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How to give your finances a spring clean while you’re at home

With most of us confined to our homes, we take a look at how you can use the extra time at home to spring clean your finances.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

If you’re lucky enough that your job hasn’t been affected during the coronavirus outbreak, it’s likely that your income levels have remained the same, but your spending has dropped.

With the majority of the UK staying at home to help stop the spread, some people will have cut back on how much they spend on things like entertainment, eating out and even transport.

We take a look at how you can make the most of the extra time and cash you might be lucky enough to have during the lockdown.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please ask for advice. If you choose to invest, the value of your investments will rise and fall, so you could get back less than you put in.

How much are you saving at home?

You might be spending a little more on food shopping and running the house, but it’s surprising how much money you could be saving each week without even realising. An evening meal at your favourite restaurant, travel expenses on your commute to work and a drink out with friends all add up.

For those who are still earning their full wage, we’ve calculated you could be saving around £60 extra a week. And that’s taking into account a likely increase in energy and food bills of around 50%.

We think it makes sense to put your extra savings to good use, if you can afford to. Covering your essential bills and helping out family or friends in this crisis will of course come first. But after that, with the money you’re saving on your morning coffees or lunchtime meal deals, you might want to consider a savings plan.

Try our budget calculator to work out how much extra you could afford to save.

Budget Calculator

First include what your outgoings used to be before lockdown, the budget calculator will help you work out your expenditure compared to your income. Then calculate what your outgoings are now versus your income – the difference between the two figures will tell you how much extra you could potentially save.

Deciding what to do with your money

It’s a good idea to pay off any short term debts first. Then if you haven’t got one already, think about building a cash buffer so you can easily withdraw money if you need it. If the past couple of weeks have taught us anything, it’s that you don’t know what’s around the corner, or when you’ll need a pot of money to fall back on. As a starting point, our financial planners typically suggest that we need three to six months’ worth of expenses in cash to cover emergencies.

Once you have a rainy day stash in place, you should then think about whether your goals are short or long term.

Both saving and investing lets you put money aside now, for the potential to have more in the future. But if you're trying to grow your money over the long term (say five years or more), you might find your cash savings aren’t growing as fast as prices are rising and inflation is eroding the value of your savings. This means cash saving tends to be for short term goals, whereas investing should be for the longer term.

Your short-term goals might include saving for a house, a wedding or home improvements, or you might simply want to be able to access your money easily. You could think about paying into an easy access savings account – you could get a better return on your cash.

More on cash saving with HL

If you’re saving for your long-term goals, like retirement, you could think about investing in the stock market if you are happy with the added risk. History tells us that investments have a better chance of producing a favourable return the longer they are left to grow. For this reason, we always encourage taking a longer-term (at least 5 years) view when investing. But remember that past performance is not a guide to the future.

Investing involves putting your money into different asset types with a view to generating an income, growth or both. It can help you grow your money over the long term, but unlike the security offered by cash, investments can fall as well as rise in value, so you could get back less than you invest.

New to investing?

If you’ve never invested before, it’s best to start with the basics. We can help you learn more about what’s involved, and show you how to get started.

Watch our videos to find out more about what investing money is all about, why risk is often misunderstood and how compounding could improve your returns.

Get started with investing

Want to know more about HL?

We’re a secure FTSE 100 company that has been helping UK savers and investors for over 38 years. Our aim is to give you all the tools, information and support to help you make the most of your money.

We offer a range of investment accounts to help you achieve your goals. Whether you’re looking to build a pension pot for retirement or you’re just looking to save for the future, we can help.

More about HL


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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