A recent news article by the financial times showed that annual income in the UK has reduced by 4.5%. An income shock, to economists, is jargon that means that something unexpected hits the economy. A negative income shock, such as what is occurring with coronavirus, is when the unexpected hit makes people worse off. This has indeed happened to us.
As I mentioned, my spouse lost his job. As he makes about as much money as me, this means that our total take home income has been reduced by about 45%. Additionally, because of budgetary reasons, my employer has also removed my “Acting-up” bonus. An acting up bonus is for something that you do that is above your pay-grade. Because of budgetary reasons, they say that they will not pay this starting as soon as next month. This means that our total income will now be 44% of what it was the end of February.
So how do you readjust your finances after such a colossal change? I thought I would talk about the big things and the small things we are doing and also the short term and the long term things that we are doing. This post only deals with the short term and I will write future posts that will explain the other things. Of course, we are also immigrants and as a consequence, we do not have “recourse to public funds.” So figuring out what we are actually entitled to (or not) was also something to figure out and not being able to stay in the country is also part of our long term planning.
Short term Income: Figuring out what refunds/payments we can claim for
- JSA: The first thing that my spouse should be able to claim for is “new style” job seekers allowance (JSA). This is one type of assistance that is actually open to immigrants on visas assuming that you have paid into the system for 2-3 years. If you have done this and you are made redundant, it seems that you can claim aprox 74 pounds a week up to 6 months. This is actually going to really come in handy for us for groceries and spending money.
- Tax rebate: another thing to check is whether you are eligible to get back any overpayment in taxes if you are made redundant in the middle of the year. There is a tax calculator here that you can use if you are in the U.K.. For people in other countries, I would check with your tax authority.
Short term Debt: Paying off all high interest debt and contributing to our emergency fund
- We are using my spouse’s furlough payment to pay off all short term debt because we will not have the income to support these debt payments once we do not have two incomes. All of our disposable income has been going to this and hopefully we will have zero credit card debt once we shift to single earnings in September. Note that we can do this because we already had some emergency savings from before.
- Contributing to our emergency fund. Because my partner is getting some redundancy pay, this will go directly into our emergency funding. With this money and the money we already had invested (which I since moved into cash), we should have about 6 months of emergency cash. Note, however, that we have big bills coming up if we stay in the country and keep the house. We need to get some important renovations done on our house (some work on the chimney) if we stay and we will also need to pay for indefinite leave to remain if we stay, which means that immigration costs alone will be around 7000 pounds. These two things will easily eat up our emergency money. Another consideration is the fact that we come to the end of our term on our fixed term on the mortgage next year and our financial situation has changed which may also impact our mortgage / allowance for our mortgage. So we need some money to throw at that as well if necessary (for example if they decide the mortgage payment is too high for my income alone).
Short term Budget: Making a new budget
- We have made a new budget to reflect our current situation. I have avoided taking any kind of holiday on our mortgage or on credit cards nor will I refinance our car loan. This is because we have to remortgage next year and I want no major changes to our finances or credit report and also because it’s unclear whether unpaid debts are bad for immigration applications. What is sad is that our new budget probably looks a lot like most people’s budget in the UK. Importantly, it also has no extra savings and no travel or “no fun” as my partner would say so I need to find some way to put this in. This budget includes the JSA 75 pounds a week benefit that we expect to get for 6 months.
|48.7||Housing & Council Tax|
|7.2||Utilities (Water, Gas, Electricity, Internet)|
|13.2||Transport (Car Loan + Insurance)|
|16.5||Food and Other|
For comparison, I found some statistics from the Office of National Statistics (ONS) by income decile for 2019. One thing that I notice here is that debt is not included in the chart.
Anyways, that is it from me for this post. Let me know if you have any comments or questions. Truth be told, at least we have enough money (with the JSA) to actually live off one income for 6 months, which should be long enough to figure out what we are doing next. There are a lot of people out there which cannot say the same, I am sure. I hope that if anyone else is in our situation that this information is helpful.