. 

Tax relief for Working from Home

If your employer requires you to work at home, you can – and always have been able to – claim tax relief for increased costs due to working from home, eg, heating and electricity. Right now, because so many of us are working remotely due to the current restrictions, almost everyone is eligible to claim this relief. There are two ways to do this, with employers either paying you an allowance up to £6 per week extra tax free, or you can claim through the HMRC’s brand new microservice. For more information, you can visit this handy summary from Martin Lewis

Financial health support 

For anyone seriously struggling with their finances – whether it’s due to loss of income, increased debt or simply anxiety around the future, there are incredible support networks that can help. This includes StepChange, who offer the largest range of debt solutions in the UK, including a Covid Payment Plan that aims to give you time to recover your income and regain control of your money. Similarly, the Money Advice Service is a free, easy-to-use money platform, providing tools, information and advice. This includes everything from budget planners to mortgage calculators. The FCA provides an extensive list of trusted networks that offer coronavirus support here.

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We built ikigai specifically for those who want to bring their lifestyle to the next level, by taking better care of their finances.

ikigai beautifully combines wealth management and everyday banking in one single app. And by doing so, it creates a whole new world of opportunities.

Visit https://ikigai.money to find out more.

Maurizio & Edgar, Co-Founders, ikigai

When investing, your capital is at risk.

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Last modified: 23 November 2020