Information in recent days seems to indicate that the Covid-19 crisis is going to take months rather than weeks to solve. If this is the case then households may have to take remedial action regarding their finances in order to sustain a period of reduced economic activity, which is likely to lead to reduced or no earnings.
Any household which is affected by redundancy (even if temporary in nature), reduced working hours or in the case of the self-employed, reduced income should immediately give priority to examining their finances to see what outgoings can be reduced or eliminated, at least temporarily.
Here are some suggestions;
1. Discretionary spend
Examine the services you use in terms of whether they are critical (like electricity) or discretionary (like subscriptions, gym membership etc). If you can do without the service, have you signed a contract and if so does it allow you to cease the service, possibly with a small exit charge.
2. Current Account
Examine current account statements line by line for unnecessary spend – if you are not bound by a contract you can cancel standing orders and direct debits using your online banking facility.
Note; be careful when cancelling any standing order or direct debit. If you inadvertently cancel the wrong payment it can have repercussions for you.
Due to the fact that many people pay their electricity bills by direct debit, usage and bills have increased in many households.
- Print off your last three bills and look at them – you may be shocked at the amounts. Have a look at your energy usage and examine whether energy is being wasted.
- If you have been with the same electricity supplier for some time, have a look at the amount they are charging you per kilowatt hour, the standing charge and what discounts you are getting. Many companies give a very competitive deal to attract your business but quietly switch you to a higher tariff and/or take away your discounts after the contract period has elapsed. Consider moving to a new supplier to avail of reduced costs and possibly an introductory credit.
It is likely that your mortgage repayment makes up a significant proportion of your households monthly expenditure.
- Many people overpay their mortgage. If you have been doing this it may be the case that you are ahead of your repayment schedule and can cease or reduce repayments for a period of time. Check with your Bank before doing this and get confirmation in writing.
- Consider asking for a moratorium on repayments. If you have paid to terms since you took out the mortgage and you have not availed of a moratorium previously, it is likely that your Bank will agree to one, for a period of three months at least. Consider first whether you need this now, or would you be better availing of it in three or six months time. Banks will be under pressure to collect loan and mortgage repayments and unless they are directed to by the Government it is unlikely that they will extend moratoria for unlimited periods.
5. Motoring expenes
Many households have two cars, depending on your circumstances it may be the case that only one will be required in the short term. Consider taking the car which has the highest running costs off the road temporarily.
- Regarding motor tax it can be possible to cease your motor tax and even obtain a refund depending on your circumstances. If you decide not to renew your motor tax you should complete and submit a Declaration of non-use of a motor vehicle form RF150 otherwise you will be liable for back tax when you subsequently put the car back on the road. More information is available on the Citizens Information website.
- Regarding insurance, if you pay monthly consider suspending or cancelling but check with your insurance company first what your options are and whether you will be penalised. If you pay annually, consider ceasing from the next renewal date. Bear in mind that insurance companies may try to take away no claims bonuses if there is a gap in your cover. We have made representations to a TD that legislation be enacted to prevent this practice during the Covid-19 crisis and immediately afterwards.
6. Life Assurance
Approximately 70% of people who take out a mortgage also obtain their mortgage protection cover from their bank. The vast majority of people who obtain cover from their bank overpay – as banks have a captive client base they aren’t seeking to be the cheapest. If you save €10 a month that adds up to €2,400 over a twenty year mortgage. Many people save a lot more.
You can obtain a quote for new cover or to see if you are overpaying for your existing cover through our sister website https://lowcostmortgageprotection.ie/
This crisis could cause people to question whether they have sufficient protection cover to protect their family in the event of the death of an earner. It is not sufficient merely to have life cover for the amount of your mortgage. Everybody who has children should have family protection cover for an amount which, in the event of their death, will be sufficient to bridge the gap in the household budget, atleast until the youngest child finishes third level education.
If you rent you should seriously consider taking out life assurance so that your family don’t lose their home in the event of your death.
You can obtain a quote for new cover or to see if you are overpaying for your existing cover through our sister website https://getlifecover.ie/
Let us know if we can help
If you are considering any financial issue we’re happy to help. Feel free to give us a call on 01 546 1100 if you have any queries. We have the capability to write business remotely with no need for face-to-face interaction so it’s business as (nearly) normal for us during the crisis. You can reach us by email to [email protected] or use the Live Chat facility in the bottom right corner of the screen.
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© Highfield Financial Planning 16 March 2020 at 11.54 hrs
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