The coronavirus crisis has had a huge impact on everybody’s lives. As well as rapidly having to adapt to a new way of life, most of us have also been affected financially. Some have lost jobs or had their salary cut, while others have ended up saving money simply due to spending less.

Protect your finances

No matter how you’ve been affected, with talk of a looming recession, it’s important to make sure your finances are as robust as possible. Here are eight steps to help…

1.Get better at budgeting

The best way to get a clearer understanding of your finances is to go through your bank statements with a fine-tooth comb. Work out exactly how much you have coming in each month and what you’re spending on bills, essentials such as food, travel expenses and other costs.

Zoe Bailey of financial planning firm Tilney says it’s important to get a true picture of your outgoings and whether your financial situation is changing: “By understanding the impact of the pandemic on both your income and outgoings, you will be in a much better position to draw up a household budget through the current period and beyond.”

If you are spending more than you have coming in, you’ll need to make cutbacks if you can. A good way to do this is to get rid of any subscriptions or memberships you don’t need. As an example, if your gym membership has been frozen during lockdown, consider whether you should cancel it permanently.

If you’ve been exercising happily and successfully without going to the gym, do you really need to go back?

Separating your money into different ‘pots’ for bills, mortgage or rent, food shopping, childcare costs, and debts can also help you understand exactly how much you need to allocate towards each one every month.

2. Make sure you’re on the best deal

Another way to ensure you’re not spending more than necessary is to check you have the best deal for household bills such as:

• energy

• car insurance

• home insurance

• broadband

• mobile phone contracts.

The easiest way to do this is to use a comparison site such as GoCompare, Compare the Market or MoneySuperMarket to compare deals.

Avoid simply renewing your car and home insurance as insurers rarely offer their best deals to existing customers and you could save hundreds by shopping around and moving to a cheaper deal.

If you have a fixed energy tariff or you’re currently tied into a broadband or mobile phone contract, you may need to wait until it ends before you switch – although it’s worth weighing up the penalty for leaving versus the savings you’ll make by doing so.

3. Focus on paying off debt

Research by AA Financial Services shows that eight in ten people have spent less money during lockdown by not being able to spend on holidays, dining out or high street shopping. Of those, 15% said they would use the extra cash to pay off credit card debt.

If you have multiple debts, an easy way to clear them more quickly is to put any spare money towards the debt with the highest interest rate first. Once that debt has been paid off, you can move on to the next highest interest rate, and so on.

Remember to still keep up with minimum monthly repayments on any other credit cards you have, as well as any fixed loan repayments.

For those who don’t have any spare cash to throw at their debts, consider moving existing credit card debt to a 0% balance transfer credit card as this will give you a break from paying interest for a number of months.

Note that there will be a transfer fee to pay (often around 3% of the balance) and you’ll need to try and clear your balance before the 0% period ends and interest is charged. You’ll also need a good credit score to be accepted for the best deals.

Alternatively, you could look into consolidating your debt with a personal loan at a cheaper rate of interest – again, the deal you’re offered will depend on your credit score.

If you’re successful, you’ll be able to combine your debts into one monthly payment with one lender and, if the loan has a lower interest rate, save yourself a decent sum of money at the same time.

Alternatively, talk to your credit card or loan provider about taking a payment holiday, but note that you’ll still have to pay interest which can make it more expensive in the long run.

4. Build up an emergency savings pot

Another important way to recession-proof your finances is to build up an emergency savings pot of cash – if you can. You’ll then have this to fall back on should you lose your job, face an income cut, or have to deal with unexpected costs.

Laura Suter, personal finance analyst at investment platform AJ Bell, says it’s a good idea, where possible, to build up between three to six months’ worth of outgoings: “Tot up your mortgage or rent, bills, and essentials and work out how much you need. If this seems like a high figure then just put away anything you can.

“This money should be available immediately, so put it in an easy-access cash account rather than one where access to the money is restricted.”

5. Protect your family

Whether you’re married, live with a partner, or have children or other dependants, it’s important to ensure they would be provided for if you became ill and had to stop working or if you died.

Having life insurance in place will ensure your dependants receive a lump sum to help them pay bills and other costs if you die within the term of the policy. You can use a comparison site to get an idea of how much premiums will cost you each month – typically, the younger you are, the less you’ll pay.

Critical illness cover – which pays out if you are diagnosed with an illness listed on the policy – can also be added to many life insurance policies for an extra cost.

If you already have life insurance, it’s worth regularly reviewing whether you have enough cover, particularly if your family has expanded, or if your income has gone up or down since you originally took out the policy.

You may even find you have too much cover, perhaps if your children have fled the nest and now have jobs of their own.

6. Make a will

It also pays to make sure you have an up-to-date will. If you die without one, known as dying intestate, your assets will be shared out according to certain rules, rather than according to your wishes.

It is generally best to use a solicitor to help you write a will, but if your will is simple, you could use a will template that can be bought online or from stationary shops. Be aware though, if you make any mistakes, you won’t have the same protection as you would through a solicitor.

Alex Price, director of planning at Charles Stanley, acknowledges it is not easy, but planning for these situations can make a significant difference to loved ones: “Discussing how your assets will be dealt with when you pass away can be a difficult conversation to have with your family. However, it can be one of the most important conversations you ever have.

“Putting your affairs in order not only gives you significant peace of mind but can also help your family sort out affairs more quickly and ease the burden.”

Finally, you may also want to think about having some type of income protection insurance in place that will pay out a monthly benefit if you cannot work due to an accident or illness. Some policies also pay out for redundancy.

7. Review your investments

If you’re an investor, now is the ideal time to review your investments and assess whether you need to rebalance your portfolio and what you’re investing for.

AJ Bell’s Ms Suter said: “If you think markets are going to be rocky for a long time, you need to make sure you’re investing for the long term.

“If you know you’ll need access to the money in the next couple of years, for example for retirement or to buy a house, you should think about gradually de-risking your portfolio so you’re not exposed to swings in the market when you need the money.

“No-one wants to be a forced seller just after markets have fallen, but likewise no-one wants to have to delay big events like retirement or a house purchase because their investment pot has taken a big hit.”

8. Think about your pension

Finally, it’s also worth giving some thought to your pension (if you have one).

Many pension pots have lost value in recent months so it’s worth considering whether you want to increase your monthly contributions to help make up for the shortfall, or even delay your retirement date to give your pension some time to recover.