The state of our finances can have a significant impact on our wellbeing and mental health.
Although NHS staff have not generally been affected by furloughing or job losses during the COVID-19 crisis, we have seen many people take on new roles, work overtime or return to the service after retirement, all of which can impact our finances. In addition, our partners and wider family may be furloughed or coping with a reduced income. At a time when there are so many professional and domestic demands to attend to, what can we realistically do to improve our financial health?
As part of the Arden & GEM wellbeing webinar series, we’ve been working with Chartered Financial Planner, Neil Howchin and his team, from Eulogie, to help raise awareness of practical steps that can help us maintain control of our finances, whatever our current situation. While we can’t provide financial advice, here are some tips to help get your finances in shape:
Know your finances: Listing all your incomings and outgoings is an ideal place to start. A comprehensive list of costs will immediately indicate whether your outgoings are larger or smaller than your income, making it easier to make meaningful changes where you need to.
Core and discretionary spend: The next step is to break this down into core costs, such as mortgage or other debt repayments, food, utilities and commuting costs etc., and discretionary costs such as subscriptions, technology, meals out and entertainment. This is the basis of your budget. If you don’t have anything left over at the end of the month, you could look at your discretionary expenses to see where savings could be made.
Emergency savings: Although the economic impact of COVID-19 is – like the health impact – unprecedented, there are always national or international events which affect our day-to-day finances, so it’s a good idea to aim to have some reserves for emergencies. As a general rule of thumb, financial advisors suggest aiming for three months’ worth of income in savings to navigate short term emergencies. Understanding what you have in which savings pots, as well as your fixed assets such as your home or car, can help paint a more complete picture of your overall financial health, as well as your tax liabilities.
Shop around: Many of us stick with the same utility companies, banks or insurers because switching feels like a hassle. But it pays to shop around. There are plenty of websites that can help you do this, but always check the credentials of any site before entering personal details.
Government benefits: Make sure you are receiving any benefits you are entitled to. This is particularly important if your circumstances have changed. If you or someone you know is suddenly out of work, registering for Jobseeker’s Allowance will not only put some money in your pocket – it will protect your state pension contributions too. Unfortunately, the burden falls on individuals to apply for benefits, so you will have to put some time into finding out what you or members of your family are eligible for. Some COVID-related benefits are time limited so it’s important to check as soon as you can.
Know your pensions: Pensions is a huge topic, and a complex one in healthcare, with a number of different NHS pension schemes in operation. But your pension is your ticket to comfortable living post retirement so it’s important to understand your entitlement. Everyone should be entitled to a state pension, which is currently worth approximately £9,000 per year and is linked to inflation. However, you do need to have paid national insurance contributions for 35 years to benefit from your full entitlement. You can request a statement from HMRC and make up any shortfall in contributions should you wish to.
Similarly, you can request a total rewards statement from NHS Pensions to help you plan your retirement income. For those that have returned to work to support the pandemic, it’s worth being aware that the Government has suspended but not stopped the ‘abatement rule’. This rule was in place previously to prevent people earning more on returning to the service than they had pre-retirement. It’s important to keep an eye on the suspension and seek financial advice if you expect to be affected once the suspension is removed.
Estate planning: Everyone’s situation is different but it’s worth thinking through and seeking professional advice on what protection is right for you and your family should the worst happen. Most importantly, review, update or write a will and make sure you fill in any forms which state who protection or pension payments will go to in the event of your death.
Managing finances can feel overwhelming – particularly at such a busy and uncertain time – and unfortunately there is no ‘one size fits all’ approach. However, knowledge is power. The more you understand about your own incomings and outgoings, the more able you will be to balance your finances.
For more information on specific financial topics, including salary sacrifice, pensions, planning for ill health, savings and investments, and complex issues affecting high earners, visit the NHS Arden & GEM financial wellbeing webinar series.
Please note: This column is intended to raise awareness only and does not constitute financial advice. The Chartered Insurance Institute provides a directory of Chartered Financial Planners should you need to seek advice. Always check the credentials of any financial advisor before sharing personal information.