Those who have experienced a financial shock linked to the coronavirus pandemic, such as a job loss or pay decrease, have seen their income drop by an
Those who have experienced a financial shock linked to the coronavirus pandemic, such as a job loss or pay decrease, have seen their income drop by an average of £538 per month, new data suggests.
This is equivalent to almost a full week of spending for the average household, according to ONS figures, research from the money app Yolt shows.
While plenty of emphasis has been placed on Britain’s accidental savers, it found that two in five have experienced a financial hit since the beginning of the pandemic.
The average income of those it surveyed was around £40,000, meaning with the £538 decrease per month, the new average income stood at £33,600 – a £6,400 difference.
Adults facing a financial shock due to the pandemic have lost an average of £538 a month
However, some have lost much more than £538 with 4 per cent of those surveyed saying they had seen their salary decrease by over £2,000 per month.
This is due to many being furloughed, living with 80 per cent pay for months on end, while others have unfortunately lost their job altogether, due to the coronavirus.
In response, 34 per cent have dipped into their savings and 26 per cent have turned to credit card spending.
Some 20 per cent tried to raise money by selling things online and 16 per cent borrowed money from their family.
Despite hitting financial troubles, more than half have not taken steps to protect themselves against a potential dip in finances.
However, experiencing a financial shock makes people much more likely to put precautions in place in the future, as 74 per cent of those who had previously experienced a shock have taken action, compared to 33 per cent who hadn’t.
These steps include reviewing monthly outgoings to see where cutbacks can be made, putting money aside in a rainy day fund and a focused approach to paying off debts to help ease financial pressure.
‘I’ve had to take two self-employment grants’: The 39 year old facing financial insecurity
Katie Flinton, 39 faced a financial shock this year, finding her business suffered greatly after the pandemic hit.
Katie, 39, is someone who has faced financial difficulties due to the pandemic
Katie, from Birmingham, is self-employed and owns a cleaning business.
She was working on her business full time before the pandemic but has since gone down to working part time and is now receiving Universal Credit.
She said: ‘The pandemic had a real impact on my business and I had to take two self-employment grants. I can’t work in the same way as before, as there is a number of people I would usually work for who are shielding.’
About 50 per cent of her clients are in vulnerable group, meaning she can no longer work for them.
She has also had to cancel her coffee shop clients as they are struggling as well.
‘Before the pandemic I lived month to month in terms of my finances. In a way, it has had a positive impact in terms of making me feel more in control and aware of my money.
‘However, it has still been hard especially when things such as end of year council tax comes around.’
She is now a carer for a 14-year old girl who she fosters and is receiving foster money.
As such, Katie is now in a better position to manage her finances and to know what she will have to work with each month.
She has now managed to put aside £10 each month to ensure she has something saved. To manage her money, Katie has a business account, a credit card and she uses a mobile banking app.
For the future, she has considered using a financial adviser to help her with her finances.
Katie added: ‘I am feeling hopeful for 2021. I hope the vaccine will help us get back to normality and that I will be able to go on holiday with my savings.’
The pandemic has led to more people being proactive with their money as 25 per cent said it has made them finally look to tackle their debt.
However, financial uncertainty continues to fuel consumer anxiety in the UK with 38 per cent extremely worried about their financial future and 54 per cent wanting to protect their family financially more now, than ever before.
Pauline van Brakel, chief product officer at Yolt, said: ‘We’re unfortunately seeing a widening wealth gap, with some people able to save during this period, as the opportunity to spend has declined, and other people unfortunately having suffered a significant reduction in income.’
‘With the UK still experiencing great levels of uncertainty there could be further financial shocks on the horizon for many – especially with government support schemes such as furlough due to come to an end in the coming months.
‘It’s no doubt a challenging time for all but engaging with your finances and looking to see where you could make cutbacks to save even a small financial cushion can be a lifeline if you do experience a financial shock.’
How to cut spending and save money
There are several things households can do to cut spending, or save, during these difficult times and these are the five key ones according to Yolt:
1. Budget: Those looking to save money – or simply keep afloat – during the pandemic are advised to keep a budget.
This may mean cutting back to get through but if it helps, it is worth doing.
2. Switching: It is also suggested to switch providers to cut costs if you can.
This includes energy, mobile, broadband and TV bills.
Using a price comparison service can help you find the best deals for you.
3. Subscriptions: Now is a good time to check through your subscription services and see if there are any you don’t use that often and can cancel.
This includes TV apps such as Netflix and Prime Video as well as music streaming platforms such as Spotify and Apple Music.
4. Switch credit cards: One way to help save money is to move outstanding credit balances to a zero transfer balance credit card.
This will ensure you are getting a much lower interest rate and can avoid paying large interest fees that are often introduced after the initial zero per cent interest offer runs out.
5. Speak to debt advisers: If you are seriously concerned about your financial state, you can speak to debt advisors, such as Stepchange who can offer you advice and help you make a plan to get more financially stable.
The research was carried out online amongst 2,001 UK adults in January 2021.