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The current crisis is putting new and unprecedented strain on family finances. John Ellmore has some simple advice to get the family finances in order
John Ellmore is operations director for NerdWallet , an independent financial comparison website on a mission to provide clarity for all of life’s financial decisions. He’s some helpful advice for working dads looking to take back control of the family finances in 2021.
2020 was a hugely challenging year for many families. Beyond the harrowing illnesses and loss of life, Covid-19 has also taken a significant toll on millions of households’ finances.
Widespread job insecurity and unemployment will have stretched some people’s finances to breaking point. Indeed, according to a recent survey of over 2,000 UK adults, commissioned by NerdWallet, a third (33%) of respondents saw their household income fall throughout the first lockdown alone.
So, it has never been more important for people to review and reorganise their finances to strengthen their position at the start of the New Year. And this need not be an intimidating task. There are simple steps which families can take to get their finances under control for 2021.
At the start of the New Year, it would be advisable for parents to sit down and conduct a thorough audit of their current financial situation. This will involve making a note of all incomings and outgoings, in order to understand exactly where their money is going. Doing so will enable families to identify and, more importantly, eliminate problematic spending.
From there, it will be possible for families to restructure their weekly or monthly budgets, which will ensure their spending remains under control throughout 2021. What’s more, this new budget can easily be monitored via one of the many handy budgeting apps available today.
During testing economic periods, it can become more difficult for people to access loans, mortgages, and even credit cards, with the credit market typically tightening in response to volatility. So, it is important that parents do what they can to strengthen their credit scores.
For some, this process will be fairly simple. Ensuring all bills are paid on time is a good start. For those who lose track of payment deadlines, it might be beneficial to set up direct debit payments. Even registering to vote could help people make incremental improvements on their credit score. These points are just the tip of the iceberg, however, so parents should take time to research the numerous options that could boost their scores.
Even parents with a low or non-existent credit score can still take steps to improve their situation. Taking on a credit rebuilder card – a card with a low and manageable limit – offers users the opportunity to rebuild their score, without debt becoming unmanageable.
Shopping around for a cheaper deal on household expenditures may seem like an obvious point. Yet an alarming number of people fail to do so. For example, each year approximately 12.9 million households auto-renew their home insurance without shopping around for a better deal, either because they believe it is the easiest or cheapest option.
However, shopping around does not need to be a time-consuming task. Parents keen to find cheaper deals on a variety of products, from car insurance to utility bills, should use comparison websites. Don’t spend hours trawling the internet yourself. These sites search the internet for various deals and present their findings in a clear, jargon-free table. Then, users can simply choose the best option to suit their family’s circumstances.
Putting the more technical points to one side, motivation remains one of the main hurdles many families face when they look to revamp their budget. Resolutions are made, particularly in the New Year. But as we move beyond January, it is easy for old spending habits to re-emerge.
Setting savings goals is an excellent method for counteracting this. Whether saving for a family holiday abroad – once travel restrictions have been lifted, of course – some refurbishment works or simply a particular financial figure you want to have tucked away, having a goal in mind is an excellent way to keep one’s spending in check.
Savings goals should not be too long-term, though. Try setting smaller, short-term targets, which will give the sense of more achievable progress.
Over the expensive festive period, it can be easy for spending to spiral out of control. This can leave some parents overwhelmed as they struggle to balance budgets. Indeed, when NerdWallet recently commissioned a study among more than 1,750 UK adults who celebrate Christmas, 22% said they were worried about the impact the festivities would have on their finances. 19% expected to take on more debt than usual in 2020 to cover the costs.
Importantly, if these financial concerns or debt become overwhelming, parents do not need to struggle alone. Help is on hand in the form of debt charities such as StepChange or Citizens Advice. Working dads can use them as a friendly ear to offload their concerns. Or as a practical tool to help put together a sound strategy to get finances back in check.
There is no quick fix when it comes to organising one’s finances. However, through disciplined spending and careful planning, many families will be able to create a sound financial plan and start 2021 in a stronger position.