For the past 30 years I’ve been writing about family money, and this is the toughest time I have known for finding the right tone and approach.
When NHS staff are facing enormous stress and risking their health every day, other vital workers are battling to keep us supplied with food, and many face the prospect of losing jobs, talk of money-making can seem crass.
But while a lot of us may be struggling on reduced income, others may, ironically, be better off, because they have had to curtail their social lives or are not having to pay commuting costs.
So I want to address some issues raised by those who are keen to help families and the wider community, and offer ideas of how we can best use the extra time we will be spending at home.
While a lot of us may be struggling on reduced income, others may, ironically, be better off, because they have had to curtail their social lives or are not having to pay commuting costs
IT’S TIME TO GET YOUR BILLS ORGANISED
If you usually commute or socialise a lot, you may find you have several extra hours on your hands. Instead of vegetating in front of Netflix, why not use a little of that time to get your bills under control?
List organisations you regularly pay, such as energy, telecoms and broadband firms, TV companies and credit and store cards, then set a target of sorting out one each week.
One key item should be your energy bill. The clocks may have moved forward, but if your family are at home all day, your power bills are sure to rise.
If you are not in a fixed contract with penalties then use a switching service such as Energyhelpline, Which?Switch or Uswitch to track down the best deals.
And if your children have been marching to Greta Thunberg’s tune and demanding we cut greenhouse gases, now is a great time to get them to practise what they preach by turning off lights, computers and TVs when they are not using them, and putting on a sweatshirt instead of turning up the heating.
Check you really need those complex TV packages you’ve subscribed to. Remember the core channels such as BBC 1, 2 and 4, ITV 1,2,3 and 4, Channel 4 and Channel 5 are all available via a normal TV aerial without charge on Freeview or with a satellite dish on Freesat.
Many add-on sports channels are on a monthly rolling contract, so you could switch them off and restart them again later.
IF YOU ARE FEELING FINANCIALLY FLUSH
I hate to harp on about it, but while some are struggling, others will find they have extra money – especially the young.
If you usually eat and drink out several times a week, you may be starting to notice your bank balance looking rather healthy.
If you usually eat and drink out several times a week, you may be starting to notice your bank balance looking rather healthy
So what can you do with this money? I’d suggest starting by paying down any debts on store cards and credit cards and then tackling your overdraft.
Check what interest rate each is charging and start with the most expensive.
If those aren’t a problem, start a rainy day fund you can dip into if your financial situation deteriorates.
DON’T CUT HOME LOAN PAYMENTS
Mortgage rates are falling.
That’s not much consolation if your income has dropped, but if it remains the same you could consider telling your lender you don’t want your monthly payments cut.
Paying extra on your loan each month will cut the length of time you have to borrow, meaning you pay far less interest in the long run.
More than this, it will help to build a buffer if you ever need to reduce payments in the future.
HELP OUT CHILDREN WITH NO TAX FEARS
A recurring theme in my email inbox has been older people who want to help their children and grandchildren but are worried by tax rules.
While the over-70s may have been advised to lock themselves indoors, many will not have seen their income drop significantly — though some will have had to stop working or will have lost money in the stock market.
Here’s a typical question: ‘My wife and I are both in our 80s and have three grandchildren whom we want to support while the coronavirus restrictions are in place.
We have a modest amount of savings and could afford to send money to them. ‘According to tax authorities, I can make a maximum of £3,000 in gifts without any penalties.
‘If I gift more than £3,000, I will be liable to pay tax up to seven years after the gift was made.’
With inheritance tax you can give as much as you want to your children and you, personally, will not face a tax bill
Let’s dispel some myths regarding inheritance tax (IHT). There is a £3,000 annual allowance which you can give away every tax year (April 6 to April 5) without affecting your inheritance tax position.
You can carry this over one year. So if you did not make a gift in the 2018/19 tax year, there is still just enough time to use this.
But the most important fact is that you can give as much as you want to your children and you, personally, will not face a tax bill.
If you die within seven years of making a large gift, then that amount may be deducted from the IHT nil-rate band on your estate.
This band stands at £325,000 per person and can be shared between married couples and legal civil partners.
IHT is charged at 40 per cent above this. So, if you gave away £50,000 today and died in a year’s time, your IHT nil-rate band would be reduced to £275,000. (Though you could offset some using the £3,000 gift allowance).
