STRUGGLING London households can avoid being plunged into debt during the coronavirus crisis if they follow five simple steps, according to a financial expert.
Millions of Brits are facing an uncertain future as the Covid-19 pandemic forces businesses to make difficult decisions to survive.
And the sudden blow of losing regular income sources could force many of us to borrow money in order to cover essential bills.
Adam Deering, CEO of Hanover Insolvency, says people often underestimate how easy it is to go into the red but that in many cases it can be avoided.
He said: “Many of us are worried about our futures right now as we don’t know exactly how this Covid-19 pandemic will turn out.
“It could lead to a major recession and huge job losses, with economies across the world having suffered a monumental hit already – and the worst is still to come.
“But we still have bills to pay to keep a roof over our heads, so the temptation to turn to credit cards and loans may be stronger than ever.
“There is nothing wrong with using credit to get you out of a short-term hole, but it is vital to make sure this does not spiral.
“The key is to take full control of our finances as soon as possible to give us the best chance of coping with whatever comes.”
Here are Adam’s five key steps to avoid spiralling debt during the coronavirus crisis:
1. Track all incomings and outgoings
It’s vital to make sure you are aware of every single penny that comes in or goes out – you can’t tackle your finances properly if you don’t even know where your money is going.
Keep a written record of your spendings and tally it with your income.
Use this to identify any outgoings that are not completely necessary, such as a gym membership you don’t use or a charity donation you can no longer afford.
Many banks – especially some of the newer ones such as Monzo and Starling – provide budgeting tools on their websites and mobile phone apps.
These let you separate your outgoings into different pots and makes it easier to see how much you have left once all the essentials have been accounted for.
2. Set yourself a budget and stick to it
If you are spending more money than you are taking in, then you are on a slippery slope.
Take back control by identifying how much money you need to cover your essential costs such as housing, travel and food.
If you are able to set aside some money for small luxuries, that’s fine – but not if you can’t afford it.
3. Try to bring in extra cash if possible
Many of us are increasingly turning to side hustles as a way to make extra money each month. Perhaps you are able to make money from a hobby such as arts and crafts or baking.
This way you can turn your passion into cold, hard cash while also keeping your regular nine-to-five income.
4. Communicate with your creditors
Burying your head in the sand will not make debt go away. In fact, it can make things a lot worse.
If you cannot afford to keep up monthly repayments on credit cards or store credit, talk to the provider and see if there is anything they can do to be flexible.
During the coronavirus crisis some UK banks are offering payment holidays of up to three months in order to help those most in need.
5. Seek professional advice if you are struggling
It’s okay to ask for help if you are feeling like there is no way out of your growing debt.
There are professional bodies out there with lots of experience of helping people struggling with spiralling debt.
Citizens Advice is one of the most well-known charities that offers people free, confidential advice on tackling money, legal, consumer or other problems. You don’t have to fight this alone.