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Financial lessons learned…From the pandemic

Maxine McCreadie
Maxine McCreadie

29th July 2021

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The pandemic has left a lot of people struggling to keep their heads above water financially. Whether you’ve had your salary cut, suffered from a drop in demand, or been made redundant, the last 18 months has been rough for all of us. 

But there are some silver linings to be drawn from the clouds. The pandemic has been a financial emergency as well as a medical one, but it has given many of us the chance to reassess our financial lives and clarify what’s really important to us. 

Below are 6 of the most important financial lessons we’ve learned from the coronavirus pandemic. 

Make sure you have a financial safety net

One of the lessons that the pandemic has driven home is that none of us have as much control over our financial situation as we like to think. It’s possible to be doing fine one month, and be worried about your job or your home the next.

It doesn’t take a worldwide pandemic to bring about a financial emergency. We all come into unexpected expenses from time to time, whether it’s a burst pipe, a dental problem, or an energy bill that’s gone through the roof.

But if you want to make sure the next financial wobble doesn’t cause you to fall off a cliff, it’s important you put in place a financial safety net.

Work out how much you would need to keep you going for a few months in the event you weren’t earning at all. Then set aside that sum of money and don’t touch it, except in case of emergencies.

Cut back on unnecessary costs

One of the things we learned during the pandemic (aside from the first names of every delivery driver working in our local area) was that it’s easier to save when you can’t go anywhere.

If you were one of the fortune folk able to keep their jobs throughout the coronavirus crisis, there’s a good chance you were working from home and spending less. Even if you were on furlough, the savings you made from not going out probably compensated for your loss of earnings.

Now that we’re transitioning back to regular life, those regular old expenses have come back into our lives – but with one crucial difference: We’ve learned we can live without them.

We all learned to do without certain luxuries during the pandemic, whether it was going for a run rather than heading to the gym, or making use of our Netflix subscription when we weren’t able to go to the cinema.

While there will definitely be activities you can’t wait to get back to, you may have realised there are others you can do without. If an expense comes back on your radar and you realise you were doing fine without it, cut it. Put that money towards the things that are more important to you.

Understand your credit score

Once the pandemic hit, there were a lot of people out there who found themselves needing money fast. And more than a few of them would have learned the hard way that lenders wouldn’t touch them.

The decision largely comes down to your credit score, the three-digit number that gives banks, building societies, and mortgage companies an indication of whether you’re a trustworthy borrower or not.

While many lenders did make certain moves during the pandemic to service those in need of a cash injection, they may not be quite so lenient during the next financial emergency that comes around.

That’s why it’s important to understand your credit score. You can get a free credit score check via credit reference agencies like TransUnion, Equifax, and Experian, and once you know your score, you should make sure you build up a positive credit history to strengthen your position the next time you’re in need of a loan. 

Pay down your debt

Levels of problem debt in the UK have risen throughout the pandemic, and the signs are that they’ll spike again in September once the furlough scheme wraps up for good.

Coronavirus has impacted the entire global economy. Taking on debt might not have been a problem for you pre-pandemic, back when you had a steady source of income and lenders still had confidence in the market.

But skip forward 18 months and the level of debt you were comfortable with previously might now be a millstone around your neck. That’s the next lesson the pandemic taught us: paying down your debt should always be a priority.

It’s hard to achieve your financial goals with debt hanging over you. Even if things are going well you should look to pay off existing credit as quickly as possible, and if you’re taking on new credit, hunt for low interest rates and short payment terms.

If things are going badly, don’t put off dealing with your debt. Take action. If you have debts you’re struggling to repay, or creditors hounding you at every turn, you should seek professional debt advice immediately and get help coming up with a plan of action. 

Prioritise what’s important

Arguably the most important thing the last year and a half has taught us is not to take things for granted, whether that’s in your personal life, your financial life, or the grey area in the middle where those two meet.

We’ve missed out on a lot of things during the course of the pandemic, and may still be missing out on them now. But if you look back on the things you missed the most in the darkest depths of lockdown – family, friends, gigs, football – you’ll see the common thread.

None of the things are primarily about money. They may be money-adjacent. You may need a level of money to take part. But fundamentally they’re about the experience, an experience which isn’t measured in pounds and pence.

So that’s the final lesson to take from the pandemic – prioritise what’s important to you. When you’re thinking about your money and what you’re going to do with it, don’t concentrate only on what makes sense financially. It’s just as important to consider what will bring you the most enjoyment.

Money might be the vehicle that gets you to where you want to go, but what’s most important is what you do when you get there.


Maxine McCreadie
Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed's, and various other debt solutions.

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HISTORY

Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

July 29 2021

Written by
Maxine McCreadie

Edited by
Ben McCormack

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