If you are homeowners and your estate is worth less than £2million, you will receive an extra residence allowance so long as your home is left to children or grandchildren; this includes adopted, foster or stepchildren.
This top-up will raise the total IHT tax-free band to £500,000 per person from April 6 — so £1million per couple.
But the main point is that there are no tax rules which prevent you from giving as much money as you wish to your children or grandchildren now — and you will not pay any tax on money you give.
In fact, there could be a benefit, because as long as you live for seven years, you will have reduced the eventual IHT bill on your estate.
There are a couple of issues to take into account. The first is that you must be wary if you expect you may soon need to go into care.
There are rules which allow your local authority to attempt to recover assets you have recently given away if you cannot afford to pay for your own care and they believe you gifted the cash to avoid contributing to care fees.
Age UK has an excellent factsheet online at ageuk.org.uk. The second concern is whether a lump sum from you could affect any benefits they are already receiving. If you are concerned, check with your children first.
KEEP PLAYING, KEEP PAYING
If, like me, you’ve booked theatre, events or cinema tickets, then — as long as you can afford to – don’t rush to claim your money back.
Many places will be hoping to reschedule events. My local independent cinema is run on a shoestring. I’ve written off the cost of the tickets we bought.
Small, independent places in particular need breathing space. By not demanding your money, you could be helping to pay someone’s wages.
Personally, I would rather lose the cost of a couple of cinema tickets and a night out at the Bootleg Beatles than see these places go out of business. The same goes for deposits left with small restaurants.
If you’ve booked theatre, events or cinema tickets, then — as long as you can afford to – don’t rush to claim your money back
Give them a chance to reopen and supply the meal you want or you may not get to eat there again in the future.
Do you have a cleaner or other helper at your home? If you can afford to, you should try to pay at least some of their normal money.
The same goes for those who attend a private class, whether it be for singalongs, Zumba or a foreign language.
Many are trying to run these online — so if you can afford to keep paying and joining in, do.
TEACH THE YOUNG ABOUT FINANCE
Many parents are teaching children from home. I’d like to put in a plea for personal finance education.
There are some brilliant resources on the website youngenterprise.org.uk. But you can go further. Why not involve your children in your family budget?
Let them see how you struggle to make ends meet. Introduce them to the idea of looking at how much things cost per year — we have got so used to being quoted monthly prices.
Few of us, especially the young, ever look at how much things cost over a full year. Let them see some of your credit card bills, especially if you pay interest.
And, again, show how much that amounts to over a year.
Explain that every pound paid to a bank in interest is a pound you don’t have to spend that month.
GIVE CHARITIES THE BOOST THEY NEED
Many of us may wish to give to charities struggling to help those in need. If you give money, then try to use the Gift Aid scheme.
This will boost every £1 you give to £1.25 because the charity can reclaim the tax on your donation. All the charity needs is your name and address with a declaration that you are a UK taxpayer.
Those selfish shoppers who stacked their trolleys before the lockdown have, by all accounts, ignored the boxes supermarkets put out for food banks.
If you go shopping, try to remember to buy something you can donate. Many more people will be relying on help from these brilliant operations at the moment.
WHAT ABOUT INVESTMENTS?
The shocking falls in the stock market have seen 20 per cent or more wiped off many people’s savings.
More falls may yet come or we may begin to bounce back. Whichever, if you believe in the Western way of life and the market economy then you have to believe share prices will climb again.
I remain committed to investing regularly in falling markets as well as rising. I recently bought more shares in soft drinks firm Fever-Tree when the price dropped to £10 per share from previous highs of more than £30.
Time to invest? If you believe in the Western way of life and the market economy then you have to believe share prices will climb again
I do not claim any special insight. It is merely my opinion that this has not suddenly become a bad company.
While people cannot drink in pubs and clubs, they can still drink at home. And when this is over I suspect the partying will go into overdrive.
I have also recently bought more shares in the Scottish Mortgage Investment Trust, which invests in solid companies such as Amazon, its Chinese equivalent Alibaba, Tesla, video game company Tencent and Illumina, a firm involved in DNA sequencing.
I am avoiding buying into the style of investment fund known as an Open-Ended Investment Company (Oeic) because these use ‘forward pricing’.
This sees all trades made at midday the day after you place your order to buy. In times of volatility, the price could bounce up several percent between the time you place your order and when it is carried out.
Then it could slump the following day. I want to know how much I am paying, so investment trusts and exchange-traded funds for stock market trackers are my preferred options.
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